The Ultimate Loyalty Rewards Handbook

Coming up with loyalty rewards ideas can be challenging. This guide shows you how to create better rewards, benefits, and incentives.

The Ultimate Loyalty Rewards Handbook
antavo-cover-loyalty-rewards

Coming up with loyalty rewards for your membership program is such an exciting time for your company. All the brainstorming, all the crazy ideas! It really brings out your team’s creativity, don’t you agree? Unfortunately, reward planning meetings often end up inconclusive. In our experience, most problems stem from a lack of knowledge about reward frameworks. What types of rewards are there? What are the best practices in rewards programs? And what blunders should you avoid? Don’t worry, you’re in good hands. This guide has all the information you need.

What Are Loyalty Rewards and Why Do They Matter?

Before sinking our teeth into reward types and exploring how they are utilized, let’s look at what loyalty rewards actually are, in the context of customer retention.

Simply put, rewards are benefits or physical items that are granted, gifted, or assigned to members based on their achievements or efforts within the loyalty rewards program.

The success of a loyalty program massively depends on the rewards you offer for members. Identifying the most fitting incentives for your brand and target audience is equally as crucial as determining the goals and objectives you would like to achieve with your loyalty program.

Loyalty rewards are key motivators that:

  • Keep customers invested in the long run
  • Prompt actions you want customers to perform

Rewards motivate customers to change their behavior. Such behaviors might include more brand engagement or simply the use of features or services of your business that customers haven’t used before. To help you determine the best rewards for your members, we have created a Reward Planning Worksheet that will lead you through the entire process. Keep reading this guide for an in-depth explanation of each step.

Banner recommending readers to download Antavo's Reward Planning Worksheet
In this article, we’ll show you numerous industry examples. Use our reward planning template as a benchmark for your own reward system.

9 Steps to Build a Rewards Catalog Your Customers Will Adore

Step 1: Choose the Best Types of Rewards for Your Customers

The first thing you need to understand is what types of loyalty rewards you wish to offer. There are five basic loyalty reward categories. Successful loyalty programs typically feature a mix of these, but not necessarily all of them. That’s why it makes sense to start by examining which align best with your strategy. 

1. Financial Benefits

Financial benefits are either percentage-based or fixed-amount discounts, such as coupons offering either 5% or $5 off a purchase or free shipping. When customers receive financial benefits, they feel that they are getting real value after each purchase and are saving money. Financial rewards are the quickest and easiest to set up, as you don’t need to deal with physical items.

A loyalty program membership page showcasing a variety of event and experience-driven rewards.
Make sure to display rewards, coupons, and discounts front and center on your loyalty program membership page, subtly reminding members to redeem their rewards.

2. Service-Related Benefits

These kinds of rewards make the shopping experience more convenient from a customer’s perspective. Examples include express shipping, extended return periods, money-back guarantees, free alterations, early access, stylist recommendations, gift wrapping, priority customer support, etc. Service-related benefits are a great way to shift customers’ attention away from discounts and toward a more convenient shopping experience and generate positive word-of-mouth.

Love, Bonito offers its LBCommunity+ gold members a complimentary private session with one of its Style Ambassadors.
Make features such as stylist bookings available for everyone, while reserving early access for your most valuable members.

3. Gifts

When signing up for a reward program, customers often expect to receive some sort of physical product or hand-crafted item. Gifts can come from your own inventory or from a third party. You can offer gifts on special occasions, like member birthdays or their enrollment anniversary. Gifts are the perfect way to express gratitude for your customers and show you care.

A mockup of a perks program.
Physical rewards work best when members don’t expect them. This way, you can really put a smile on their face!

4. Events & Experiences

This category consists of happenings such as parties, concerts, hotel stays, or free lunches, which can be organized by your company or a partner. Events and experiences are great opportunities to build deeper engagement, provide exclusivity, and give customers memories they’ll talk about for years.  Keep in mind, however, that the more exclusive the reward, the rarer it should be to avoid damaging the feeling of exclusivity. Moreover, organizing events requires a lot of effort, especially when you’re operating in multiple countries.

Sign up page for Simply Be’s loyalty program
Placing an emphasis on great experiences — like a hotel getaway, a community event, or a party with influencers and brand ambassadors — helps you build long-lasting brand love.

5. Custom Rewards

Showcase a portfolio of unique rewards that customers can’t find anywhere else. Let your imagination run wild and come up with unique or brand-specific rewards that help your business stand out. However, realizing something truly unique will require a large amount of customer insight, creativity, and resources.

