Points Rewards programs are certainly a popular form of loyalty program, but it's important to remember that there are numerous loyalty program designs that don’t include points at all. In fact, there are 7 distinct types of loyalty programs to consider when revamping a loyalty program or starting a brand new one. A sound loyalty program design process will start with your objectives and the unique opportunities that exist for your brand, and only then move to program concepts that are best aligned. Although you’ll want to mix and match to achieve a balanced program design, these 7 different loyalty program types provide a good starting point for brainstorming and ideation.
Loyalty Program Examples
Starbucks and Delta recently announced a significant new loyalty program partnership that offers members of both programs easy and innovative ways to earn more Stars and SkyMiles. It also includes some unique aspects delivering special treatment along with a sense of exclusivity. This move is a strategic one for Starbucks in particular, and sets the stage for more of these types of Loyalty Partnerships. This article digs into the five key features of this innovative loyalty partnership that can serve as inspiration for any loyalty program design.
Loyalty program partnerships can dramatically increase the relevance and appeal of loyalty programs for any participant brand, particularly those with infrequent purchases or smaller customer bases. For the anchor/sponsor brand, it can help expand your reach into new segments or markets. In either case, tapping into the right kind of loyalty partnerships is beneficial for two reasons: you attract more high potential customers to your brand, while also expanding relationships with your existing customers. With the advent of technology solutions and open API’s, connecting with loyalty partners is easier and more cost efficient than ever. In terms of best practices, United Airline’s MileagePlus program provides a comprehensive example of loyalty partnership design.
Personalized Loyalty Programs succeed based on their ability to tailor offers, point earning opportunities and/or rewards based the member’s behaviors and interests. The personalization can take place at a segment level, grouping similar members together and customizing accordingly, or at the individual level based on Artificial Intelligence and Machine Learning. While it is a heavier lift from a technology standpoint, the benefits are significant vs one size fits all schemes because the incentives can be structured much more surgically, and test/learn can be applied to optimize. 7-Eleven’s 7Rewards program has over 55 million US members, and has rocketed to the forefront of the loyalty arena with their innovative program. A big part of that is based on personalization of the experience across all channels.
CRM Loyalty Programs take a softer approach to developing customer loyalty, avoiding points and other complicated schemes in favor of a simple value proposition to encourage the customer to identify themselves and engage with the brand. Strategies for this type of program can range from a simple email club to a highly personalized experience designed to maximize the relationship. IKEA Family is a massive global loyalty program adopting this approach, and it has helped this retailer to get to know their customers better while battling brands like Wayfair in a highly competitive marketplace.
Subscription Based Loyalty Programs are becoming increasingly prevalent and an interwoven piece of the subscription product value proposition. An informative example of Subscription Loyalty Programs can be found in the wine industry, where there are many new entrants building on the traditional wine of the month club concept. This article profiles two of the most successful programs, Naked Wines and Firstleaf, in order to identify Subscription Loyalty best practices that any business owner can apply.
Tiered Loyalty Programs can build real loyalty sentiment and boost retention by introducing a switching cost – members don’t want to lose their status. Each tier is achieved through a combination of spend and/or frequency, and benefits are progressively added for each threshold. The loyalty tier qualification criteria can be tweaked to enable a manageable audience for the most select benefits. Tier Based Loyalty Programs are a good fit for organizations that are well equipped to deliver the extra services – the highly competitive luxury department store sector provides useful insights and creative thought starters for this type of program. Nordstrom’s Nordy Club builds on their famous service heritage with benefits that keep high value customers coming back.
Google Local Guides may not come to mind as a Gamification Loyalty Program, in fact most consumers aren’t even aware of it. Take a closer look though, and you’ll see that it’s the GOAT of gamification in loyalty programs! How many other programs can tout so many members who have had such a transformative effect on their business? Google Local guides is tough to beat, with over 150 million Local Guides globally, who:
As noted in the Nov 5 New York Times Article How Frequent Flier Programs Are Changing in a Changed World, business travel is still way off of pre-pandemic levels, and US Airlines are battling to retain the loyalty of frequent travelers. Tactics include lowering elite tier thresholds and increasing the credit allowed for non-flying transactions such as credit card spend. In addition, they are reducing focus on mileage due to the environmental concerns related to the notion of travelers taking unnecessary trips just to earn or retain their status.
Much of this response is due to the changes felt due to Covid-19, though as the author notes, some “may be disenchanted with airline loyalty programs, which, in the years leading up to the pandemic, had made upgrades and free tickets more elusive”.
The online travel agent (OTA) space is highly competitive, and undergoing consolidation down to two key players: Booking Holdings (e.g booking.com, Priceline, Cheapflights and OpenTable), and Expedia Group (e.g. Expedia, Orbitz, Travelocity, and VRBO), and they are battling it out for market leadership.