5 Best Loyalty Programs and How to Simply Create Yours
Customer loyalty programs are a vital part of retail marketing strategies.
Are you hunting for some inspiration for yours?
With all the focus on complex gamification and personalization, simple and successful loyalty program ideas might be hard to come by.
An easy way to find inspiration is from the “best in show” – those big retail loyalty programs who have managed to consistently grow and innovate while keeping the basic mechanism quite simple.
With so many programs out there, how do we find the best in show?
We’ve analysed the most successful customer loyalty programs out there to bring you a fresh list of inspiration to take your 2020 marketing strategy to new heights.
A quick refresher on customer loyalty programs
If you’re new to the concept of loyalty marketing, here’s a quick refresher.
We know that these days customers make purchasing decisions based on much more than price or brand. It’s now about trust, loyalty, incentives, and word-of-mouth among other factors.
A loyalty program is essentially an incentive – or rewards – based program targeted at regular customers of a brand or retailer. Frequent customers are invited to join the program to receive points, discounts, freebies, access to exclusive content, or upgrades based on their continued support.
“79% of consumers say that loyalty programs make them more likely to continue doing business with brands”AccessDevelopment.com
Ready to learn from top programs? Let’s go!
The 5 Best Retail Loyalty Programs
It’s no secret that Amazon is coming for nearly every single industry out there! And their latest loyalty program called Amazon Moments is a great lesson in using the power of a large retailer to cover the rewards expenses of smaller businesses in a way that elevates both.
Amazon Moments is actually aimed at vendors who can set up a moment and reward for customers to interact with on Amazon. This way, the vendors can control what they spend on customer rewards and Amazon fulfills the rest at a global scale.
What makes this a great customer loyalty program is that the shoppers themselves don’t pay any added fees, it’s a win-win for everyone involved. Vendors get to roll out rewards within their own threshold, customers are served the offers and invited to participate, and Amazon delivers.
They are currently rolling this out with vendors such as Disney and TikTok who have so far reported astounding success.
Mobile game Disney Heroes: Battle Mode used Amazon Moments as an acquisition and retention tool and increased net revenue 6.8x by offering players a reward of $5 in Amazon credit when they reached level 15 in the game.
Learning app Sago Mini, which is also selling toys on amazon, reported a 296% increase in downloads for one of their apps – aimed at their existing user base, also by offering a $5 Amazon credit on its products.
“By running a Moments campaign, we were able to complement the in-app experience by offering a discounted Sago Mini toy, delighting families and raising awareness around our physical merchandise. It also allowed us to deliver real business results in a flexible, affordable way.”– Nick Shim, Sago Mini Case Study via Amazon
Lessons from this loyalty program:
Keep it simple.
Make the incentives worth the effort, look at how easy it is for vendors to use the program, making it even easier for customers to participate with a single action.
Leverage scale. If you can offer more to your customers based on existing infrastructure, go for it. What you spend on the fulfillment side of things will be gained by a loyal customer base.
Using Amazon Moments
It’s easy to get started with an Amazon Moments campaign. All you’ll need to do is:
- Choose the action or “Moment”, i.e: what the customer will do to receive the reward, e.g.: install your app, convert to a sale.
- Choose your CPA (cost per action).
- Decide on the kind of reward you want to offer. This can be an Amazon credit or free items like t-shirts or small gadgets.
- Now you’re ready to go!
Nordstrom: The Nordy Club
This popular US retailer kept it super simple with their free rewards program: the more you spend, the better the perks. Customers can unlock new tiers of rewards and benefits by spending more across all their subsidiaries.
We like how each tier is named: Member, Insider, Influencer, Ambassador – which reflects the current trends in customer loyalty and ambassador marketing at the moment.
According to a Digiday case study on the program: their 10 million+ active members spend 4X more and shop 3X as often than non-member customers.
Business through their loyalty program increased from 35% – 55% over the past 5 years and is growing rapidly.
Lessons from this loyalty program:
Make the transaction logical and simple: 1 point = 1 Dollar. The more you spend, the better the perks.
Let customers gain points by shopping at your partners and subsidiary companies to broaden your customer base.
Offer tiered levels so superusers or high spenders can be rewarded at a level more suitable to them, and so moving up each tier becomes another incentive to participate and spend more in the program.
Sephora: Beauty Insider
This beauty retailer is a pioneer in customer loyalty programs and you’ll often hear Sephora in many use-cases. This comes as no surprise that they offer one of the best loyalty programs in retail.
Sephora’s Beauty Insider program allows members to earn points and redeem their points in any way they like, whether it’s by receiving discounts off their products, or by purchasing gift cards.
The program has over 17 million members which make up nearly 80% of their annual sales according to this shopify.com/blog/loyalty-program”>Shopify case study.
