I’ve always found customer loyalty to be an interesting topic. Have loyalty programs become less popular in recent years? Or have customers’ expectations changed, rather than their willingness to form a bond with a brand? According to a study by Yotpo, roughly 61% of customers are only loyal to 1-5 brands. This tells me that the real question isn’t whether or not people like loyalty programs, but rather whether the one you have is good enough to be in their top 5. In order to succeed, you need to get the foundations right and select from the various types of loyalty programs that fit both your business model and audience perfectly.
Table of contents:
- – Testing Which Types of Loyalty Programs Fit You
- – Earn & Burn Type Programs
- – Tiered Loyalty Programs
- – Perks Programs
- – Gamified Loyalty Programs
- – Loyalty Communities
- – Coalition Loyalty Programs
- – Paid Loyalty Programs
- – Lifestyle Loyalty Programs
- – Influencer / Referral Loyalty Programs
- – Hybrid Type Loyalty Programs
Testing Which Types of Loyalty Programs Fit You
Loyalty programs come in all shapes and sizes, but after analyzing recurring trends and core features, we’ve identified 8 definitive categories. To help you find the type of program that may work best for your business and strategy, we’ve created a guided list, with corresponding statements that are tied to a specific program. The bracket that features the most statements you agree with will indicate which types of loyalty programs could be the most beneficial for you.
The list is based on actual client interactions with Antavo’s Loyalty Lab. Although the test merely indicates a possible program type, at the end of the article, I’ll tell you how you can get a professional, in-depth assessment.
For a general roundup about differentiating loyalty programs, check out our Customer Loyalty Minutes video, starring Zsuzsa Kecsmar, Antavo’s CMO, and Jörn Roegler, Antavo’s VP of Strategy & Insights.
Earn & Burn Type Programs – Simplicity Is Key
- Our customers have high purchase frequency
- We’re specializing in selling commodities
- Our brand is positioned on “value for money”
- Lightning-fast launch is a high priority
- Our philosophy is “the simpler, the better”
If you agree with these statements, then your business is likely to benefit from an Earn & Burn type of loyalty program. This is a traditional approach to loyalty programs, where customers earn points and redeem them using a mechanism that is easy to implement and rules that are easy for customers to understand. Earn & Burn programs are favored by customers who love to chase rewards, and the point system encourages members to identify themselves when making online and in-store purchases.
Tiered Loyalty Programs – Build Long-term Engagement
- Our brand faces a longer decision time in terms of customer purchase
- We offer emotionally relatable products
- A high-quality shopping experience is important for us
- We want to shield top-spending members from the competition
- We are aiming to build long-lasting engagement
If this section speaks to you, a tiered loyalty program type might be your choice. Tiers equal status and exclusive benefits (especially at the top), therefore they are popular among affluent and higher-spending customers. Tiered loyalty programs also help you segment your audience more effectively with targeted incentives and communication. Last but not least, reaching a higher tier demands commitment, and top-ranking members are less likely to give up their privileges by switching to a competitor.
Perks Programs – Create Emotional Connection
- Our customers have low purchase frequency, but a higher basket value
- We wish to generate a sense of customer gratitude
- Our brand offers exclusive or unique services
- Brand building is a high-priority task
- We seek to achieve a high adoption rate
These statements represent a challenge that Perks programs are well suited to solve. A loyalty program based on perks extends benefits to all members unconditionally. Perks are ideal if you’re planning to increase purchase frequency via long-term engagement and emotional attachment. Also, if you offer services like free shipping, you can offer them as members-only perks to encourage customers to sign up for the loyalty program.
Gamified Loyalty Programs – Engagement Beyond Transactions
- We seek a loyalty program that offers a challenge to customers
- Highlighting share values with our customers is a priority
- We wish to offer a gamified customer experience
- Our goal is to incentivize recurring customer behavior
- We aim to encourage non-purchase-related engagement
This bracket shows that you could benefit from a Gamified loyalty program, which is based around engaging customers in an interactive way, through a series of badges or challenges. The overall goal of a gamified program is to encourage members to repeat behaviors that are valuable to your business. This includes submitting reviews or visiting the website multiple times each month. What makes this category interesting is that gamified programs work best when paired up with other types of customer loyalty programs, such as Earn & Burn or Tier-based programs.
