8 Common Types of Customer Loyalty Programs

Estimated Reading Time: 4 minutes

Customer loyalty indicates the tendency of a customer to select a brand over the competition. This is a result of continuous positive emotional experience and perceived value of a product or a service, and it increases the likelihood of a customer to repeat business.

Why is building customer loyalty so critical?

Customer loyalty is one of the most important tactics to retain customers, increase revenue, and guarantee long-term business success. It does take time and effort to establish trust, assure satisfaction, generate engagement, and increase loyalty, but it does pay off in the future.

Additionally, it costs a lot less to sell to existing customers than acquire new ones.These loyal customers will always help the business bring new customers with the help of word of mouth.  So brands have to work on strategies to approach customers and show them how much they care about and value their existence. Incentivizing  the customers time and again is very important and therefore must be top priority. 

Now, let’s list down some of the most common types of customer loyalty programs which will help in customer rentention and improve the customer relationship.

Points-Based Customer Loyalty Programs 

The Points program is one of the most commonly used customer loyalty programs in the commerce world. It is a type of marketing strategy wherein every time your customer makes a purchase (on your website, mobile app, or in-store), they earn points. Sometimes these points depend on the size of their purchases. These points can be later on redeemed into different types of rewards such as discounted services, special customer treatment, or even giveaways. Businesses can manage the points programs with a loyalty card or a mobile app.This is on of the most used loyalty program in the retail business.

Tier-Based Customer Loyalty Programs 

Tier-based program is similar to the points program, but it is based on levels of loyalty. Whenever a customer buys something, they earn points. And the more the points they earn, the higher the level of loyalty they reach. And the higher the level of loyalty, the more the rewards, benefits, perks, and incentives, they will get.

Value-Based Customer Loyalty Programs 

The value in the program refers to the value attained by the customer because of doing business with a brand. In other words, customers perceive that if they do business with you, they would be adding value to something they believe in. So paying for a product or service to them would be the cost of kindness or the cost of something good.

For example, a business will create a loyalty program similar to the points program. And whenever customers spend a certain amount of money or buy a certain product, the business will designate a sum of money that will get donated to a certain charity. So you are engaging with a customer through your shared commitment to a cause.

Spend-Based Customer Loyalty Programs 

The spend-based program is based on customer expenditure. In the program, the customer gets loyalty credits for the amount they have spent at a store (cashback). It is an effective way to keep up the customer engagement  and to increase the transaction amounts.

Gaming-Based Customer Loyalty Programs 

Gaming programs entertain customers and offer them incentives or rewards by joining a game in-store or through a game application. This program has proven effectiveness for engaging the young, tech-savvies.  Letting customers complete more game levels or quests to earn rewards, is a great way to keep the younger customers hooked and coming back for more.

Paid/Membership Program

A paid or membership program involves customers paying to join a membership group, where they have to pay for it either on a monthly or yearly basis. Through this paid program customers gain access discounts, offers, special service, and other unique offers. For this type of loyalty program to be applied effectively, businesses need to promote it to existing buyers frequently. And the problem must include exclusive benefits for members, or else it loses its value.

Coalition Program or Partnered Program

Strategic partnership with other brands is beneficial for both your business and your customers. It helps with retaining your customers and growing your business. You can partner with other brands to provide inclusive offers to your customers. For example, customers who made a purchase worth over 5000 INR in a furniture store will get a 25% discount in a lighting store. So you should be careful with selecting which business/brand would be a good fit for this partnership.

Hybrid Loyalty Program 

A hybrid loyalty program is a fusion of two types of loyalty programs. The most common type of program merging is the point-based program with the tier program. Through this merge, it is easier for customers to keep track of their earned points, redeem them, and get encouraged to pursue the next loyalty level, leading to more purchases.


How can technology help in these loyalty programs?

Using tech solutions for customer loyalty programs can help to grow your business, attracting new customers, and re-engaging with the existing ones. An outbound calling tool like NeoDove can help businesses in building and maintaining a database for customer information, including transnational information, and the product category or services they are interested in. Businesses can maintain communication with customers through the tool’s outbound calling solutions.

In a strategy including royalty programs, there is no way better than the other. Choosing a type of royalty program completely depends on your business’s mission, the product you offer, and the goal behind the reward program. The key to effectively deploying the tactic is to understand your customers and to improve how you provide value to them. And in the aftermath, your customers are happy and thinking about the benefits of interacting with your business.

Liked It? Share in your network as well

Related Resources