16 customer loyalty programs of 2023 + how they work
A customer loyalty program, also known as a rewards program, is a strategy that helps retain customers and encourages them to continue purchasing from your brand. Read on for examples of the best loyalty programs.
By Halona Black, Contributing Writer
Last updated May 23, 2023
Sometimes, you need to give customers a reason to keep buying from you. To build customer loyalty, some businesses will offer special discounts to customers who make regular purchases. This strategy is known as a loyalty program.
If executed well and with the customer at the center, loyalty programs can help your customers feel good about purchasing from you. There are many different types of customer loyalty programs you can use to increase customer engagement. What you choose depends upon your mission, your product, and your goals for the reward program.
Read on to learn how and why customer loyalty programs work, plus see examples from popular brands.
What are customer loyalty programs?
A customer loyalty program (or rewards program) is a customer retention strategy that motivates customers to continue buying from you instead of competitors.
Benefits of a customer loyalty program
Like personal relationships, customer relationships are successful when both parties feel they’re getting something beneficial from the relationship. Customers give you their support when they buy from you, and loyalty rewards like discounts and freebies affirm that they’re receiving something in return.
According to Accenture, more than 90 percent of companies have some sort of loyalty program, so it’s advantageous to implement one if you haven’t already.
Here are several benefits of a customer loyalty program:
Customer loyalty programs can boost your business’ revenue. The more a buyer loves your brand and the longer they stick around, the more they’re likely to spend. For example, many shoppers will purchase more to obtain a higher tier in a program or receive a discount.
Improves customer retention and customer lifetime value
Customer loyalty programs increase customer lifetime value and repeat business—rewarding your frequent customers for their purchases is an effective way to keep them coming back for more. Plus, by giving buyers an enjoyable experience, they’ll be more satisfied with your brand. This can help you forge connections with new customers as well.
Builds stronger customer relationships
According to the Zendesk Customer Experience Trends Report, 75 percent of customers make purchasing decisions based on their experience with a brand. Half of the consumers we surveyed also said that customer experience is more important to them now than it was a year ago. Customer loyalty programs can help you build a more engaging experience and improve customer relations.
Differentiates a brand from its competitors
Implementing a customer loyalty program is a great way to stand out from other brands that may not already have one. A loyalty program can:
- Give customers another reason to engage with your brand
- Provide rewards that allow customers to purchase products at a lower price than your competitors
Companies with successful customer loyalty programs increase revenues up to 2.5 times faster than competitors and generate 100 to 400 percent higher returns to shareholders, according to HBR.
Encourages word-of-mouth marketing
Customer loyalty programs can also encourage word-of-mouth marketing, especially when customers get rewarded for telling others about your brand. For instance, you can reward customers with a discount for providing a review on Yelp.
This also plays into refer-a-friend customer loyalty programs. When a customer refers a friend, for example, you can reward the customer with a free month of service if their friend makes a purchase.
Shows customers you appreciate them
A customer loyalty program is one of the best ways to show customer appreciation. These programs reward repeat customers with discounts and services—basically thanking them for their business.
Motivates consumer behavior
A customer loyalty program can encourage your customers to take certain actions, such as subscribing to your newsletter. For example, you can motivate customers to sign up for a newsletter or text alerts by enticing them with a discount code in exchange.
How do loyalty programs work?
Loyalty programs work by offering customers incentives to purchase from or engage with the company. The aim is to retain customers, increase customer lifetime value, and show customer appreciation.
Though each type of loyalty program works differently, here’s the general process:
- Customer makes a purchase or engages with a company
- Company prompts the customer to sign up for its loyalty program
- Customer signs up using their information (phone number, email, etc.)
- Customer receives rewards for purchases or through promotional materials
Customers can redeem points for discounts or gifts in a points program, whereas subscription programs reward customers when they subscribe. Many businesses use a combination of different types of customer loyalty programs. Learn more about each type and how they work below.
