Loyalty Program: How It Works, Examples, and Tips
A customer loyalty program can encourage repeat purchases from your brand. Let's explore why this matters and look at examples you can apply.
What is a customer loyalty program?
A customer loyalty program (or rewards program) is a customer retention strategy used by businesses to incentivize repeat purchases. These programs often include benefits such as discounts, free gifts, or other perks that customers receive when they shop again.
Every business understands that it’s not enough to simply open a store and expect customers to come—there needs to be a reason for them to buy. Sometimes, a great product or excellent customer experience (CX) is enough to draw them in. However, in many cases, businesses need a structured strategy to keep customers coming back.
Loyalty programs reward loyal customers with perks such as product discounts, special promotions, and other benefits. This guide will help you understand how loyalty programs work, the benefits they offer, and how they contribute to a positive customer experience.
In this guide, you will learn:
- How customer loyalty programs work?
- Benefits of loyalty programs
- Types of loyalty programs
- 5 examples of effective customer loyalty programs
- How to build a successful loyalty program
- FAQs
- How good customer service enhances customer loyalty
How do loyalty programs work?
Loyalty programs benefit both businesses and customers. As customers make repeat purchases, business revenue grows. In return for their loyalty, businesses reward customers with perks such as exclusive offers, free gifts, product upgrades, or early access to new items.
While the exact mechanics vary, most programs follow a general flow:
- A new customer makes a purchase or shares personal information.
- The business invites them to join the loyalty program.
- The customer signs up and begins earning rewards for future purchases.
- The more they engage, the more valuable the rewards become.
As we’ll explore further, loyalty programs can take many forms—point systems, referral programs, hybrid models, and more.
Benefits of a customer loyalty program
Boost revenue and retention
One of the main benefits of a loyalty program is its ability to increase revenue while improving customer retention. It encourages customers to stay connected with your brand and buy more in order to earn rewards.
For example, a customer may increase their order value to reach a discount threshold or shop more frequently to advance to a higher tier.
Build stronger customer relationships
Loyalty programs help businesses connect with their customers and strengthen relationships. By offering benefits that go beyond the transaction, businesses can exceed expectations and show appreciation.
Differentiate your brand
Offering a loyalty program can set your business apart from competitors that don’t have one. A good loyalty program:
Gives customers more reasons to engage with your brand
Offers better value compared to competitors
Encourage word-of-mouth marketing
Loyalty programs can naturally drive referrals, especially when customers are rewarded for inviting friends. For instance, customers may earn discounts for leaving reviews on Google or incentives for referring others.
Show appreciation for your customers
A loyalty program is one of the most effective ways to express gratitude to customers. Businesses can get creative with rewards — from personalized discounts to birthday specials.
Motivate purchasing behavior
Loyalty programs can also drive specific behaviors, such as signing up for emails or SMS notifications in exchange for a discount code.
Types of loyalty programs
There are several types of customer loyalty programs, each tailored to different business needs. Here are some common models:
Point-based proigrams
Customers earn points for purchases or specific actions.
Points can be redeemed for cash, discounts, or gifts.
Tier-based programs
Customers move up to higher tiers as they spend more.
Each tier unlocks greater rewards.
Mission-based programs
A portions of revenue is donated to charity.
Businesses can partner with nonprofits that align with their mission.
Spend-based programs
Customers earn rewards based on how much they spend.
Subscription-based programs
Cusomers pay a membership fee to access exclusive benefits.
Referral-based programs
Customers are rewarded for referring friends.
5 examples of customer loyalty programs
- Marriott Bonvoy
A points and tier-based program for hotel bookings. Members can redeem points for free nights, meals, and other experiences. They can also earn points through car rentals, flights, and enjoy free Wi-Fi and
- Grubhub+
A monthly subscription program offering free delivery and exclusive deals. For $9.99/month, members get:
$ 0 delivery fees
Lower service fees
5% cashback on pickup orders
Priority delivery at reduced rates
Other exclusive perks
This program encourages repeat orders through the Grubhub app rather than turning to competitors.
Grubhub also demonstrates how customer service strategies can enhance loyalty programs. My using Zendesk to streamline operations and better connect with customers and drivers, they createa seamless experience that strengthens loyalty.
- Delta SkyMiles Medallion
A tired program for frequent Delta Airlines passengers. Tiers are based on Medallion Qualification Dollars (MQDs) spent the previous year, which can be earned through flights or partner credit cards:
Silver: Silver: 5,000 MQDs.
Gold: Gold: 10,000 MQDs.
Platinum: Platinum: 15,000 MQDs.
Diamond: Diamond: 28,000 MQDs.
Each tier unlocks more perks, such as travel vouchers, priority sevices, and free upgrades.
- Amazon Prime
A paid membership program offering benefits like free shipping, streaming, and music. For annual fee, members gain access to:
Two-day free delivery
Streaming movies and shows
Music streaming
Prime Day deals
And more
- Ben & Jerry’s
A mission-based program where a portion of proceeds is donated to charity. While the brand does not offer typical discounts or gifts, customes are drawn bt shared values. For example, themed ice cream purchases support causes such as anmal welfare, human rights, climate action, and social programs
How to build a successful customer loyalty program
Set clear goals: Define what your business wants to achieve with the program.
Know tour customers: Make sure rewards align with their needs and preferences.
Choose the right program: Select a model that fits your business goals.
Promote your program: Use email, your website, and receipts tto encourage sign-ups.
- Track and optimize: Monitor perfomance and make improvements as needed.
Enhancing customer loyalty with great service
A loyalty program can set your business apart and increase customer retention. But for it to truly succeed, it must be backed bt high-quality customer service.
Explore Amiras' loyalty customer care software to help you build lasting relationships with your customers today!