Lessons from this loyalty program:
Sephora understands its customer base well enough not to limit how they use their points. All members, including free Insider members, get to choose how they spend their points by choosing from a variety of benefits such as exclusive products, gift cards, discounts, and events. This kind of flexibility will keep customers coming back.
The tiered benefits offer seasonal savings for all members, with an opportunity for those on the top tier to receive their very best offers first.
All members have access to their in-store services and beauty classes which makes even the free membership worth joining.
This popular global brand and retailer has a classic customer loyalty program which offers customer rewards on purchases, birthdays, events, and other personalised special offers. The app-based loyalty program gives users a truly amazing mobile experience, making it easy to participate in-store.
The Starbucks app can also be used on a transactional basis – customers can pay for their food and drinks using their points or pay with their phone by loading funds onto their loyalty ‘cards’.
We love that their apps are tailored for each country to provide localised and relevant rewards.
This is one of the biggest customer loyalty programs in the world, and they’re continuing to grow.
In 2018, the app increased its active user base in the US to 12% – that’s 1.6 million users!
“Starbucks Rewards transactions accounted for 40% of tender in U.S. company-operated stores over the past two years.”TheWiseMarketer.com
Lessons from this loyalty program:
Make your program or app more useful by introducing payment options. This will increase the likelihood that users will use the app more often during their shopping journey.
Integrate with other relevant services. The Starbucks app integrates with other services to provide a full brand experience over and above the loyalty rewards feature, for example, users can connect to Spotify to identify tracks played in stores.
Leverage data for personalized rewards. Because users can pay via the app, Starbucks has enough data to personalize their rewards.
The North Face: VIPeak
No other outdoor retailer does a better customer loyalty program than The North Face. Even the name of their program – VIPeak – speaks to their deep understanding and appreciation for their adventurous customers. The program offers cleverly tiered options: Basecamp, Halfdome, and Summit Level, each offering generous discounts of between $20 to $30.
VIPeak members shop twice as much as their average shopper and spend 20% more.
And while many other customer loyalty programs and apps have clearly won the numbers game, The North Face has won big on trust. Customers know that any small discount is worth the effort because of the high quality and value of their apparel and gear and this keeps everyone – from free to paid members – active and loyal.
Lessons from this loyalty program:
The North Face has allowed customers to earn points for interacting with them online. Users can earn points from downloading their app and checking in in-store. This is a great way to acquire and retain an online customer base.
The rewards are curated which means customers get a personalized rewards experience.
How to create a successful customer loyalty program
So, you’ve taken a few lessons from the best in show on our list, now what?
Let’s start with a step-by-step guide to creating your very own loyalty program.
1. Define your ideal loyal customer
Ask yourself who your ideal loyal customer is, and build a persona of what their behavior looks like. Does your loyal customer frequent your clothing retail brand once a week or once a month? How much do they spend on average? What are their demographics? These are all important questions to ask when determining who that customer is.
Tip: Make use of insights, analytics, and marketing tools to help you profile those audiences and soon you will be able to find out WHAT to offer them.
2. Decide on what you can offer
Now that you have a few ideal personas based on actual data, you can start working out what you can offer in terms of rewards. Your loyalty program can incentivize customers based on your available budget as well as on their shopping behavior.
Remember, this is a competitive space and other retailers are after the same customer, so what are you prepared to offer that is unique, simple, valuable, and worth the effort?
Take things up a level with a layer of personalization. The best customer loyalty experiences are either personalized by individual shopping behavior and customer demographics or by creating a similar experience for a group of customers who share specific interests.
Tip: run a survey to find out what kind of rewards existing customers prefer!
3. Set up the rewards structure
Once you have worked out a budget and identified a few ways to reward your customers, it’s time for the fun part: working out how they will earn those points. This is where many retailers fail or sail, because they’re often tempted to roll out a complicated gamified program with too many levels and complex redemption rules right from the start.
Our advice from the examples we picked above is this: keep it simple.
You don’t want to put off your customers by making them jump through too many hurdles in order to enjoy the benefits of your loyalty program so if $1 spent can earn them 1 point, it’s easy to understand.
Don’t be afraid to introduce some gamification. A few levels and opportunities to gain more rewards could make your loyalty program so much more experiential. You can start with simple mechanics and build up new features as your program grows.
4. Decide where the transactions take place
Decide on where your customers will earn and burn their points. Will it be on an app or on a physical store card? How will the transaction work? Look at how well Starbucks does this by making it easy to pay for items with the app, and to top it up – we really like that it is ‘self-service’, so customers are in complete control of their points.
Our advice is to create an omnichannel experience for seamless interaction between online and bricks and mortar stores. Take a lesson from The North Face; their loyalty program makes it possible to earn points from downloading their app and checking into stores.