Types of customer loyalty programs
There are several types of customer loyalty programs that your business can take advantage of:
- Points programs
- Tier-based programs
- Mission-based programs
- Spend-based programs
- Gaming programs
- Free perks programs
- Subscription programs
- Community programs
- Refer-a-friend programs
- Paid programs
- Cashback programs
Points programs are among the most popular types of customer loyalty programs. They’re useful because points are easy to earn and redeem. Customers can redeem points for:
- Credit toward their next purchase
- Discounted services
Customers can track points with a loyalty card, online account, or mobile app.
Because so many brands employ a points program, it’s a recognizable format for customers—they understand how to take advantage of it and enjoy the experience.
Tier programs are like video games: Once you complete one level of spending, customers can unlock a new level that gives them access to additional benefits or perks.
For example, you could have a tier of “diamond level” clients. Customers at this level could earn exclusive pricing for your most expensive products and services.
This will motivate your customers in lower tiers to make an effort to reach the next level of spending. The more exclusive the reward, the greater the customer appeal.
Not every rewards program focuses on tiers and discount codes. If your company is highly mission-driven, you may want to try a customer loyalty program with a cause.
Aligning with a mission allows you to build customer engagement and drive repeat purchases through your shared values. These programs can be more effective when you partner with a nonprofit organization that has a strong connection to your company’s mission.
Spend-based customer rewards programs allow businesses to recognize high-spend customers. Airlines, in particular, are transitioning from points programs to spend-based systems. It allows them to engage deeper with travelers who pay more for fewer flights.
Gaming programs inject an element of fun into the act of making a purchase. This type of program incorporates a simple game—like spin to win—that a customer plays to obtain a prize. It can include a discount or a free item with a purchase of a product or service.
Free perks programs
Who doesn’t love gifts? Free perks programs give loyal customers complimentary products and services. In many free perks programs, shoppers can redeem points for things like free food or a free makeup sample.
A subscription program, also known as a premium loyalty program, is where customers subscribe and pay a fee upfront for a product or a service and receive rewards in return. These rewards can be redeemed and used toward future purchases.
Community customer loyalty programs foster customer engagement and can sprout from an existing loyalty program. For example, online clubs and groups may form within a loyalty program, such as Sephora’s Beauty Insider Community.
Brands with this type of program can allow customers to post questions, share photos of themselves wearing a product, and interact with one another.
Referral programs reward customers for referring their friends and family. This word-of-mouth strategy can help turn loyal buyers into brand advocates—and on top of that, the referral may refer someone else in the future.
Referral programs may also reduce your customer acquisition cost because the customer will be doing the work for you.
A paid loyalty program requires customers to pay a fee for loyalty perks and provides instant, ongoing benefits for participating. For example, customers can sign up for a $5-a-month membership that gives them access to 50 percent off their purchases every month.
Cashback rewards programs give customers cashback or money to spend with the business. This helps customers feel that, even though they’re spending money, they’re also getting something in return. This type of loyalty program is common among financial companies.
16 successful customer loyalty program examples
Looking to implement a loyalty program but need some inspiration first? Check out these examples of 16 innovative customer loyalty programs from well-known brands such as Marriott, Sephora, Amazon, and more below.
Marriott’s rewards program, Marriott Bonvoy Benefits, allows members to redeem points for free hotel nights, dining, and other experiences. They can also earn points with car rentals and flights, share points with friends and family, and get free Wi-Fi and special rates.
Program type: Points program
Why it works: Marriott can analyze customer behavior and use that data to create a better experience tailored to each guest. The more they know about a customer’s preferences, the more the company can offer personalized rewards.
DSW’s customer loyalty tier program helps create a vibe of exclusivity. The tiers are based on consumer buying behavior and include rewards like free shipping and extra points for donating unwanted shoes. Tiers include:
- Club: The initial tier every customer begins with
- Gold: Achieved when the customer spends $200 on eligible purchases*
- Elite: Achieved when the customer spends $500 or more on eligible purchases*
*Note: Eligible purchases vary based on a business’ specifications, but this added parameter can help drive customers to a desired product or category. In DSW’s case, eligible purchases are “purchases of DSW products such as footwear, handbags, and accessories.”
