Different types of loyalty programs and their benefits

A happy customer is a returning customer. So, the first task of every business owner is to make their customers happy. Many factors affect customer engagement and satisfaction- from product quality and pricing to customer service and brand values. Plus, you want to engage your leads and customers over different channels. For example, you need quality, informative and engaging online content to boost web lead conversions. Once you’ve converted your leads into customers, the next goal is to ensure they commit to your brand. And the best way to do that is to tangibly show appreciation for them. After all, they chose your brand over others and kept returning. How can you do that? By acknowledging their loyalty and offering something of value in return, of course. So let’s explore different types of loyalty programs and their benefits.

What is a loyalty program?

A loyalty program is a structured strategy that combines different methods to enable a company to build strong relationships with its audience and promote community and advocacy. Most loyalty programs combine tactics such as communication, marketing strategies, commercial incentives, events, etc. Simply put, companies use loyalty programs to offer discounts, rewards, and other special incentives. These enable the brand to attract and retain customers, reduce churn rates and build a reputation.

What are the benefits of loyalty programs?

Loyalty programs are beneficial for both companies and their audiences. People love being appreciated. And loyalty programs are an excellent way to do precisely that. They show your customers that you see them and care about their interaction with you. They’ll love that about your company and are more likely to continue their engagement with your brand. On the other hand, companies can expect plenty of advantages, too. For example, you’ll:

  • build a strong relationship with your audience
  • increase sale rates – even though it seems counterintuitive, giving rewards and discounts will boost your revenue
  • encourage more customers to be loyal to your brand
  • improve your customer analytics – loyalty programs collect data about your audience and provide valuable insights
  • reduce churn rates – in the same way; the ConvertMore callback widget helps you retain users’ attention on your website; loyalty programs will motivate more people to stay with your brand
  • improve brand recognition and reputation.
a happy customer holding a big smiley balloon
All types of loyalty programs, if well done, increase customer satisfaction and happiness

Different types of loyalty programs

Of course, one size doesn’t fit all. There are many loyalty programs, and all of them have advantages and disadvantages. Some are better suited to retail-type companies, while some are a better fit for B2B businesses. Which one is a better fit for you will also depend on different aspects of your company, such as size, budget, channels you use, growth stage, etc. Here, we aim to present you with different kinds of these programs so you can choose the one that best aligns with your business model.

Point-based loyalty programs

One of the most common programs is based on points. Each purchase is rewarded with a certain number of issues. Of course, the more customers spend, the more points they get. Once they reach the set number of points, your company rewards them with a product or a discount for their next purchase. It encourages your customer to work toward their goal and is also simple and fun.

Tiered programs

Tiered programs are similar to the points system but a bit more complex. You can arrange the benefits customer gets into tiers. By staying loyal and spending more, customers move from lower to higher levels (for example, from bronze, over silver and gold, to platinum). Ensure all your tiers have something of value to offer and that the higher levels have more significant rewards. The greatest benefit of this program is that it encourages initial loyalty and the continuation of that loyalty.

Paid/Subscription based loyalty programs

This type of program is a bit different. It requires the customer to make a significant initial contribution. Then, they become members of your VIP or Premium club by paying a monthly or yearly subscription or fee. As a result, they can enjoy plenty of different rewards. The rewards include discounts, preorders, delivery benefits, special services, and unique opportunities.

a happy woman with a lot of shopping bags
All loyalty programs encourage customers to spend more and stay loyal

Loyalty programs based on the amount spent

Now, all loyalty programs encourage customers to spend more. But with a spend-based program, you reward a customer for the amount they pay. For example, for every 5$ spent, they get 1$. Or if they spend a certain amount, they get free delivery or some other advantage. This program encourages customers to increase their order value and helps retain more customers in the long run.

Partnership loyalty programs

Partner-based loyalty programs rely on a partnership of two (or more) companies. It works best when these companies provide different products and services but share the target audience. So, by purchasing with one company, a customer gets a reward, a discount, or a voucher for the other company and vice versa. As a result, everyone wins. Both companies gain new customers and encourage them to stay loyal. And customers are happy to get several things they want that they couldn’t get from the same company.

Value-based programs

Lead engagement software will help you gain and keep your ideal audience’s attention. But, you should also engage customers personally, which is valuable for building relationships and community around your brand. What does it mean? It means you don’t want your audience to see you as an impersonal corporate entity whose only goal is to earn money. Instead, you need to create a personality for your brand and find something that will resonate with your audience. Value-based programs will help you do that. By shopping with you, the customers don’t get the reward. However, they get to contribute to the cause you support and share the same values.

a man designing a loyalty program for his business
Create a loyalty program that fits your business model

Hybrid programs combine different types of loyalty programs

Lastly, if too many of these loyalty programs seem excellent for your business, don’t feel pressured to choose just one. Instead, you can combine two or more to create a unique program that best suits your brand. However, ensure you keep it clear, simple, and transparent. Your customers will appreciate your tailored and exciting approach that will make you stand out from the crowd.

As you may see, there are many different types of loyalty programs. However, they all serve the same function – making your customers feel happy and appreciated for their interaction with your brand. Not to mention that they provide plenty of benefits for companies simultaneously. So, follow our guide and choose the best fit for your business model and goals.



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