CUSTOMER LOYALTY

How to Choose the Perfect Loyalty Rewards To Maximize Customer Retention

by Emma Kimmerly

May 26, 2023


Customer loyalty is the backbone of your business. It's what turns one-time buyers into repeat customers, and repeat customers into brand advocates

But how do you cultivate that loyalty? 

One of the most effective ways is through a well-designed loyalty rewards program. 

In this post, we'll explore different types of loyalty rewards and provide actionable insights on how to choose the right ones for your business. 

Whether you're a SaaS company, a fashion brand, or a food subscription service, we’ve got a loyalty rewards plan for you with some data to back it up.

Types of Loyalty Rewards

We know that customer loyalty programs increase customer lifetime value (CLV), sure. But which loyalty rewards actually motivate customers to keep coming back for more? Well, that depends on your business and what your loyal customers want.

Here are the most popular (read: successful) customer loyalty rewards that businesses use to encourage repeat purchases and increase customer lifetime value steadily.

Points-Based Rewards

Businesses are always looking for ways to keep their customers coming back. One of the most effective methods is a Points-Based Rewards system, where customers earn points for every dollar they spend, creating a strong incentive for repeat business.

This not only encourages customers to make more purchases, but also more expensive ones, as they strive to earn more points.

But loyalty points don't stop at purchases. Brands are also rewarding different types of customer actions, like writing a product review, referring a friend, or sharing your content on social media. Bonus points for different customer behavior other than purchases not only boosts engagement but also turns your customers into brand ambassadors.

Saalt rewards customers for a few different actions that support the brand in ways other than by making purchases.

Then, loyalty members can redeem points at checkout, bringing them back into your shop and building customer loyalty for life.

Annmarie Gianni makes it easy to keep track of all loyalty rewards points as well as redeem them by including easily spotted buttons to redeem rewards.

The key is to make your points system simple, transparent, and valuable. Customers should easily understand how to earn points and what they can redeem them for. And the rewards should be something they genuinely want. 

Tiered Rewards

In the world of customer loyalty, Tiered Rewards programs are a game-changer… literally. Using gamification principles, these programs are designed to incentivize existing customers to engage more with your brand, and in return, they receive increasingly valuable rewards.

This doesn't just apply to customer loyalty programs, either. This can be used with referral programs too.

Nuuly is an excellent example of how to do this with a referral program. Nuuly's referral program has a tiered system, which provides ongoing benefits to regular customers based on how many new customers they refer.

Some of these tier-based benefits could include free products, subscription add-ons, or ongoing free shipping.

Aloha Collection's customer loyalty program has a tiered system that increases its point multiplier for every new tier loyalty program members join.

But here's the beauty of tiered rewards: they don't just incentivize spending. You can reward customers for a variety of actions, like sharing your content on social media, writing reviews, or referring friends. This way, you're not only boosting engagement but also turning your best customers into brand ambassadors.

That's exactly what Aloha Collection does with the brand's loyalty program. Loyalty members can earn points for every dollar they spend, as well as for creating an account, celebrating a birthday, following Aloha's social media accounts, leaving a review, and referring friends.

By providing customers multiple opportunities to earn points, the brand is able to retain customers for longer and increase customer revenue. It's a simple yet powerful strategy.

The key to a successful tiered rewards program is to make the benefits of moving up the tiers clear and enticing. The rewards should be valuable and relevant to your customers, and the process of earning them should be straightforward and enjoyable. 

Surprise & Delight Rewards

In the world of loyalty programs, sometimes the unexpected can make a big difference. That's where Surprise & Delight rewards come in. These are unexpected rewards that businesses give to their customers, often as a thank you for their loyalty.

There are many Surprise & Delight perks you can offer to boost customer loyalty, like offering a free item periodically for no reason (or for a birthday), sending through an exclusive discount to loyalty program members, or other perks that will foster customer relationships without expecting anything in return.

Our customer Nuuly takes this approach when greeting new customers in their inbox before they've even signed up for their subscription.

