Customer loyalty programmes have been around longer than any of us have been alive with examples dating back to 1793 when a Sudbury, New Hampshire merchant began rewarding customers with ‘copper tokens’. The tokens could be accumulated and used for future purchases, thereby generating repeat visits.

With the concept having survived as long as it has, there is merit in the idea, but do they still work for the ever-changing consumer of the 21st Century? The short answer is yes but as with all things in life, it is never that easy. Not all loyalty programmes are made equal and some work better than others.

The good news though is that 77% of the UK population are members of loyalty programmes and 36% use reward programmes several times a month. Intent and appetite are there, it just needs to be tapped into.

 

Benefits of loyalty programmes

Everybody likes to feel special and appreciated and loyalty programmes by their very nature, if done right, can offer customers that feeling but the benefits are two-fold Businesses can achieve that thing they all want. Customers just keep coming back. The best loyalty programmes can:

  • Improve customer retention
  • Increase customer lifetime value and repeat business
  • Boost revenue
  • Build stronger customer relationships
  • Help your brand stand out from your competitors
  • Encourage word-of-mouth marketing
  • Show customers appreciation
  • Drive customer satisfaction

 

Types of programmes

Most programmes fall into categories that we’re familiar with. These include:

  • Points-based programmes where customers collect points and then can redeem them in a way that suits them.
  • Tier-based programmes offer customers more and often better rewards either through spending or lifetime tenure.
  • Mission-driven programmes that offer community or charity rewards to causes through the purchase of special edition products.
  • Spend-based programmes that unlock status or reward when annual spending targets are reached.
  • Instant reward programmes offer, as the name suggests, an instant reward at the point of purchase either with the retailer or a retail partner.
  • Paid reward programmes offer exclusive access to products, rewards, and services for an annual fee.

The one thing we noticed when doing the research was that some of the most effective and well-received combined different elements of each kind of programme offering flexibility and choice to the customer.

 

Examples from around the world

 

FlyBuys

Style of Programme: Points Based

This extremely popular loyalty rewards programme is huge across New Zealand and Australia. It is the purest form of points turning into rewards out there. Businesses can participate as issue partners, rewards partners, or both. Customers collect points by shopping with issuing partners and can redeem the rewards from the Flybuys store. Physical products make up a large majority of what is on offer and they are supplied by the rewards partners.

With the system being run by a recognised leader in the loyalty market, a lot of the hard work is taken care of for retailers. It opens them to potential new customers that may have collected points from other places but choose to spend them with you.

However, depending on customers’ spending habits, it can take a very long time to collect enough points to get anything of real value and points will expire meaning customers could get close but not close enough. This is somewhat offset by the ability to top up with the money to claim the reward.

 

AA Smart Fuel

Style of Programme: Points and Instant Reward

Another example from New Zealand, this scheme goes head-to-head with Flybuys but rather than targeting customers with promised rewards that are across many products, Smartfuel offers a discount at the fuel pump.

When used at the petrol station, customers can claim an instant discount or save it and start to accumulate a larger reward for use later. Other retailers can get in on the action and offer fuel rewards for customers that choose to shop with them which the customer can add to their balance and redeem at their next fuel up.

The programme is easy to understand, offers up benefits right away but also allows for the chance to get more. And we’ve all seen the prices at the fuel pumps so you can understand the popularity. It is of course limited in its reach. If you don’t drive or own a traditional fuel-based car, it is of little use.

 

Shopto

Style of Programme: Points and Tiered (with Instant Reward) that are Spend Based

Shopto is an online retailer that specialises in the gaming industry. They offer a range of digital delivery products as well as the more classic physical buy and dispatch products.

Their loyalty scheme, or membership as they refer to it, starts with points collection at their entry bronze tier. As customers spend more and move up tiers, the points collection is replaced with instant rewards and VIP-style benefits. It moves through silver and finishes on gold offering exclusive access, support, and a higher rate of discount.

Another example of an easy-to-understand and use programme that offers an incentive to stick around and get to the highest rate of membership and once there, maintain it.

 

Boots

Style of Programme: Points and Instant Reward

You’d be hard-pressed to find someone in the UK that does not know what the Boots Advantage card is. Launched all way back in 1997, it offers customers the ability to collect points from in-store and online purchases.

These points convert into spendable credit at a collection rate of 4 points per pound spent. The exchange of points to credit value is clear too. Have 797 points? That is £7.97 to spend.

But the card does more than that. Product specials are often available to cardholders with instant price-saving rewards and bonus points, like coupons, which can be digitally loaded onto the card via their app.

