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Do you believe in the power of rewarding your customers? Have you ever wondered how a simple gesture can turn a one-time buyer into a loyal brand advocate?

Recent data from 2023 reveals that 73% of companies rely more on their current customers than on developing new markets.

It highlights the value of customer loyalty in today's competitive business ecosystem. When you reward your customers, not only do you make them feel valued, but you also pave the way for increased sales and brand advocacy.

So, how do you reward customers in ways that resonate with them and keep them returning for more?

Let's dive in and explore the different types of customer loyalty programs you can use

How do we reward customers?

When rewarding customers, it's not just about handing out freebies or discounts. It's about showing genuine appreciation and building a lasting relationship. The essence of rewarding your customers lies in understanding their needs and preferences.

The primary aim of loyalty programs is to keep customers returning, enhance their overall value to the business, and express gratitude to them. However, the intricacies of each loyalty program differ.

For instance, in point-based loyalty schemes, customers can exchange points for discounts or gifts. On the other hand, subscription-based schemes offer exclusive benefits to those who commit.

But how do you choose the right approach? And what are the different ways of rewarding customers effectively?

Let's delve into the 11 types of customer loyalty programs to determine which aligns best with your business goals.

11 Types of customer loyalty programs

Choosing a loyalty program suitable for your business can be overwhelming because of multiple options.

We have shortlisted 11 distinct types of customer loyalty programs, helping you discover the one that resonates most with your audience.

1. Points programs

Points programs stand out as a top choice when considering how to reward customers.

Customers earn points for purchases, which they can later redeem for discounts, special offers, or even freebies. The process is straightforward: shop, earn points, and enjoy rewards.

A standout example is Marriott's loyalty program, Marriott Bonvoy Benefits. Travel enthusiasts earn points for hotel stays, dining, car rentals, and flights. These points can be exchanged for free hotel nights or unique experiences.

What sets Marriott apart is their emphasis on personalization. By analyzing customer data from the points program, they tailor rewards, ensuring each guest feels valued.

The approach not only enhances the rewarding experience but also strengthens brand loyalty.

2. Cashback programs

When considering how to reward customers, cashback programs stand out. They offer a tangible return, making customers feel valued.

For example, Gap rewards shoppers with Gap Cash for in-store or online purchases.

Bank of America's Preferred Rewards is another prime example. Customers earn cashback by choosing spending categories and using their cards at various outlets. John Sellers, a Rewards Executive at the bank, highlights the program's success.

It boosts customer satisfaction as eight in ten participants recommend the bank. Cashback programs are a win-win, fostering loyalty while driving increased spending.

3. Tier-based programs

Tier-based programs elevate the concept of rewarding customers to an engaging game of progression. Starting with a foundational points system, these programs add benefits, enticing customers to aim for the next tier.

For example, DSW, in 2019, rolled out its VIP tier program for Canadian customers. Designed around buying behaviors, tiers offer perks like free shipping and bonus points for sustainable actions like shoe donations.

Combining tier-based rewards with a points system provides a consistent structure, giving customers clear goals and a rewarding journey to look forward to.

4. Spend-based programs

While points programs reward every purchase, spend-based programs take a different approach. They're designed to recognize and incentivize high-spend customers, ensuring they remain loyal to your brand.

For example, Azerbaijan Airlines offers travel points based on the ticket's base fare. Reach elite status faster, and you're in for treats like complimentary lounge access, priority boarding, and extra baggage allowances.

Spend-based programs are especially beneficial for business travelers. Those booking last-minute flights, often at higher prices, feel valued for their frequency and the amount they spend. It's a win-win, ensuring customers feel recognized for every dollar they part with.

5. Refer a friend program

Have you ever thought about how to reward customers for spreading the word about your brand? Refer-a-friend programs are the answer. They transform loyal customers into brand ambassadors.

Take Airbnb, for example. Their rewarding customer strategy offers the referrer US$18 per qualifying stay and US$10 per qualifying experience. It's a brilliant way to amplify brand reach while making the referrer and the referred feel valued.

Airbnb’s referral program increased their bookings by over 25%, and the last version came in stronger than before, boosting referrals by more than 300%.

