loyalty program

Do Customer Loyalty Programs Really Work?

Generating loyalty for your brand and business continues to require creativity and innovation. With a company like Amazon offering a loyalty program with free two-day shipping on nearly everything they sell, getting your customers to stick with you can be tricky.

Studies have shown that nearly 80 percent of customers are likely to stay with a business if it offers a loyalty program. Additionally, 73 percent of customers say they are likely to recommend a business that has a good loyalty program. 

The truth is creating loyal customers who stay with your business doesn’t have to be difficult. Customer loyalty programs are one of the easiest ways to keep customers coming back. However, there are two questions you need to answer before starting or even continuing your loyalty program: 

1. What type of loyalty program makes the most sense for my business? 

2. What are the incentives for customers? 

Different Types of Loyalty Programs

There are a few main types of loyalty programs that range from free to the customer to a monthly/annual cost. The type of program you choose will impact the types of incentives you offer. Here are a few common types:

Point-based

These are some of the most common types of loyalty programs. Point-based programs are usually free to the customer, and they accumulate points as they spend on your brand. They can redeem those points for free products, services, or different perks. Generally, this takes time for the customers to accumulate enough points to redeem any value from the program. 

Paid

If you’re looking to offer a more immediate incentive for a customer to join your loyalty program, a paid subscription is what you’re looking for. This is a monthly or annual subscription that offers direct benefits to customers like free shipping, discounted service visits, access to VIP service, etc.

Tier-based

This can be looked at as more of a combination of the two above programs. It can start out as a free rewards program but offer different tiers that cost more and offer more incentives. This works like the point-based program because the more a customer spends at your business, the more points they collect to redeem later. 

Let’s take a look at some companies with the best loyalty programs right now. 

Amazon‘s Loyalty Program

As we mentioned above, Amazon offers one of the best paid-based loyalty programs out there. It’s one of the reasons the company is continuing to forecast revenue growth in spite of the global pandemic. 

Customers seem not to mind the $119 annual fee to pay for the benefits of a Prime Membership. Not only do Prime members get free two-day shipping on millions of products on the Amazon website, but they also enjoy thousands of free shows and movies on its streaming app. 

Sephora‘s Loyalty Program

The beauty retailer is an excellent example of a tiered-based loyalty program. Customers can join it for free or pay a fee to get better incentives. The free program offers free shipping on orders $50 or more, while the next tier (at $350 per year) lowers that minimum to $35. If you’re a really loyal customer you can spend $1,000 per year and get free shipping no matter what you spend. 

For each level, you earn 1 point for every dollar you spend and you can redeem the points for free merchandise. The company also offers discounts on seasonal savings events with each tier getting you a higher discount. 

Starbucks Loyalty Program

If you’re looking to offer a free loyalty program, look no further than the Starbucks rewards app. The coffee company’s app not only offers free drinks, online ordering, and other incentives, but it also learns about its customers along the way. 

The more Starbucks-lovers use the app the more the company learns what they like and when they’re likely to spend money getting the drinks they love. This kind of data can drive sales, marketing campaigns, and more.

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