Program type: Tier-based program
Why it works: It offers a structure that customers can rely on for months or even years at a time and gives customers a goal to strive for.
3. Azerbaijan Airlines
Azerbaijan Airlines, like many other airlines, utilizes a spend-based program that rewards frequent flyers with travel points based on each ticket’s base fare. Those travelers who reach elite status sooner get perks like complimentary lounge access, early boarding, and additional checked baggage allowances.
This kind of program benefits business travelers who pay more money for last-minute flights to their next meeting or scheduled events.
Program type: Spend-based program
Why it works: It recognizes how often customers buy and how much they spend.
Grubhub’s loyalty program, Grubhub Points, allows customers to redeem ongoing offers, which can total more than $400 in free food at any given time. For every dollar spent, customers can earn 20 points.
The program helps its restaurant partners promote their restaurants on the app by introducing customers to places they haven’t tried before.
Program type: Free perks program
Why it works: It gives Grubhub customers an incentive to keep using the app to earn more points towards discounted rewards.
5. Dollar Shave Club
Dollar Shave Club offers a subscription-based program—without membership fees. You become a member simply by making your first purchase. Instead of spending more to earn points, members automatically have access to new and exclusive products, personalized recommendations, member-only magazines, and free shipping.
Program type: Subscription program
Why it works: The program follows a more community-like approach rather than enticing customers to spend more to get benefits.
Sephora’s Beauty Insider program gives customers a choice of gifts based on a points system. It also offers something unique: an online community.
The Beauty Insider Community is an online community where customers can ask questions, share their looks, and swap tips.
Program type: Community program
Why it works: It adds an emotional element and strengthens customers’ relationship with the brand.
7. Bank of America
Bank of America’s Preferred Rewards provides cashback rewards to customers when they use their debit or credit card to make purchases at certain national retailers, restaurants, and other companies.
According to John Sellers, Rewards Executive at Bank of America, some of the benefits of the program include:
- Higher customer satisfaction—eight out of 10 program participants are likely to recommend Bank of America to friends and family
- Greater customer retention
- Increased customer spending, leading to higher profits
Program type: Cashback program
Why it works: This program gives customers the flexibility to use their rewards where they want to, increasing overall customer satisfaction.
Freshly’s referral program gives an existing customer a $30 discount for every new customer they refer, while referred customers receive 12 free meals (a $120 value).
Program type: Refer-a-friend program
Why it works: It helps encourage word-of-mouth marketing by rewarding customers who tell people they know about the business.
With DoorDash’s paid program, customers can become DashPass members for a small monthly fee. In exchange, they get free delivery for a wide range of restaurants, so customers who use the app often ultimately save on orders.
The takeaway? Paid customer loyalty programs work when the value outweighs the cost.
Program type: Paid program
Why it works: Regular customers only need to pay a small price to enjoy exclusive benefits with the brand.
10. Amazon Prime
Amazon Prime is a great example of a paid program: For a set annual fee, Prime members get free two-day shipping. The membership also includes other perks, such as special deals on Prime Day and access to Amazon’s streaming service.
Program type: Paid program
Why it works: This program gives customers a reason to shop exclusively at Amazon and offers convenient and competitive delivery times.
11. Ben & Jerry’s
Ben & Jerry’s mission-based program creates ice cream flavors with themes of social justice. For every purchase of these themed pints, the company will donate profits to charities that support animals, the environment, social programs, and other causes.
Before starting this type of program, ensure your company values and mission are aligned. Then, identify organizations or causes that would resonate with your customer base.
Program type: Mission-driven program
Why it works: It allows customers to feel like their purchase—whether big or small—helps improve others’ lives.