6. Gaming programs

Gaming programs infuse the routine act of purchasing with excitement and engagement. By gamifying the rewards process, brands can make earning points more enjoyable, encouraging customers to spend more and stay hooked.

Instead of a straightforward points system, these programs often introduce challenges, tiers, or special rewards that customers can "play" to earn, turning the Social shopping experience into a fun game.

Starbucks in 2016 evolved from a basic points system to a gamified approach. Previously, every purchase earned a point, regardless of its value. Now, customers earn two 'stars' per dollar, favoring those who spend more.

But it's not just about stars. The program has expanded, allowing stars to be redeemed for more than just coffee – think extra espresso shots or select merchandise.

Managed through their mobile app, Starbucks also alerts customers to bonus point opportunities, ensuring the game stays fresh and engaging.

7. Subscription programs

Amazon Prime might be the gold standard when considering rewarding customers through subscriptions. However, even smaller brands can harness the power of subscription-based loyalty.

For example, Dirty Lemon, known for its unique lemonade blends, offers discounts exclusively to subscribers. Those not subscribed? They pay the full price. It's a simple yet effective way to reward loyal customers and encourage repeat purchases.

8. Mission-driven programs

If your brand stands firmly behind a social mission, a mission-driven customer loyalty program could be your path to deepening customer engagement.

Such programs resonate because they align purchases with shared values. Take Ben & Jerry’s, for instance.

They've crafted ice cream flavors inspired by social justice themes, channeling sales towards charities championing various causes, from environmental conservation to social welfare.

The mission allows customers to feel their purchases, regardless of size, contribute to a greater good. If you're considering this route, ensure your brand's values are clear and identify causes that resonate with your audience.

9. Community programs

While many brands focus on rewarding customers with tangible perks, Sephora takes a different approach.

Beyond their points-based rewards, Sephora's Beauty Insider program introduces an online community. This Beauty Insider Community is a hub for beauty fans and newcomers to discuss, share, and learn.

Sephora provides value and fosters a deeper emotional connection with its customers by offering an interaction platform. Such community-driven rewards strengthen the bond between the brand and the customer, making the rewarding experience more personal and engaging.

10. Paid programs

Have you ever considered how to reward customers willing to invest upfront? Paid programs might be the answer. Customers pay a fee to unlock exclusive perks. Take DoorDash as an example.

Members enjoy free delivery from numerous restaurants by subscribing to DashPass for a nominal monthly charge.

The key to a successful paid loyalty program? Ensure the benefits surpass the cost, making it a win-win for both the brand and the customer.

11. Free perks programs

When considering how to reward customers, sometimes the simplest gestures make the biggest impact.

Everyone adores complimentary treats, and free perks programs tap into this universal love. By offering loyal customers free products or services, businesses express gratitude and encourage repeat visits and purchases.

Take Grubhub as a prime example. Their loyalty program showers customers with ongoing offers, potentially summing up to over $400 in free food.

This rewarding approach not only delights their users but also boosts visibility for restaurant partners, introducing diners to new culinary experiences on the app.

12. Send gift cards

Gift cards have always been a favorite when pondering how to reward customers. They offer flexibility, allowing customers to choose what they want while feeling the brand's appreciation.

Whether it's a holiday, a special occasion, or a thank-you gesture, gift cards can significantly impact you. They're not just tokens of appreciation, but also incentives that often lead to further purchases, enhancing customer loyalty.

But what if you could take this a step further?

Elevate rewards with Xoxoday

The traditional methods remain effective in customer engagement, but there's always room for enhancement.

Enter Xoxoday Plum, a platform designed to revolutionize how you reward customers. Its API-first loyalty program technology promises to engage shoppers year-round, turning occasional buyers into brand advocates.

The platform offers easy integration, next-gen loyalty logic, and a redemption marketplace covering various categories and brands.

By delivering AI-enabled rewards automation, Xoxoday Plum ensures each reward feels tailor-made, enhancing the overall customer experience.

So, if you want to elevate your loyalty game, it might be time to explore Xoxoday Plum.