marketing-strategies | 4 mins read

The Big 5- Types of Loyalty Programs and How to Find What's Best for You

the big 5 types of loyalty programs and how to find whats best for u 1643648992 4853
Kanika Jain

By Kanika Jain

What is a Customer Loyalty Program and How Can it Help my Business ?

With ever-increasing competition in the market, people have hundreds of options to choose from. It's not enough for businesses to offer the best product or service, or even a great customer experience to make sure customers become brand devotees. They have to reward customers for simply walking through the door in order to have them coming back. It is this effort to incentivize patronage that has birthed the loyalty program.
Marketers call the loyalty program or the rewards program the best marketing tool around today. By offering a customer rewards, it lures them back to the business, and simultaneously tracks buying behavior and preference. This provides valuable market intelligence for the business itself, gathering data that can help the business with future strategies.
Millions of consumers subscribe to loyalty programs and enjoy their perks. But before we dive into the depths of the loyalty program, let's get a grip on what it really is.

Loyalty programs are marketing strategies adopted by companies to lure new patrons to their business and retain existing customers. Rewarding them with points and free gifts every time they make a purchase, whether through a website or store, makes the customer feel important and valued. This way, companies entice their customers to keep coming back, turning them into revenue generators. This helps both, the customer and the brand, as both reap the benefits of the arrangement. According to experts, just 5% customer retention can raise business profits by 95%!

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3 Ways A Business Can Benefit From Loyalty Programs

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1. Increases Customer Lifetime Value (CLV)
Customer lifetime value is the net profit of the overall relationship a business builds with a customer. It forecasts a customer's future buying by tracking their current consumer habits. To make loyalty programs more attractive to a customer, it's important to analyze their buying choices and identify the obstacles on their path to a purchase. A business can help the customer overcome those obstacles with targeted program rewards that can help them go ahead and complete the purchase.

2. Builds a Personal Relationship With Customers
In the early 2000s, a brand would offer a customer rewards only on special occasions like a birthday or anniversary. Today, bent on developing a great Customer Relationship, brands are rewarding their customers for every purchase. But every purchase has a different value, and must be proportionately rewarded.To help do this, it's important to categorize customers into different value segments based on their buying behavior.
A point-basedloyalty rewards program makes iteasy to categorize customers according to the value of their purchase. A business can then navigate through each customer's buying history and deploy targeted marketing tactics to gain their attention. This way each customer is addressed individually through relevant marketing channels like social media marketing, Email Marketing, and mobile messaging. The customer rewards offered them are accordinglytailored to their preference.

3. Creates Brand Advocates
It's human tendency to advertise what one loves. A loyal customer works as a brand ambassador, promoting the brand by word of mouth or on social media. Brand advocates will follow you on social media channels and promote festive sales and restaurant events. This brings a business free publicity and draws in prospective customers. Such buyers do not make their buying choices based on money alone, but on an emotionalconnection. Ultimately, the Best Loyalty programs are driven by love.

On that note, let's take a look at popular types of customer loyalty programs. . .

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5 types of customer loyalty programs 1 loyalty points 1643779843 4500

You may have heard a person say they booked a hotel room or an airline ticket, or snagged a free meal on the back of their loyalty points. The points system is a heavy-hitter when it comes to rewards programs. Its benefits are real and immediate.

Loyalty points are points based on the number and value of orders placed by the customer. The bigger the purchase, greater the points. Businesses allow customers to redeem points in lieu of certain benefits, which could include cash back offers, free food, merchandise, or third-party rewards or discounts. Most points programs offer customers a time-frame within which to redeem points or they stand to forfeit them. By angling benefits customers crave, a smart business will have them spend more to drive up their score.

Getting down to the finer points of this reward program. . . A business should assign an appropriate cost value to each point so that it benefits their business model. The perceived value of each point should be higher than it actually is. For example, if a point costs the business 0.35 cents, the buyer should believe it is valued at 1 cent or more. There's no one-size-fits all formula to arrive at the value of a loyalty point. Each business must do the math individually. The points program is a transparent strategy and one of the most effective ways to cultivate Restaurant Loyalty.

2 tiered program 1643789141 7156

A tiered loyalty program is a hierarchical structure that clearly defines each customer's relationship with the brand. To avail higher rewards a customer is expected to spend a certain amount defined by the company, and only after reaching a minimum value can they cash in.

Tiered loyalty programs mirror the dynamics of class systems. In society, people aspire to move up the social ladder for the perceived benefits of a higher social status. In the same way, tiered programs offer multi-layered schemes based on customers spending, with differentiated rewards for each category. To avail a brand's exclusive benefits, a consumer will continue to actively engage with it, spending more for that elevation to a higher order.
Sephora, the renowned multi-cosmetic retailer, uses the tiered loyalty program expertly. The company, which is the subject of several case studies, offers a great working model for young businesses. Sephora extends long-term benefits to its patrons, who over time becomeloyal customers. The company focuses more on retaining premium clients rather than findingnew customers.

