What Is a Loyalty Program? 6 Most Common Types

What is a loyalty program? Why does every business need to build one? In the article below, Mona Media will explain for you Loyalty Program what a loyalty program is and how many types of loyalty program are in common use today.

What is a loyalty program?

A loyalty program is a marketing strategy that encourages customers to keep using the services or buying the products of a particular business or brand. It offers customers gifts, discounts, special deals and rebates to bring them back to use the service or product. Today, most retail stores, airlines, hotels, restaurants and many other industries run loyalty programs to keep their customers. ->See more: What is 4C marketing? A special combination of the 4C and 4P models

Why is a loyalty program important?

Loyalty programs play an important role for a business because they bring the following benefits:

• Increase sales: A loyalty program encourages customers to come back and use the business's products and services. By offering exclusive, valuable deals to loyal customers, the program raises sales and revenue considerably. When customers feel cared for and enjoy exclusive, valuable benefits, they tend to shop and use the service more often and spend more.
• Build engagement and loyalty: A loyalty program helps build a longer-lasting, closer relationship between the business and its customers. Because they receive many benefits and privileges, customers tend to come back to the product or service as soon as they need it. This creates a strong bond between business and customer and avoids cases where customers choose a competitor's product or service.
• Collect customer information and analyze data: A loyalty program helps a business collect important customer information. By tracking customers' purchases, interactions and preferences, the business can gather valuable data on consumer behavior and feed it into its business strategies. Through data analysis, the business can understand its customers better, personalize the shopping experience and make marketing campaigns more effective.
• Build a good brand image: A loyalty program helps build and strengthen a positive brand image in customers' eyes. When customers enjoy the deals and benefits, they tend to speak well of the business and spread the word to others. This gives the business free marketing and more potential customers.
• Compete and retain customers: In today's fiercely competitive market, loyalty programs help a business keep its current customers and not lose them to competitors. By offering special benefits and deals to customers who use the service often, a business creates a barrier for customers who think about switching to other brands. It also makes it harder for competitors to win customers away.

6 common types of loyalty program

Discount

A discount loyalty program is a common format in which customers receive special deals and discounts based on how loyal they are to the brand or business. The more often customers use the business's products and services, the more deals and discounts they get. Offering discounts is an effective way to encourage customers to come back and stay loyal to the business.

Points system

A points-system loyalty program lets customers collect points based on how much they spend, how many purchases they make, how often they use the service, or by taking part in surveys. Once they reach a certain number of points, customers can exchange them for valuable rewards such as discount codes, gifts, or access to the business's exclusive products and services. ->See more: What is influencer marketing? How to run influencer marketing effectively

Cashback

A cashback loyalty program lets customers get back part of what they spend on each transaction. When customers buy a product or use a service, a certain percentage or a specific amount is refunded to their bank account or e-wallet. The refund can be used for the next purchase or service, or withdrawn as cash.

Club cards or member programs

A member loyalty program is a membership card that a business or brand gives customers when they use a service or buy a product. Customers can use the card to get deals such as discounts or to collect points. A membership card can also give customers benefits such as joining exclusive events, getting the latest news on products and services, premium deals, and a dedicated service experience.

Partnerships

A partnership loyalty program is one in which different businesses or brands work together to offer customers a wider range of benefits and deals. Through a partnership program, customers can get special deals or collect points from several businesses within the same ecosystem. For example, an airline's loyalty program can team up with a hotel chain, so customers collect points and get deals from both partners.

Coalition

A coalition loyalty program is an extended form of the partnership model. Here, many businesses in different industries work together to create one shared program. Customers can receive deals and discounts from every partner in the network and use them at any business they like, as long as it is part of the network. This gives customers variety and flexibility in using their reward points. ->See more: what a budget is? The best way to plan a marketing budget

Common types of loyalty program

Points-for-rewards shopping program

A points-based loyalty program is a common format in which customers earn points based on how much they spend and can then exchange the points for rewards or deals. This format encourages customers to shop more often and builds a closer connection with the business.

Tiered membership loyalty program

A tiered loyalty program is an advanced form of loyalty program. Customers are placed in different membership tiers based on how loyal they are and how much they buy and spend. Each tier has its own deals and benefits, such as bigger discounts, more special gifts, and access to exclusive events or special customer care. This program motivates customers to shop and spend more often to move up a tier, which brings a large revenue stream to the brand or business.

Paid loyalty program (VIP)

A VIP loyalty program is a premium format in which customers must pay a fee to join. By paying, they receive a range of exclusive deals and privileges that regular members do not get. A VIP program targets a special group of customers who want premium services and experiences. For example, airlines give their VIP customers benefits such as priority check-in counters for fast check-in, access to VIP lounges (with free food and drinks), priority security lanes without queuing, business-class seating, extra free baggage allowance, and the freedom to change flight times.

Examples of customer loyalty programs

Starbuck Starbucks Rewards is the loyalty program of Starbucks, one of the biggest coffee brands in the world. Here are the details of this brand's loyalty program:

• Earn and redeem points: Customers earn points every time they buy drinks or products at Starbucks. Every 1 US dollar (USD) spent equals 2 points. Customers can redeem their points for rewards and free offers.
• Membership levels: The Starbucks Rewards program has 3 membership levels: Green, Gold and the Starbucks Rewards Visa Prepaid Card. Each level has its own benefits and deals, such as joining exclusive events, birthday gifts, and early access to the sale of exclusive drinks and products.
• Birthday gift: Every customer in the program gets a free drink on their birthday.
• Partner deals: Starbucks also regularly works with partners to offer special deals to Starbucks Rewards members, including different brands such as Spotify, Uber and others.
• Mobile app: The Starbucks Rewards program is built into the Starbucks mobile app, so customers can easily track their points, manage their account and find the nearest stores.

->See more: What is Marketing 4.0? The evolution of marketing in the digital era Amazon Amazon Prime is a paid membership program from Amazon, one of the biggest e-commerce companies in the world. Specifically:

• Free and fast shipping: Prime members get free, fast shipping on millions of products marked “Prime” on Amazon. This includes same-day delivery, two-day delivery, or delivery within a specific time frame depending on the shipping address.
• Access to online entertainment: Prime Video is Amazon's online video streaming service. Prime members can access a library of movies, TV shows and Amazon originals, including films, series and Amazon's own productions.
• Access to music: Prime Music is Amazon's online music service. Prime members can listen to millions of songs, create personal playlists and even download them to listen offline.
• Special deals and discounts: Prime members often get special deals and exclusive discounts on certain products and services. This includes big shopping events such as Amazon Prime Day, when there are many deals and discounts on thousands of products.

This article, Mona Media has given you all the information about Loyalty Program is, how many types of loyalty program there are today, and what benefits a loyalty program brings to a business. We hope the information above is useful to you. Don't forget to visit Mona Media for more helpful articles about Marketing, SEO and websites.