A Case for Loyalty Programs – Increase ROI


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A Case for Loyalty Programs – Increase ROI

Loyalty programs have been around for decades, and they are more relevant than ever—they are a top choice for businesses looking to increase repeat sales and build long-term relationships. Why are they so effective? Because who doesn’t love free stuff and discounts? Let’s dig into the types of programs, and how your business can best use one to increase ROI.

Common Types of Loyalty Programs
Different types of loyalty programs cater to different customer behaviors and target audiences, aiming to provide a personalized experience. That’s the beauty of loyalty marketing—there are all sorts of flavors. Where some programs are paid and offer big deals, others are free and offer smaller but accrued/tiered deals. Let's explore the most common program types.

  • Point Based — reward customers for shopping. This type of program accumulates points that customers can redeem for rewards, free products, and exclusive discounts. Loyalty points might also be earned through desired customer behaviors, such as referrals and social media engagement.

  • Tiered — offer customers different levels of rewards and benefits based on a membership tier. By reaching purchase thresholds, customers can unlock higher tiers, leading to a sense of achievement and loyalty. The benefits of higher tiers may include exclusive access to new products, free shipping, and increased rewards points. This type of loyalty program is an effective way for businesses to reward customers at different spending levels. By offering lower tiers, companies ensure that any customer can benefit from the program.

  • Subscription — tend to offer a paid membership that grants customers exclusive benefits and rewards. For a recurring fee, customers gain access to perks like free shipping, exclusive products, and specialized services. These programs not only generate a consistent and predictable revenue stream, but they also nurture customer loyalty. Members enjoy benefits such as early access to new products and dedicated customer service, incentivizing repeat purchases. Subscription loyalty programs offer a compelling value proposition, enticing customers to become paid members.

  • Co-Branded — offer a wide range of rewards and benefits by partnering with other businesses. This creates a win-win situation, expanding brand reach for all involved. A co-branded loyalty program is more of an offshoot of the programs mentioned above.

The 3Rs and Building an Effective Loyalty Program
Creating a successful loyalty program breaks down nicely into 3 Rs—rewards, relevance, and recognition. In short, all successful programs offer a tailored and relevant experience for users. Let’s look at a few simple yet powerful ways to incorporate the 3Rs into your own program.

  1. Segment customers
    Categorize customers based on demographics, purchase behavior, and loyalty levels. Effective segmentation helps identify and target different customer groups, encouraging loyalty and retention. And creating tiers and levels of rewards for different segments can increase engagement and loyalty. Wouldn’t you want a more relevant benefit and reward?

  2. Design rewards for ease of use
    Simplify reward structures and program rules to enhance your customer experience and participation. Programs need easily redeemable and accessible rewards (QR codes, electronic submissions, points and etc). And clear communication of program benefits and rewards can prevent customer confusion. We find that making rewards and benefits easily accessible both online and via mail-in options is a great way to improve the overall program experience.

  3. Let customers track and redeem rewards online
    A seamless experience allows for redeeming rewards and benefits increases overall program engagement—which in turn increases brand loyalty. Many people live behind a screen. Convincing them to request rewards by mail or phone-in to track benefits is a great option to have. But you will alienate a large portion of potential users.

  4. Offer exclusive benefits
    Exclusive offerings are what sets loyalty programs apart. Exclusive access to new products, services, and/or events is an awesome way to get new hands on new products. Additionally, you can offer higher-tier rewards and benefits to recognize high-value customers. Benefits such can include free shipping, early access to sales, and exclusive discounts. Or even offer dedicated customer service and support.

  5. Regularly review and update offerings
    Regularly evaluating and enhancing loyalty program offerings is crucial for ensuring their relevance and effectiveness. By analyzing customer feedback and program data, businesses can identify areas of improvement and new opportunities for rewards. Adapting rewards and benefits based on customer preferences and behavior enhances engagement and loyalty. Moreover, incorporating innovative rewards keeps customers engaged and loyal to the program, increasing its overall success. Regularly reviewing and updating offerings is essential for maintaining a fresh and appealing loyalty program.

Examples of Great Loyalty Programs
Starbucks logo for loyalty program

  • Buy more coffees. Earn points to use towards a free coffee
  • Use both the website and app to manage rewards
  • Double points days, order ahead, and exclusive freebees
  • Get 1 point if you pay with the app. Get 2 points if your preload your account balance or buy gift cards
  • Enjoy even more rewards through co-branded partners (like a free coffee when traveling with Delta)

Amazon Prime
Amazon Prime logo for loyalty program

  • $15/month or $139/year. Students and government employees get 50% off
  • Try the 30-days for free
  • Get free 2-day delivery on most purchases
  • Enjoy ad-free podcast, music, tv, and video game streaming
  • Exclusive deals and try clothing before you buy it

Sephora Beauty
Sephora Beauty logo for loyalty program

  • 3-tiers: insider (free), VIB (spend over $315/yr), and Rogue (spend over $1,000/yr)
  • Exclusive seasonal and point-multiplier events
  • Get more options as you move up tiers
  • Rogue tier get first access to products
  • 25% off your first purchase when joining
  • Co-branded deals with Kohls

Get Started With Your Own Subscription Loyalty Program

Sempris has been in the game of building, managing, and upselling subscription loyalty programs for 20+ years. Our time-tested programs are proven to provide fun new ways to engage customers and drive more sales. For more information on our custom programs, click here.

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