The LVR Sneakers Club by luxury fashion giant LuisaViaRoma is a great example of a custom reward, which is unique to the brand. It’s a brilliant way to engage customers. The club prompts members to use their points, and the early access feature is a cost-effective incentive.

Step 2: Define the Actual Value and Cost of the Reward

One of the main things you need to think about is how much rewards will cost you. You don’t want to offer everybody a benefit that costs a fortune — you should keep the most special and costly gifts for your top customers. At the same time, try to offer quality incentives that customers want to get their hands on while also preventing going over budget.

High value: As these are the most costly rewards, only offer them for a select few. Examples include personal shopping experiences at your flagship store or a gift from your luxury collection.

Medium value: A gift package of various products. Use gamified profiling or view people’s purchase history to pick items that customers love, making the surprise even more satisfying. 

Low value: Small but meaningful rewards – such as including a lipstick in the member’s order, product samples, or free toppings for visitors at a fast-food chain. These drive WOM, but only cost you a little.

Free: Virtual badges, personalized emails, or chatbot messages come at no cost to you, but they still help you to develop the relationship with customers.

Skechers Plus loyalty program.
Skechers Plus members receive extended 90-day returns and double points during their birthday month — rewards that come at a medium to low cost for the company but are sure to be enjoyed by customers.

Step 3: Determine Perceived Value and How Customers See Rewards

The higher the perceived value of the reward is for the customer, the stronger the emotional bond you will be able to build with them. For instance, an autographed picture of their favorite singer will be of great value but for your brand, the costs don’t necessarily have to be high. 

High: A special, personal reward like a custom-designed shoe or a VIP experience carries high perceived value in the eye of the customer. 

Medium: Free express shipping or early access are somewhat ordinary benefits, so, although members appreciate them, they only have a medium perceived value.

Low: If the perceived value of the reward is too low it might not be enough to keep customers buying from you and you might risk losing their interest. So try to come up with reward ideas that members will appreciate enough to come back for more — and maybe even tell their friends.

Girlfriend Collective’s tiered loyalty program.
The Collective’s tiered loyalty program offers exclusive first access to sales for its top tier members. First access costs the company nothing, but creates a high perceived value for members.

Step 4: Manage the Accessibility of Loyalty Rewards 

Placing limitations on your rewards is essential to prevent accidental expenses. There are pros and cons to using both limited and unlimited rewards.

No limitation: Think of any discount or coupon with a set markdown. When there’s no time limitation, more customers will be able to redeem the reward.

Time limitation: A classical FOMO tactic in which customers need to redeem their reward within a specific period of time. Time limitations are also useful for seasonal campaigns like Black Friday or Christmas bonuses, which are only available for a given time. 

Quantity limitation: When stock is limited, people automatically see the reward as valuable. Limiting quantity creates FOMO as well. Plus, customers race against each other because early birds get the worm.

Limitation by status: You can also segment your audience based on relevancy and spend value, giving special rewards to affluent buyers.

Nike’s loyalty program.
Nike offers its members motivational music or podcasts they can listen to while working out. The members-only feature has a monthly cap on the number of tracks they can access. When increasing their tier level this limit increases as well, which is a great incentive that also fits the brand’s image and audience.

Step 5: Decide on a Spending Limit

Spending limits are usually set in loyalty programs that offer coupons or discounts. This means some coupons are only available when customers reach a minimum spending limit. For instance, when customers spend at least $50, they receive a 10% discount or get access to free shipping. Spending limits are a great way to protect your bottom line.

A welcome email and offer from JoJo’s loyalty program.
JoJo Maman Bébé’s loyalty program was designed to ensure that tier upgrades are only received after a specific number of purchases are made and minimum order values are met.

Step 6: Create Rewards That Resonate With Each Customer Segment

Not all customers are the same. Put an emphasis on providing loyalty rewards that customers actually want. This means you need to offer rewards that align with specific target segments in order to make your loyalty program attractive. Create rewards that are only available for a specific demographic segment or given target audience of your loyalty program, like Millenials and Gen Z sports lovers or new mothers.

Beer Hawk’s loyalty program.
Beer Hawk, UK’s largest specialty beer retailer, rewards their beer-loving community for returning their expensive beer kegs.

