The Ultimate Guide to Customer Loyalty Programs

Customer loyalty programs are a proven way to keep shoppers coming back. A report by Queue.it shows that around 65% of a brand’s revenue comes from repeat customers.  Whether it’s through points, discounts, or exclusive perks, these programs help businesses retain customers and boost sales.

But not all loyalty programs work the same way. Some focus on rewards, while others prioritize personalized experiences. The key is choosing the right type for your business and customers. In this blog, we’ll understand what customer loyalty programs are, their different types, real-world examples, and important factors to consider when building one.

What are Customer Loyalty Programs?

Customer loyalty programs are structured marketing initiatives designed to incentivize repeat purchases and foster long-term engagement. These programs work on the simple premise that the brands offer their customers some lucrative incentives, offers, and discounts in return for their customer’s repurchase from the same brand. Ultimately, the brand and the customers are tied together in the loop of repeated purchases and interactions.

What Do The Customer Loyalty Programs Bring to the Brand’s Table?

The customer loyalty programs not only benefit the customers with some tangible assets and offers but certainly they also bring a great deal from the brand’s perspective as these programs help the brands in these certain ways;

• Improved Customer Retention: Customer loyalty programs are often credited for improving a brand’s customer retention rate. Customer retention is nothing but the ability to keep the customers coming back to the same brand and making significant purchases. This retention metric helps the brands effectively calculate the impact of the loyalty program, audience reception, and participation.  Plus, as per a study by the Harvard Business School, it is believed that even a slightest 5% hike in the customer retention rate can hike up a business’s profit margins by 25%-95%.
• Better Brand Recognition & Customer Insights: With the commencement of a brand’s loyalty program, its recognition and popularity are bound to have a great leap amongst the audiences in general. Along with better brand recognition, the loyalty programs also assist in giving better customer insights to the brand. Brand loyalty is only a successful marketing plan if it resonates well with the customer.
• More traffic, More Customers: As the brand loyalty programs offer vivid and attractive offers and discounts the brand’s can also expect to have good traffic channelised towards their routes. And eventually more traffic means more potential customers.
• Enhanced Revenue Streams: Loyalty programs encourage repeat purchases by rewarding customers for their continued engagement. It is also seen that returning customers tend to spend more than new ones. Thus, by offering points, discounts, or exclusive perks, brands can increase average order value, reduce customer churn rates, and eventually reflect in their enhanced revenue.
• Improved Levels of Customer Satisfaction: Personalized rewards and recognition make customers feel valued and validated. This not only increases the customer’s satisfaction but also heightens their participation levels for the upcoming campaigns.
• Cost Benefits: The cost of acquiring a new customer is higher than retaining an existing one. Therefore, customer loyalty programs provide businesses with cost benefits due to their nature of engaging customers.

What Criteria Should Brands Consider Before Choosing the Right Loyalty Program?

There are a plethora of different types of loyalty programs for brand’s marketing programs however, a brand’s loyalty program should be finalized and based out of the following criteria for making the right decision;

• Intent: The brand should have a clear intent when it sits down to finalize the type of loyalty program it would like to opt for. Their intentions behind launching a loyalty program may range from increasing their customer base to collecting data, but with every possible manner, they have to align with their goals.
• Competition: The retail space is a crowded place, hence, the brands ought to have competition in their respective field. So, to stay ahead of the competitive curve, brands should keep a close eye on their competitors and their offered loyalty programs so that they don’t come out as identical or similar to their competitors in the eyes of the audiences.
• Niche: The brand should be fully aware of its niche and target audiences to whom they are trying to cater eventually. Having the knowledge and awareness of all things and gestures that motivate their customers to buy can help devise the most effective and successful marketing plan.

Types of Customer Loyalty Programs

1. Tier based loyalty programs:

The tier-based loyalty programs are those programs that enable the users to upgrade their tiers with some purchases they make from that particular brand. Usually, these programs have three tiers and their associated perks offered to their customers.

For instance, Nestlé runs a three-tiered loyalty program, and the members of the loyalty program get assigned any of the tiers as per their spending with the company. These tiers have specified rewards associated with them that keep their existing customers hooked to the brand.

2. Points-based loyalty programs:

The next category of loyalty programs is points-based loyalty programs. In these programs, the customers get to collect some points after each purchase, and once a significant number of points are accumulated, they can redeem those points for enjoying some rewards and perks.