Another innovative way to implement this is by rewarding customers for pausing or delaying their subscription. This might seem counterintuitive - don't you want customers to use your service as much as possible? But in reality, giving customers the freedom to control their subscription frequency can actually increase their loyalty.

Some customers might not need a new box every month. By giving them the option to pause or delay their subscription, you're showing that you understand their needs and respect their choices.

And when you reward them for doing so - perhaps with a special discount or an exclusive gift - you're creating a positive experience that can strengthen their loyalty.

No matter how you choose to surprise and delight your customers, it's a win-win situation. Customers feel valued and appreciated, and businesses maintain a positive relationship with their customers.

See how Nuuly's referral program generated thousands of organic subscriptions within weeks.

 

Cash Back Rewards

Cash Back Rewards programs are a win-win for both small businesses and customers. As a business owner, you could offer a percentage of a customer's total purchase value as cash back, which they can use on future purchases. This not only encourages repeat business but also increases customer satisfaction.

To get an idea of just how powerful cash back rewards can be in any type of rewards program, let's take a look at one of our most successful customers. Casper, an e-commerce brand that sells mattresses, found that offering cash or gift cards worked better at incentivizing referrals than dollar-based discounts.

They offer a $75 gift card to Advocates (existing customers who refer new customers), and Friends (the referred customers) get a discount. This incentive structure had a 7x higher lift than their average marketing investment.

While cash rewards are simple, they are powerful.

How Casper Generates Greater Return With Referral Marketing

 

Subscription-Based Rewards

Subscription-Based Rewards programs are a great way to build a loyal customer base. Think of a subscription or premium loyalty program kind of like a VIP club. Customers pay a little upfront, and in return, they get instant access to some really cool perks, such as free shipping, discounts, or members-only content . It's all about making the customer feel like a rock star and showing them they're at the heart of what makes the brand special.

The key to this successful subscription-based program is to offer value that far exceeds the cost of the subscription, ensuring customers feel they're getting a great deal.

Charitable Rewards

Charitable Rewards programs are a fantastic way to align your business with your customers' values. These programs allow customers to donate their rewards to a charity of their choice.

For instance, if you run a sustainable clothing brand, you could offer a program where customers can choose to donate a percentage of their purchase value to an environmental charity. This not only encourages customer loyalty but also enhances your brand's reputation as socially responsible.

Game-Based Rewards

Game-Based Rewards programs add an element of fun to customer loyalty programs. These programs reward customers with points or prizes for participating in games or contests. For example, if you run a restaurant, you could offer a "foodie bingo" where customers get a stamp for each menu item they try. Once they complete a row or column, they get a free meal. This not only encourages repeat business but also enhances customer engagement.

Community-Based Rewards

Community-Based Rewards programs are a great way to build a sense of community among your customers. These programs reward customers for participating in your brand's community, such as writing reviews, referring friends, or sharing your content on social media. For example, if you run an online beauty store, you could offer points for customers who write product reviews or share their beauty tips on your forum. This not only boosts customer engagement but also provides valuable user-generated content for your brand.

Exclusive, Limited Products

Exclusive, Limited Products rewards programs offer customers access to products that are only available to members of the loyalty program. For instance, if you run a craft beer brewery, you could offer members exclusive access to limited-edition brews. This creates a sense of exclusivity and value, encouraging customers to join and stay active in your loyalty program.

VIP Experiences

VIP Experiences rewards programs offer high-value customers exclusive experiences or events. For example, if you run a luxury fashion brand, you could offer top-tier members invites to exclusive fashion shows or meet-and-greets with designers. This not only rewards your most loyal customers but also enhances their emotional connection to your brand.

First Access to Products

First Access to Products rewards programs offer loyalty program members the opportunity to try new products before they are released to the general public. For instance, if you run a tech gadget store, you could offer members early access to new releases. This creates a sense of exclusivity and anticipation, encouraging customers to stay active in your loyalty program.

Charitable Donations

Charitable Donations rewards programs allow customers to donate their rewards to a charity of their choice. For example, if you run an online bookstore, you could offer customers the option to donate a percentage of their purchase value to a literacy charity. This not only encourages customer loyalty but also enhances your brand's reputation as socially responsible.