12. The North Face
The North Face uses a points program to reward its customers. By joining the XPLR Pass, customers receive 10 percent off their first online order, access to exclusive gear, birthday gifts, specialized customer service, and more.
Shoppers earn points for every dollar spent at the retailer, plus extra points for referring a friend, downloading the North Face app, and checking in at a national park or monument.
Program type: Points program
Why it works: This program gives customers flexibility on how they can earn points. The North Face also speaks directly to its target audience by granting points for participating in outdoor activities.
13. Panera Bread
Panera’s free perks program, MyPanera, gives customers an easy way to enjoy free items, free shipping, and personalized rewards. All customers need to do is download the Panera app, sign up for texts, and subscribe to the restaurant’s email newsletter.
Customers can also join the Unlimited Sip Club subscription for unlimited drinks. To sign up for this, create a MyPanera account, enter your payment information, and select a store near you.
Program type: Free perks program
Why it works: It’s simple and free to use—customers don’t need to purchase anything specific to receive perks.
Starbucks is known for its gaming program that incentivizes customers to make a purchase. For example, customers earn two “stars” for every dollar spent, rewarding those who spend more money during shorter periods. However, it doesn’t stop with stars.
The coffee giant also introduced a tier component that expands the points program, allowing customers to redeem their stars for items beyond cups of coffee, like an extra espresso shot or free merchandise.
Customers play the game on a mobile app, which Starbucks also uses to notify customers of opportunities to earn extra points.
Program type: Gaming program
Why it works: It encourages future purchases by making the points process more fun and keeping customers hooked.
15. The Body Shop
The Body Shop’s Love Your Body Club is a mission-based loyalty program that gives customers the option to donate their rewards to charitable organizations.
For every 100 points earned, shoppers get $10 to spend on products or donate to a charitable partner, such as:
- Black Lives Matter
- No More
- World Land Trust
- Born Free USA
Program type: Mission-based program
Why it works: It helps strengthen The Body Shop’s ethical brand image and allows customers to contribute to a good cause.
With Expedia Rewards, travelers can save around $35 per hotel or flight booking through points earned. The three-tier program allows you to earn more perks and rewards depending on how often you travel:
- Blue tier: Gain access to savings that include an extra 10 percent off hotels, and receive double points when you book through the Expedia app.
- Silver tier: Get two points for every $1 spent, plus free breakfast and spa credits after earning 10 Trip Elements.
- Gold tier: After earning 25 Trip Elements, you get 3 points for every $1 spent as well as late checkout and free room upgrades
*Note: Trip Elements refer to points you earn for each booking you make on Expedia.
Program type: Tier-based program
Why it works: It incentivizes customers to book all travel through Expedia.
How to create a customer loyalty program
Now that you’ve learned about the different customer loyalty programs and seen examples from popular businesses, you’re better equipped to implement one of your own. Here’s how to create a winning customer loyalty program in seven steps:
Figure out your goals
The first step in developing a customer loyalty program is to determine what you want to get out of it. This includes setting goals, such as the type of shopping behavior you want to promote:
- Newsletter signups
- Leaving customer reviews
- Purchasing a specific product
- Repeat purchases/visits
Once you identify the areas of your business that you want to target, you’ll be able to decide on your program type.
Choose the type of reward
Next, pick the reward you want to offer to customers. Bear in mind that you’ll want to make your reward desirable enough to keep customers interested, encourage repeat purchases, and foster brand loyalty. Types of rewards can include:
- Gifts with a purchase
- Discounts/discount codes
- Exclusive products and deals
Select the type of loyalty program
Choose the type of customer loyalty program that best aligns with what you decide for steps one and two. The loyalty program you pick will help you define the benefits you’ll reap and set you up for the next step.
Decide how you want to run your program
After you choose the type of program you want, determine whether you want to run your program manually or with software.
Running your program manually would require you to track customer behaviors by hand and reward them based on your structure—like with a punch card. It’s much easier to track this data using automated software, especially one that integrates with other tools, such as your POS system.
