How Different Loyalty Programs Drive Customer Retention?

Like many great things in the world, loyalty programs come in different forms and types.

When we hear "Loyalty Programs" Some may think of tiers and points, while others may think of discounts and exclusive offers. But a loyalty program is much more than that!

Let's talk about 5 most commonly used loyalty programs. Read on!

1. Tiered Loyalty Programs

As the name suggests the loyalty program sets aside different rewards for different tiers (levels) and it provides more valuable rewards to members in higher tiers. A study revealed that nearly 2/3 of customers tailor their spending to maximize loyalty points, making tiered loyalty programs highly profitable for businesses.

XpertXample- Total Tool's "Insider Rewards"

2. Subscription-Based Loyalty Programs

Also known as paid or premium loyalty programs, a subscription-based loyalty program needs its members to pay an advance or recurring (monthly, quarterly, or yearly) A McKinsey study found that paid loyalty program members are 60% more likely to make purchases, while those in free loyalty programs are only 30% more likely to do so.

XpertXample- Amazon Prime

3. Points-Based Loyalty Program

As the name suggests, a points-based loyalty program rewards members with points for every transaction, engagement, or activity. A study found that 7 out of every 10 customer's brand choice is heavily influenced by their capacity to earn rewards program points.

XpertXample- Chipotle Rewards

4. Value-Based Loyalty Program

As per a recent study, almost 60% of customers said that they would like to stick with brands that align with their values. Value-based loyalty programs highlight the business’s values and align that with customers’ values. Businesses that use value-based loyalty programs aim to build deeper connections with customers.

XpertXample- Toms Shoes' "Toms Rewards"

5. Spend-Based Loyalty Programs

The more you spend, the more points you get! The best thing about this type of loyalty program is that it’s extremely easy to create, manage, and understand. It has also proven to be an effective way to increase transaction amounts and reduce customer churn rates.

XpertXample- Sephora's "Beauty Insider"

Summing up, Even though loyalty programs come in different types and forms, they have one thing in common—to attract new customers and retain existing customers for a long time. Many companies are getting excellent results by understanding the strengths of different types of loyalty programs and combining complementary ones.

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At LoyaltyXpert, we have a proven track record and years of experience in designing loyalty programs for all sizes and types of businesses. If you want to leverage tailored non-financial rewards, contact us today to?book a free demo.