Mobile Experiences for Convenience

This type of rewards program offers exclusive mobile and in-app perks to make using their brand even more convenient. For instance, if you run a coffee shop (ahem, Starbucks), you could offer a mobile app where customers can earn rewards, place orders, and pay right from their phone.

Taking a look at the best loyalty programs out there, we can see how Starbucks prioritizes the loyalty program members by making it easy to earn rewards, either by scanning in-store or ordering ahead on the app.

This not only enhances customer convenience but also encourages repeat business and engagement with your brand.

How to Choose the Right Loyalty Rewards for Your Business

Choosing the right loyalty rewards for your business is a strategic decision that requires understanding your customers, your business model, and your industry. Here are some key factors to consider:

  • Understand Your Customers: What motivates your customers? What do they value? If your customers are price-sensitive, discounts or cash back rewards might be appealing. If they value exclusivity, consider offering early access to new products or VIP experiences. If they're socially conscious, charitable rewards could resonate with them.
  • Align with Your Business Model: Your rewards should align with your business model and goals. If you're a retailer, points-based rewards for purchases can drive repeat business. If you're a subscription service, offering exclusive content or features can enhance the value of your subscription. If you're a SaaS business, rewards that encourage usage and engagement can boost customer retention.
  • Consider Your Industry: Different rewards might be more effective in different industries. In the beauty industry, rewards that enhance the customer's experience with your products, like exclusive tutorials or personalized advice, could be effective. In the food industry, rewards that enhance the enjoyment of your service, like exclusive recipes or cooking classes, might work well.
  • Incentivize Desired Behaviors: Think about the behaviors you want to encourage. If you want to boost customer engagement, consider rewards for actions like writing reviews or sharing your content on social media. If you want to encourage larger purchases, a tiered rewards program could be effective.
  • Keep It Simple and Transparent: Whatever rewards you choose, make sure your program is easy to understand and transparent. Customers should know how to earn rewards and what they can redeem them for.

 

Industry

Explanation

Example

SaaS

Consider rewards that encourage usage and customer loyalty. Tiered rewards that offer more features or better service as customers use your tool more frequently can be effective. Also, consider your cost per acquisition on other growth channels. If it's low, you might have more flexibility in the offer you provide.

Offer more features or better service as customers use your tool more frequently.

Accessories

Consider offering exclusive or limited-edition items as rewards. This can create a sense of exclusivity and value. Also, consider your average order value (AOV). If it's high, a dollar-based discount might be more attractive than a percentage-based one.

Offer a limited-edition accessory as a reward for reaching a certain number of points.

Health & Beauty

Health and beauty brands often see success with free product rewards. This not only allows customers to try new products but also enhances their experience with your brand. Also, consider your other offers. If you're already offering discounts for subscribing to SMS or email, make sure your loyalty rewards are even more enticing.

Offer a free product after a certain number of purchases.

Food & Beverage

Consider rewards that enhance the enjoyment of your service, like exclusive recipes or cooking classes. Subscription brands might benefit from credits applied to the next subscription. Also, consider your AOV. If it's low, a percentage-based discount might be more attractive.

Offer a free cooking class as a reward for subscribing to your service for six months.

Home Goods

Consider rewards that enhance the customer's experience with your products, like exclusive design tips or early access to new collections. Also, consider your AOV. If it's high, a dollar-based discount might be more attractive.

Offer early access to a new collection as a reward for reaching a certain number of points.

Technology

Consider rewards that enhance the customer's experience with your products, like early access to new releases or exclusive tech support. Also, high consideration benefits from cash or cash equivalent rewards.

Offer early access to a new product as a reward for reaching a certain number of points.

Fashion / Apparel

Consider offering exclusive or limited-edition items as rewards. This can create a sense of exclusivity and value. Also, consider your AOV. If it's high, a dollar-based discount might be more attractive.

Offer a limited-edition item as a reward for reaching a certain number of points.

 

Conclusion

Need a hand setting up a loyalty rewards program that fits your business like a glove? Our team is ready to help. Reach out to us and let's get your customers coming back for more. Let's do this together.

 

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