Explore the types of customer loyalty programs in this article and understand which type is the best fit for your online store.
In today’s crowded online shopping landscape, where customer acquisition costs are soaring, keeping customers coming back to your store is super important for your revenues. That’s where Loyalty programs come in handy! These programs encourage customers to shop more from your store through benefits, perks, and rewards. But with so many types of Loyalty Programs out there, ranging from points-based systems to tiered rewards and everything in between, it can be tough to pick the right one for your online store.
In this blog, we’ll break down the different types of loyalty programs in simple terms, and what factors you should consider, so you can choose the perfect one for your business.
Let’s dive right in!
1. Point-based Customer Loyalty Program
A point-based rewards program is a kind of loyalty system where shoppers get points for every purchase or certain actions, like joining up, telling friends about the store, or interacting on social media. These points add up over time and can be used later to get rewards or discounts when they shop again. The more points someone collects, the better the rewards they can get. These programs are liked because they make people want to keep coming back to the store and doing things that help the store grow.
An example of a point-based loyalty program is the Starbucks Rewards program. In this program, customers earn points, or “Stars,” for every purchase they make at Starbucks. The number of Stars earned depends on the amount spent, with one Star typically earned for every dollar spent. Customers can then redeem their Stars for free food and drinks, special offers, and member-exclusive benefits.
Pros
– Easy to understand. Uses a simple earn-and-burn concept.
– Flexibility of rewards. Brands can offer various perks for points.
Cons
– Delayed gratification. Points tend to expire, and customers tend to forget. This creates dissatisfaction.
– Compensating customers for returns or refunds becomes challenging when purchases involve a mix of points and cash.
2. Tier-based Customer Loyalty Programs
A tier-based loyalty program is like climbing a ladder where customers start at the bottom and move up as they buy more or engage more with the brand. Each level, or tier, offers better rewards and perks than the one below it. You might get things like special discounts, early access to new products, or even personalized rewards. The idea is to encourage customers to keep coming back and spending more to unlock better rewards.
A prime example of a tier-based loyalty program is the Sephora Beauty Insider program. Customers earn points for every dollar spent and unlock three membership tiers: Beauty Insider, VIB, and Rouge. Each tier offers exclusive perks like birthday gifts and special promotions, motivating customers to spend more and ascend to higher levels for greater rewards.
Pros
– Gives a sense of status to customers in higher tiers.
– Increases customer lifetime value
Cons
– Can be confusing for customers to understand
– Customers may feel discouraged if they are unable to progress to higher tiers or if the rewards offered are not perceived as valuable.
3. Hybrid Loyalty Programs
A hybrid loyalty program takes bits from different loyalty programs, like earning points or getting special perks, and blends them. This makes the program more flexible and appealing to different kinds of customers. It’s like having more options to choose from when you’re picking your favorite rewards.
An example of a hybrid loyalty system in eCommerce is Amazon Prime. Members pay an annual fee for benefits like free shipping and streaming, and they also earn “Prime Points” for purchases, redeemable for discounts or exclusive offers. This hybrid model combines subscription perks with rewards points to incentivize both recurring revenue and repeat purchases.
Pros
– A hybrid loyalty program combines elements from various programs, offering both points and special perks. This flexibility appeals to diverse customers, providing more options for rewards selection.
– Amazon Prime is a hybrid eCommerce loyalty system where members pay for perks like free shipping and streaming. They also earn “Prime Points” for purchases, redeemable for discounts or exclusive offers, combining subscription benefits with rewards points for recurring revenue.
Cons
– It may be challenging to track the effectiveness of different reward types and determine which ones drive the most engagement and ROI.
– Offering too many reward options may dilute the perceived value of the program and the brand.
4. Joint/Coalition Loyalty Programs
Joint Loyalty Programs in eCommerce bring together various brands to offer customers a cohesive loyalty experience. These programs allow shoppers to earn and use rewards at multiple participating stores. Key features include shared rewards, cross-promotions, and a smooth customer journey across different brands involved.
WyseMe is a great example of a joint loyalty program. When shoppers purchase from a store that’s part of WyseMe’s joint ecosystem, they earn Wyse Points which are redeemable across all participating stores. This makes shopping more rewarding and gives the shoppers more options to redeem their points. For merchants, it increases discovery and reduces customer acquisition costs while boosting loyalty.
Pros
– Expanded earning and redemption opportunities for customers
– Increased brand exposure for merchants
Cons
– Associating with other brands may dilute the uniqueness and identity of each brand within the coalition.
This post first appeared on Top Most Essential Shopify Apps For Your Store In 2022, please read the originial post: here