To explain the concept of points-based loyalty programs, let us take the example of a hotel chain. If a customer chooses to stay loyal to the hotel chain each time they travel, then with each stay, they can get some points that can be redeemed the next time they plan a stay at that hotel chain. They can get additional discounts, room upgrades, and other benefits by collecting points and redeeming them. This type of loyalty program is opted for by the famous hotel chain, Marriott International, Inc.

3. Fee-based loyalty programs:

Then there are the fee-based or subscription based loyalty programs. These programs basically work on the mechanism of paying a fee for getting additional discounts and special offers.

This model is adopted by Amazon with their Prime membership programs, which offers one day delivery and extra discounts for the members of the program.

4. Gamified loyalty programs:

The easiest way to attract and retain the attention of your customers is through introducing enticing and engaging gamified loyalty programs. This kind of program keeps the customers engaged and entertained for a long time.

Thus, the renowned coffee chain Starbucks is also considering using a gamified loyalty program to engage its customers worldwide.

5. Value- propagating loyalty programs:

Last but not least, there are value-propagating loyalty programs. These programs ensure to connect with the brand’s customers by resonating a similar set of values that is synonymous with the brand’s perspective and ideology. These initiatives make brands shine in a very positive light in front of their customers.

One such value propagating loyalty program is launched by Ben & Jerry’s, which partners with the local dairies and works for their welfare and development under the name “Caring Dairy” partnerships.

6. Referral Program:

Referral programs incentivize existing customers to recommend a brand to friends or family in exchange for rewards. This leverages word-of-mouth marketing, which has high conversion rates since people trust personal recommendations.

7. Punch Card and Rebate Program:

A punch card (or stamp card) program rewards customers after a set number of purchases, while rebates offer cashback or discounts post-purchase. These programs encourage repeat visits and higher spending.

8. Partner Program:

Partner programs involve collaborations between complementary brands to offer shared rewards, expanding reach and customer value. Two or more brands can even team up to provide joint loyalty benefits (e.g., airline + hotel points). Thus, the customers earn rewards redeemable across partner networks.

Some Brilliant Examples of Loyalty Programs

Here are some of the real-world examples of customer loyalty programs:

• Walmart+:

Walmart+ is a subscription-based loyalty program designed to enhance convenience and savings for frequent Walmart shoppers. For a flat annual or monthly fee, members gain access to benefits like free shipping on online orders, free same-day delivery on groceries and other items, and exclusive fuel discounts and early notifications on special occasions like Black Friday.

• MyMcdonalds:

MyMcDonald’s Rewards is a points-based loyalty program tied to the McDonald’s mobile app, aimed at driving repeat purchases and digital engagement. Customers earn 100 points for every dollar spent on qualifying purchases, which can be redeemed for free menu items across four reward tiers (e.g., 1,500 points for a small fries, up to 6,000 points for a Big Mac).

• Adiclub:

This is Adidas’ free, tiered loyalty program that blends points-based rewards with exclusive experiences, targeting both sports enthusiasts and fashion-forward customers. The program features four levels—Level 1 (entry) to Level 4 (elite). That offer escalating perks like free shipping and early access to sneakers.

• The Northface XPLR Pass:

The North Face XPLR Pass is a free, points-driven loyalty program tailored to outdoor adventurers, emphasizing exploration and brand affinity. Members earn 1 point per dollar spent, redeemable for discounts, alongside unique perks like early access to limited-edition gear, member-only field testing of products, and free shipping on all orders.

• IKEA Family:

IKEA Family is a free membership program designed to reward frequent shoppers while enhancing the IKEA experience. Members enjoy perks like exclusive discounts on products, free coffee or tea in-store, and a 90-day price protection guarantee.

• SKIMS:

SKIMS Rewards is a points-based loyalty program from the shapewear and loungewear brand SKIMS, designed to foster repeat purchases and brand loyalty. The program offers tiered benefits, including early access to new drops and VIP perks for top spenders.

These successful examples prove that well-designed loyalty programs drive growth. But how can you replicate this success for your brand? Learn how to implement cutting-edge loyalty solutions with our comprehensive Salesforce Loyalty Cloud guide.