The value proposition is clear and with it still going strong after all these years, customers clearly love it. If we’re looking for one hitch, and it is minor, the use of the credit must cover the total cost of the purchase.

Points can’t be used to cover part of a transaction meaning if you’re looking to cash in on a pricier item, it can take a while to get to what you need and points now expire after a year of the card not being used, but to be fair using the card once a year to keep points alive is not a big ask.

 

Adidas

Style of Programme: Points and Tiered

Recently renamed the Adiclub, this loyalty programme has been around a little while and is primarily a tiered programme which unlocks new rewards as you move up levels by collecting points on purchases.

However, the ability to collect points does not stop there. Being a huge sports brand, they reward you for being active. Joining runner’s events and tracking your daily activity in their training and running app pays out points for goal completion.

Each level comes with its unique set of rewards which are added to previous levels as you move up. The points you collect can also be used to enter raffles and discover members-only products, you can exchange them for vouchers or choose to donate them.

The appeal of this programme is that it does not have to start with purchases but very likely leads to them. Bringing the community together for running events helps spread the word and builds strong brand sentiment. In all honestly, for the fitness included, it feels more like a lifestyle support programme than a rewards programme.

 

Abercrombie

Style of Programme: Spend-based and Points-based

Abercrombie is a well-known clothing retailer with online stores and traditional retail outlets across the world. Their myABERCROMBIE membership programme takes a few forms but the goal is VIP which is achieved with a £700 yearly spend.

As you spend you collect points. 10 points for every £1 spent. 2,500 points return a £10 voucher for use in-store. Points collection is capped at 100,000 points per year and don’t expire as long as you make a single purchase each year.

Membership unlocks occasional special pricing and offers, and VIP offers free standard shipping, a gift upon reaching VIP and exclusive access to events.

This is a classic style loyalty programme that is designed to keep customers coming back. How effective it really is could be up for debate, but it does reward the most loyal which one could argue would shop without the programme in place.

 

Toms

Style of Programme: Mission-driven

Probably the most famous example of the mission-driven loyalty programme, Toms started back in 2006 by offering to give away a pair of shoes to those in need for every pair bought by their customers.

This one for one has been copied by other large brands like Warby Parker and cemented the brand firmly in the minds of their customers. Anyone looking to do good and needing new shoes turned to Toms first. It also made for a compelling story when talking to anyone about your new shoe purchase.

In around 2019, they evolved this giving programme to offer a wider selection of giving choices for the customers. They can now choose to support women’s rights or end gun violence, and instead of products Toms will give a grant to a non-profit working in that area. Of course, shoes are still an option.

The value proposition for this kind of programme is clear and although no physical reward is given to the customer, those with aligned values will see these of much greater return.

With growing concerns around sustainability and customers wanting to do more to support causes close to their hearts, this style of programme, I believe, will become even more popular.

 

Amazon Prime

Style of Programme: Paid

Arguably the best example of a paid loyalty programme, Amazon Prime has become part of people’s daily vocabulary. It is by no means the only example. ASOS and boohoo have paid loyalty programmes that offer free shipping and preferential support, but Amazon takes it about 500 steps further.

Prime delivery, video, music, reading. Access to Prime Day, lightning deals and unlimited storage on Amazon Photos is just the tip of the iceberg.

Amazon has extended the Prime reach outside the platform with things like free delivery on Deliveroo and a free sub to a streamer of your choice on Twitch plus free games and loot through the Prime Gaming service.

All of this comes for a single monthly price, and it is easy to see value for money if you take advantage of everything open to you.

Does it ensure loyalty? Ask any Prime member that question and I suspect the answer will be yes. The hard sell is getting the irregular Amazon customer to buy the subscription.

It is a different approach from most loyalty programmes as there is no reward for just shopping but rewards follow a commitment on the part of the customer. The sense that you’re missing out by not being part of it and a free trial drives uptake.

The reason it works is the sheer amount of return from the investment. Some could argue that it is a subscription and not a loyalty programme but when the aim of a loyalty programme is to get customers to return and increase spending, Prime fits that model well.

 

In Conclusion

Individual customers are motivated by different rewards and not all rewards fit all products. The trick is to find something that works for your business and customers. Does it need to be a programme that you own and operate or is there a chance to join a popular programme that is already rewarding customers right now? That is a choice you’ll need to make but the options are plenty and your customers are likely to thank you for it.

The one thing to keep in mind when selecting or creating your programme is all loyalty programmes should aspire to be low effort. Anything that creates a perceived barrier to reward ultimately stifles any success.