A customer loyalty program can be implemented in a variety of ways. You can design your program based on one model or use a combination of two, or more. But before you set out to design a loyalty program best suited for your business, make sure you understand how different types of Customer Loyalty Programs work and how you can maximize their impact.
Points-Based Loyalty Programs
Points-based customer rewards programs are the easiest and most common type of loyalty programs used today. In this model, a fixed number of points are rewarded to the customer, depending on the size of the bill. These points can then be redeemed for a variety of benefits later. The simple rule that dictates this type of loyalty program is that the more a customer spends, the more he/she can potentially save.
Noteworthy Example: Pizza Hut
Ideal for: Retail Stores and Restaurants
Tiers-Based Customer Loyalty Programs
Tier-based loyalty programs categorize customers in different groups and levels and offer different rewards to each level. This model encourages the customer to increase the frequency and volume of their purchases in order to avail a wider variety of incentives by reaching the next level. A great advantage that a tier-based loyalty program offers is that all customers get benefits according to the value they bring. This makes the loyalty program more efficient financially.
Noteworthy Example: Marriott
Ideal for: Airlines and Hotels
Coalition Loyalty Programs
A coalition loyalty program is applicable to more than one business or company. Simply put, a group of brands, which may or may not belong to the same industry, come together to offer their customers more flexibility to earn and redeem points. For example, grocery stores, fuel stations and bill payment companies can forge a network to offer their customers a combined loyalty rewards program. This model has two huge benefits: access to a bigger network of customers and shared costs of running the loyalty program.
Noteworthy Example: Payback
Ideal for: Grocery and Utility Stores
Hybrid Customer Loyalty Rewards Programs
A hybrid customer loyalty rewards program combines the features of different types of loyalty programs, and hence the name. This type of program provides room to apply creativity in the design and process of the program and also allows a greater degree of personalization. Businesses looking to appeal to their customers in a new ways can build a hybrid customer loyalty program from scratch.
Noteworthy Example: Walmart
Ideal for: Everybody
Non-Monetary Loyalty Rewards Programs
Businesses who wear their commitment to value-driven business practices on their sleeves can benefit from non-monetary loyalty programs. Generally, businesses tie up with charities and non-governmental organizations to donate a small amount on every purchase made. However, make sure that there is a transparent and verifiable flow of donations and proceeds available to your customers. Donations can go towards causes aligned with the business ethics and values, or other social causes as well.
Noteworthy Example: L’Oreal
Ideal for: Value-Driven Businesses
Paid Rewards Programs
If a business already has a sizeable customer base, it can ask customers to pay you a small fee in return for better services and more privileges. While customers paying an additional fee over and above regular purchases might seem like a counter-productive idea, you’d be surprised to find out how popular this model is. Do remember that these models sustain loyalty which has already been cultivated, and not the other way round.
Noteworthy Example: Amazon Prime
Ideal for: High Commitment Businesses
While these are the most common types of customer loyalty programs that various businesses and brands implement, you can find ample of unique models as well. Which of the above program have you implemented in your business? Let us know!