Challenges in Traditional Loyalty Programs

There are certain challenges in the traditional setup of customer loyalty programs. Let us discuss those challenges one by one:

1. Lack of Personalization:

Many legacy programs use a one-size-fits-all approach, offering the same rewards to all customers regardless of their preferences or purchase history. This results in customers feeling undervalued, reduced engagement, and eventually missed opportunities for cross-selling and upselling.

2. Poor User Experience:

Often, complicated redemption processes, outdated interfaces, or a lack of mobile optimization can easily frustrate the user and make their experience not worth remembering. This can either create a bad brand image or result in lower perception rates for your loyalty program.

3. Lower Perceived Value of Rewards:

Generic discounts and lower perceived rewards are showdown for the customers and steals them out of excitement. Thus, the customers are bound to move towards the competitors.

4. Struggle Without Automation:

Manual processes (e.g., tracking purchases via punch cards or spreadsheets) lead to errors and inefficiencies. This leads to inconsistent reward fulfillment and damages customers’ trust.

While traditional loyalty programs face significant challenges, platforms like Salesforce Loyalty Cloud provide an efficient solution to overcome these limitations. Let’s discuss more about the platform in detail.

How Can Salesforce Loyalty Cloud Help?

Salesforce Loyalty Cloud, also known as Salesforce Loyalty Management, is a specialized platform within the Salesforce ecosystem. It is designed to assist businesses in creating, managing, and optimizing loyalty programs tailored to their specific needs. This platform is closely integrated with Salesforce’s Customer 360 Platform, allowing businesses to deliver personalized and connected loyalty experiences across various platforms and customer touchpoints.

Features offered by Salesforce Loyalty Management

1. Customer 360 Insights:

With Salesforce loyalty management, companies get a full 360° view and update regarding their customers and their actions. Tracking the redemption cycle of the points and referrals also becomes easy.

2. Alterable Program Configuration:

With Loyalty Management, brands can customize and alter their customer loyalty programs without any hassle, according to their needs, requirements, and industry types.

3. Tableau Analytics:

The infusion of advanced technologies and AI-powered assistance of the Tableau analytics with the Salesforce Loyalty Management makes forecasting and data-driven decision-making convenient like never before.

4. Swift Integration Capabilities:

Sometimes, the brands might also want to incorporate the capabilities of other software as well, so the Loyalty Management allows swift and seamless integration with just a few licenses with other software, allowing the brands to not even lift a finger to get the job done.

How To Create a Customer Loyalty Program?

There are various stages involved in creating a successful loyalty program. Let us understand these stages briefly:

1. Pre-Implementation Stage:

The initial stages require careful planning and groundwork. It is essential to clarify the intentions behind launching the loyalty program and to identify the desired outcomes. Next, assess the customer data to determine the type of loyalty program to implement. This process also includes selecting the mechanisms for points redemption.

2. Implementation Stage:

After completing the planning stages, leverage the capabilities of Salesforce Loyalty Cloud to finalize all elements and functionalities of the loyalty program. This includes defining point earning, tier progression, and reward management. Additionally, assess whether there is a need to develop APIs for external integrations before proceeding with the final implementation and user acceptance testing (UAT).

3. Post-Implementation Stage:

The final stage consists of reviewing everything from sandbox to production to reduce disruptions. Ensure that you monitor and analyze key metrics once the program is live, such as member engagement, reward redemption, and overall program effectiveness.

Summing Up

Customer loyalty programs are a powerful tool for brands looking to strengthen customer relationships and drive repeat sales. By offering tailored rewards and personalized experiences, businesses can significantly increase retention and revenue. However, designing an effective program requires strategic planning and seamless execution.

This is where Cyntexa steps in. We specialize in creating customized loyalty solutions that align with your brand’s identity and business goals through our Salesforce Loyalty Implementation Services. From personalized engagement strategies to connected, data-driven reward systems, we help you build loyalty programs that keep customers coming back.

AUTHOR

Jagrat

AppExchange, Salesforce Community Cloud, Loyalty Cloud

Jargrat, Delivery Manager at Cyntexa, has 7+ years of experience in the Salesforce ecosystem. He specializes in Salesforce AppExchange, Community (Experience) Cloud, and Loyalty Management, Jagrat excels in building scalable, customer-centric platforms that foster engagement, loyalty, and seamless digital experiences for businesses.