5. Leverage your partnerships
Another great way to build more value for your customers is to open up access to other retail partners in your network or physical location. Can you offer them a free cup of coffee at a neighboring store once they unlock a new membership tier? Why not?
6. Choose the right software
There are many reasons why these programs are so successful, one of them is the right software. Choose a loyalty app or software to manage your program if you’re looking to build something scalable and ready-to-use.
7. Create a marketing and communication strategy
Don’t forget about keeping in touch! You might be tempted to only focus on acquiring new members but your communication strategy should not end there.
Here are a few tips for marketing your loyalty program:
- Use transactional emails such as statements to advertise other relevant or personalized offers such as seasonal, birthday, or anniversary offers.
- Use insights and analytics gathered from your customer loyalty software to deliver personalized offers.
- Target social media promotions to new and current members.
- Send email invitations to current members to unlock exclusive offers or to be the first to know about big sales.
- Use referral marketing software to help you acquire new members.
- Send tactical emails to inactive users. Those “we miss you” emails once in a while work wonders, especially if you have just completed a big acquisition drive and have many sign-ups with a low amount of active members.
When it comes to running successful customer loyalty programs, we cannot stress enough how important it is to just keep things simple, clear, and easy to understand.
Offer tangible value to your customers, because this will keep them active. Make use of mobile apps to give members some control of how they use their points, and to make the transactions transparent because this will build trust with your customers.
Offer some level of personalization, even if it’s by curating a few products for a similar group of customers once a month.
With those basics in place you will have room to exercise all that creative flair!
Frequently Asked Questions
What are the best customer loyalty programs?
1. Amazon Moments (at no extra cost to your customers)
o You set up the moment and reward for you customers
o Customer engages and completes the action
o Amazon delivers reward to customer
2. Nordstrom: The Nordy Club
o Implemented a tiered loyalty program, in which customers could unlock new tiers of rewards and benefits by spending across all their subsidiaries.
3. Sephora- Beauty Insider
o Use a very successful loyalty point system, where customers decide how and when to use their acquired points for different rewards.
o Offer loyalty rewards through their app, integrated with other services to offer a unique brand experience.
5. The North Face VIPeak:
o Have a very successful tiered reward loyalty program, offering different, curated retail discounts so that each customer has a personalized rewards experience. They also reward customers for downloading their app.
What segment responds to customer loyalty programs best?
Loyalty programs are not applicable to all your customers or potential customers, as not every customer has the economic buying power or ability to make use of a loyalty program. It is therefore recommended that a loyalty program is put in place primarily to target the ‘frequent flyers’- these are the customers who frequent your stores, with the higher purchasing power. As a general guideline, 55 – 65% of your customers should be targeted for your loyalty program. This consists of the top 20% in terms of value, plus the next 35-45%, which represents the greatest potential. The remaining 35-45%, which are occasion buyers, should be targeted through market promotions.
What are the best hotel loyalty programs?
• Marriott Bonvoy
• World of Hyatt
• Hotels.com Rewards
• IHG Rewards Club
• Hilton Honors
• Expedia Rewards
• Golden Circle by Shangri-La
• Jumeirah Sirius
• Le Club AccorHotels
What are the best convenience store loyalty programs?
• Starbucks Rewards
• Amazon Prime Membership at Whole Foods Market
• PC Optimum from President’s Choice
• Beer Hawk Beer Tokens
• Wegmans Shoppers Club
• Tesco Clubcard
5 Reasons Why Amazon Moments Will Change How You Shop: https://www.forbes.com/sites/bryanpearson/2019/02/21/amazons-new-loyalty-program-5-reasons-amazon-moments-will-change-how-you-shop/#5c6273973acd
‘Amazon Prime was a game changer’: Retailers are rethinking loyalty programs: https://www.modernretail.co/retail/retailers-rethinking-loyalty-programs/
Nordstrom Rewards Nordy Club Perks: https://www.businessinsider.com/nordstrom-rewards-nordy-club-perks-benefits-2018-10?IR=T
8 Top Tips for Creating Killer Customer Loyalty Programs in 2019: https://acquire.io/blog/customer-loyalty-program/amp/
The North Face VIPeaks Program: https://www.thenorthface.com/vipeak-rewards.html
Examples of customer loyalty programs, Sephora Beauty Insider: https://loyaltylion.com/blog/spotlight-sephora-beauty-insider-loyalty-program
10 Examples Of Innovative Customer Loyalty Programs: https://www.shopify.com/blog/loyalty-program
The North Face Customers are Experiencing the VIPeak Loyalty Program: https://loyalty360.org/content-gallery/daily-news/north-face-customers-are-experiencing-the-vipeak-loyalty-program