The success of Sephora's rewards program is reflected in its customer data, according to which over 17 million members are part of its loyalty programonly in North America. These loyalty members generate organic publicity for the brand by sharing about their shopping experience. Many Sephora customers gift their friends Sephora Egift Cards that allow the recipient to shop for an equivalent value at Sephora's physical or online stores. It's no wonder that the company's loyalty members contribute to 80% of its sales and Sephora's is considered one of the Best Loyalty programs around.

  • Before implementing a loyalty program, consider rewards from the customer's point of view. What would your customer profile enjoy?
  • Gamify the customer's interaction with your brand, making customer engagement pleasurable and fun and strengthening your Customer Relationship.
  • Explain your loyalty program clearly and in detail, to encourage more people to sign up for it.
  • Use a top loyalty program software, like ZipLoyalty, to gather and process customer data efficiently. This will provide you with vital insights into buyer behaviour and help you make better business decisions

Referral programs are clever marketing ploys that encourage existing customers to introduce new customers to the business. In exchange, existing customers earns points or discounts on their next purchase as a signup incentive. A small bonus is sometimes thrown in for the new customers too.

With the referral program, customers get rewards that could include a free favorite order, discounts, cash back or even merchandise. This translates into quick gratification for the buyer and adds to their overall customer experience. The business, in the meanwhile, has to spend next to nothing to gather new customer data and grow its customer base. In the restaurant business, the referral program is the most sought-after method to increase customer affiliation.

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Discounts are a promotional strategy crafted to attract new customers and please old ones. Discounts are introduced when a brand is need of quick money, or when it wants to get rid of excess stock. A business must do its math before discounting a product so as not to incur losses. Food businesses typically offer huge markdowns on food items with a short shelf-life, like cakes, sandwiches, or breads. They do this at the end of the day to prevent losses from wastage. Flyers, social media messaging, Email Marketing, and other forms of advertising work well to draw the attention of customers to slashed prices.

Freebies are a type of reward program practiced largely by the hospitality industry. To make sure customers visit their establishments frequently, they are encouraged to redeem points accumulated over multiple past purchases for free products or services. A customer, for example, can enjoy their preferred cappuccino by redeeming the loyalty points stored on their digital or physical punch card.(In addition to serving as the customer's rewards program credential, the loyalty punch card strengthens the association between brand and customer.)

Businesses can learn a thing or two from the Starbucks loyalty program. Over 20 million Starbucks loyalty members use the coffee brand's plastic punch cards to access Starbucks rewards in the U.S. alone!

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Free delivery was a trend started years ago by fast-food restaurants that delivered food to a customer's doorstep at no extra charge. Big food chains like McDonald's, Domino's Pizza, Chipotle, and others, have been providing free home food delivery to their customers way before the advent of third-party delivery services. (Incidentally, most third party delivery platforms charge a fee for customer service.)

Free delivery is a good salesstrategy because it helps increase a restaurant's revenue by rolling out more orders a day. With a free delivery service, one or two employees can be dedicated to taking online orders. Had a restaurant been compelled to accommodate offline orders on-premise, it would have run up huge labor costs.

E-commerce companies have optimized the free shipping strategy, and in doing so, changed consumer behaviour entirely. The consumer eco-system has shifted from offline to online stores, thanks in part to free deliveries. Amazon is the flag-bearer of the free delivery system. By incorporating it into its business model as the Amazon Prime service, the company has grown into a trillion-dollar business thanks to the brand loyalty of its customers.

The Rewards of a Loyalty Program Software

Loyalty programs have proved their worth, but it's difficult to run one successfully without good loyalty software. Modern loyalty program software like ZipLoyalty can help a business get the most out of its reward program. This technology can be customized to the unique needs of a business. What's more the software's analytics can recommend marketing ideas tailored to individual customer profiles, and help evaluate each idea for its return on investment. Here's a look at some of the other rewards of good loyalty program software-

  • Processes Customer Data- It can be overwhelming to gather vast amounts of customer data, sort and segment it, and create effective loyalty schemes for different categories. Loyalty software collates all your customer data in one place, processes it and generates reports that can help you plan future marketing activities.
  • Edge over competitors-The marketplace is more competitive than ever today. Businesses need to be far-sighted and develop long term plans if they want to survive and scale up. Accurate data reports and sales forecasts can prevent a business from making the wrong moves, like, say, overspending on a rewards program that may have a low return on investment.
  • Better Rewards-Integrated with a restaurant's pos system, loyalty software can identify a customer's frequent orders and use that information to personalize rewards.
ZipLoyalty is one of the best loyalty programs in the food-service industry at the moment. Its benefits are multiple and immediately obvious. To sample its features, check out Better still, get in touch for a free demo.

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