How can you segment your loyalty program members for targeted rewards?

1 Segment by purchase frequency and value

One of the most common ways to segment your loyalty program members is by how often and how much they buy from you. You can use metrics such as recency, frequency, and monetary value (RFM) to identify your best, average, and low-value customers. Based on these segments, you can offer different levels of rewards, such as free shipping, discounts, or exclusive access to new products or services. For example, you can reward your best customers with a higher percentage of points or cash back for every purchase, or invite them to a VIP club with special benefits.

2 Segment by product or service category

Another way to segment your loyalty program members is by the type of products or services they buy from you. You can use data from your customer relationship management (CRM) system or your point-of-sale (POS) system to track what categories your customers are interested in, and what they are likely to buy next. Based on these segments, you can offer relevant rewards, such as coupons, samples, or recommendations for related products or services. For example, you can reward your customers who buy books from you with a free e-book or audiobook, or suggest them other titles they might enjoy.

3 Segment by customer feedback and satisfaction

A third way to segment your loyalty program members is by how they rate and review your products or services. You can use tools such as surveys, ratings, reviews, or net promoter score (NPS) to measure how satisfied your customers are with your brand, and how likely they are to recommend you to others. Based on these segments, you can offer different rewards, such as thank-you notes, testimonials, referrals, or loyalty badges. For example, you can reward your customers who give you positive feedback or referrals with a personal message or a shout-out on your social media channels, or reward them with a loyalty badge that they can display on their profile.

4 Segment by customer demographics and psychographics

A fourth way to segment your loyalty program members is by their personal characteristics and preferences. You can use data from your CRM system, your website analytics, or your social media platforms to collect information about your customers' age, gender, location, income, lifestyle, interests, values, and personality. Based on these segments, you can offer customized rewards, such as personalized offers, content, or experiences that appeal to their needs and wants. For example, you can reward your customers who are young and adventurous with a travel voucher or a curated itinerary, or reward them with a personalized video or blog post that features them or their stories.

Segmenting your loyalty program members for targeted rewards can help you increase customer loyalty, retention, and advocacy. By offering rewards that match your customers' preferences and behaviors, you can make them feel valued, appreciated, and engaged with your brand. How do you segment your loyalty program members for targeted rewards? What are some of the benefits and challenges of doing so?