Step 7: Set the Accessibility for the Rewards

Limited, one-time-only rewards create a sense of FOMO. But to avoid breaking people’s hearts, you should consider bringing back fan favorites now and again. Or you can add always-available rewards to your loyalty program, such as service-related benefits like free express shipping or extended return periods. Members will count on these rewards when shopping and can help set your loyalty program apart from your competitors.

My JDW Rewards.
JD Williams gives its dedicated customers a birthday surprise. This is a gesture that members highly appreciate. They also provide a recurring benefit, sending free gifts to customers with their orders.

Step 8: Decide Where Your Rewards Will Be Available

Decide whether you wish to make each reward accessible only online, only offline, or to make it omnichannel. 

Online: Downloadable benefits or rewards sent via email, for instance, a brand ambassador badge or free express shipping, are a convenient and cost-effective way to reward members.

Offline: Reward your in-store customers and engage them at every step of their local store experience. If you offer their gift with their next purchase, they might even do an unboxing video for social media, generating word-of-mouth.

Mobile app: Having a dedicated mobile app empowers users to claim and redeem rewards on-the-go, pull up the membership card, and even access exclusive member content.

Lifestyle: Your customer’s everyday life is the unofficial fourth channel in your omnichannel marketing strategy. Companies can forge a strong emotional bond with customers by rewarding them for engaging with their hobbies and interests.

Bergzeit’s loyalty program depicting the Strava integration.
German mountaineering product retailer Bergzeit integrated its loyalty program with the Strava Tracker app so when climbers reach a new milestone, they receive loyalty points for their achievement. Read more about this feature in our case study.

Step 9: Arrange Reward Logistics

How will customers receive their rewards? You shouldn’t forget about logistics, because they affect the core of your marketing budget.

Direct download: If it’s a leaflet or an event ticket, the customer can access it through a download link.

Digital rewards, sent via email: These are the most cost-effective as you don’t have to pay any shipping costs. But don’t forget that digital rewards have less of an emotional impact.

Delivered by your service center: The reward will be sent to the customer at the cost of the company.

Delivered with the next purchase: The customer will get their reward automatically with their next purchase. This keeps money in your pocket, but the wait can be a bit disappointing for customers.

Code redemption: The reward is a coupon code, which the customer can use during the checkout process.

e.l.f. cosmetics’ loyalty email.
e.l.f. cosmetics decided not to overcomplicate its loyalty purchase email. It’s simple but still achieves its goal: informing the customer. And it makes sure that customers are aware of how many points they can spend with a click.

Get Ready To Be Creative

Hopefully, all your questions have been answered. From now on, nothing is holding you back from unleashing your full creative potential. So schedule a brainstorming session with your team and start planning your loyalty rewards.

Of course, rewards are just a stepping stone in your customer retention strategy. For more info about loyalty programs, or to learn how to make your design idea come to life, book a demo or include us in your RFP.

Banner recommending readers to download Antavo's Reward Planning Worksheet

Headshot of Barbara Kekes-Szabo Loyalty Program Specialist at Antavo

Barbara Kekes-Szabo

Barbara is a Loyalty Program Specialist at Antavo and a Certified Loyalty Marketing Professional - CLMP. She is also a writing expert with several years of experience in marketing and also in the information technology industry. In her free time she likes traveling the world, reading crime stories, and doing crossword puzzles.

You might also like

The cover image of Antavo's Tiered Loyalty Programs article.
Guides by Zsuzsa Kecsmar • April 7, 2022 • 17 min read

Why Tiered Loyalty Programs Are So Attractive to Customers

How to create successful tiered loyalty programs: see our best practices and 7 real-life examples of brands who have done an amazing job.

The cover picture of how gamification can enhance loyalty programs
Guides by Barbara Kekes-Szabo • July 27, 2022 • 13 min read

The Ultimate Guide on Using Gamification in Loyalty Programs

Gamification in loyalty programs is fun: use a prize wheel for a thrilling reward experience, or collect data through treasure hunts.

Antavo’s article on referral programs
Articles by Barbara Kekes-Szabo • November 18, 2021 • 10 min read

How to Use Referral Programs to Generate Brand Loyalty

People trust recommendations from friends or family more than paid ads. How can referral programs help turn customers into spokespeople?

Partners who trust us
Logo line of partners working together with Antavo. Logo line of partners working together with Antavo.

recognition

Antavo's listing in Gartner.
Antavo's inclusion in Forrester.