Loyalty Communities – Promote Your Brand’s Identity
- Community building is an important element of our strategy
- We already have a loyalty program, but want to enhance it
- Offer personalized experiences is a priority
- We want to engage customers via shared interests or core values
- Our goal is to build a stronger brand identity
This last set of statements is for companies that have set out to build a community around their brand. Similar to gamified programs, Loyalty Communities are best utilized together with another program type. In short, loyalty communities are smaller clubs based on specific topics, interests, or values that are important to your customers. Joining such a club not only promises a targeted experience, but helps you build a community of like-minded members.
Coalition Loyalty Programs – Unite Brands Under One Roof
- Our business revolves around retail hubs (malls, airports)
- Work with a diverse range of partners/tenants
- Our goal is to obtain richer insights about customers
- The main KPI is to increase repeat purchases and dwelling time
- Wish to build cross-brand journeys or monitor partnership performance
If you fall into the category of a mall, shopping center and plaza or you wish to extend the capabilities of your partnership network / regional offices as a telco company or financial service provider then a Coalition Loyalty Program might be a great solution for you. By making earning and spending points at tenants’ retail locations possible, having access to a wider reward pool and a larger variety of benefits, customers are more likely to spend an increased time shopping at various stores. Meanwhile the valuable customer information collected can be useful in more precise personalization and will provide you with a better understanding of your audience.
Paid Loyalty Programs – Identify your top-tier customers
- Competing in a highly fragmented or undifferentiated market
- Our customers are experience-driven
- We wish to increase the quality of our audience
- Our aim is to identify the most valuable customers
- Providing high-value benefits to customers is important
In paid or subscription-based loyalty programs members pay a recurring fee to receive great benefits they can use immediately when signing up. By paying a membership fee customers become more engaged towards the brand as they want to exploit the possibilities of the program to their full extent. They are more committed, thus they will engage more regularly. However, bear in mind that in order to keep your customers happy and content you need to give them value in return for their money.
Lifestyle Loyalty Programs – Reward Customers for Being Themselves
- We have customers who lead an eco-friendly lifestyle
- Our target audience include Gen Y and Z
- We wish to engage our athletic-minded customer base
- Our aim is to encourage members to to live more actively or sustainably
- We are looking to reward non-transactional activities
Lifestyle loyalty programs reward customers for making positive choices. Like working out more or living environmentally friendly. Providing benefits for such non-transactional activities is a great way to engage your customers outside the buying cycle as well. You will be able to strengthen the emotional bond with them as you are appreciating something that they like doing in their everyday life.
Influencer / Referral Loyalty Programs – Leveraging Word-of-Mouth
- We wish to expand our customer base
- Our target is to increase word-of-mouth
- We are looking to identify our most devoted customers
- We wish to find like-minded customers who share the same values as us
- Our target is to build credibility
People tend to trust recommendations from their family and friends more than paid advertisements. That is why your customers are the best marketers and promoters of your product. Rewarding your customers for spreading the word about your brand helps you build customer relationships and credibility at the same time.
Hybrid Type Loyalty Programs – Achieving Success Through Adaptability
In case you found relevant parts in multiple brackets, it may mean that a loyalty solution that includes mixed elements could suit you best. This isn’t a drawback – quite the contrary: with a hybrid loyalty program, you can drive a wider range of KPIs and come up with an ultra-unique concept that matches your brand image. It’s worth considering that many loyalty programs launch starting with one particular type, but over time evolve into a hybrid program as customer feedback is collected and new features are added.
How to Receive In-Depth Assessment
As previously mentioned, this article is only meant to give you a general recommendation for the type of loyalty program that suits your business. However, Antavo offers a robust needs assessment tool that employs a proven methodology to measure and rank criteria such as urgency, exclusivity, and maturity, to recommend a custom-tailored and highly effective program structure. It also features an advanced questionnaire to uncover your most pressing KPIs.
And don’t forget to download Antavo’s Customer Loyalty Report 2022, an in-depth report that showcases dozens of statistics as well as future industry trends to help you navigate the world of next-gen loyalty programs.