Some customer loyalty program software include:
- Annex Cloud
- Open Loyalty
Infuse your branding
Inject your brand into all aspects of your customer loyalty program and personalize it as much as you can. This includes:
- Messaging (in email newsletters, texts, posters, etc.)
- Interfaces (such as the website and/or rewards tracker)
- Rewards “currency” (you can get creative with what you call “points”—make it unique to your brand)
Market your customer loyalty program
Once your customer loyalty program is in place, spread the word to attract your first rewards members. Consider doing this through:
- Text and email campaigns
- Physical signs in your storefront
- Word of mouth from store associates
- Messaging on store receipts
- Pop-ups or banners on your website
Observe and modify
Lastly, be sure to monitor how your customer loyalty program performs and adjust based on what you see and any feedback you receive. You can gather insights from your customer loyalty program software or calculate the program participation rate.
The participation rate shows you how many customers are interested in your program. To calculate this metric, divide the number of loyalty program members by the total number of customers.
Tips for a successful customer loyalty program
Here are some helpful tips to keep in mind when creating and implementing your program.
Know your audience
The key to a successful customer loyalty program is ensuring that the rewards reflect what your customers want in a rewards program.
Companies must make a genuine effort to understand their most loyal customers and what would entice them to come back again and again.
It’s all about research—to gather insights into your customer base, you can utilize things like:
- Customer surveys
- Customer service data
- Customer interviews
You need to know who your customers are and what they’ll respond to if you want your rewards program to succeed.
Give customers something to strive for
With any loyalty program, you must give customers something to work towards. For example, tier-based programs incentivize customers to continue buying until they’ve reached a higher status or tier.
Additionally, make the type of reward a customer receives enticing enough for them to want to participate in the program.
Genuinely provide value for your customer
If your loyalty program is more beneficial for your business than it is for your customers, they will see right through it.
It’s crucial to ensure customers are getting something in return for participating. For example, you might offer bonus points so customers can get more rewards the more they spend.
Add a personal touch
With so many brands offering loyalty programs, adding a personal touch is one way to stand out—and customers increasingly expect it.
For example, a clothing company could look at customer behavior and use that data to encourage customers to shop in different categories relevant to their interests and needs. If a customer always purchases dresses, you could target them with discounts on accessories to get them to buy in another section of your store.
Use technology for a more effortless experience
If your loyalty program isn’t a seamless experience, it won’t be worth it to customers. Smart use of technology helps foster that effortless experience customers expect.
Brands like Cost Plus World Market are incorporating an SMS component into their loyalty program so they can send customers gifts directly via text. That way, rewards are already in customers’ pockets. With other channels like email, shoppers often have to sign in and click around to find their offers. But with SMS, you can send a link straight to their phone.
Data is key to measuring the success of your customer loyalty program. Look at incremental sales. This measures how many sales happened because a coupon went out and measures that against what base behavior would have been without that coupon.
Another important metric is customer lifetime value. A rewards program team should ask itself: “Did the customer return after they used a coupon?” In other words, did the coupon make people more loyal, or are customers using it once and never returning?
Add emotional elements
To retain customers, add an emotional component to your loyalty program. Keep your program interesting and engaging so customers are more likely to come back and have good thoughts, feelings, and memories about your brand.
For instance, Panera’s rewards program goes beyond points and free food. Members can customize menu items however they like and then save their favorites. They’re also the first ones to see new menu items.
The best loyalty programs are customer-centric
Listening to your customers enables you to improve your entire customer experience and build a loyal fan base.
So, listen and pay attention to your audience and let them be your guide as you build out the elements of your customer experience—from your loyalty program to your customer support.
Turn the people who know your business best into brand advocates with head-turning reward programs and impressive customer service.
See how healthcare organizations can embrace the trend of conversational service while maintaining their HIPAA compliance requirements.
Leverage AI in customer service to improve your customer and employee experiences.
If empathy is what makes us human, then artificial empathy helps us deliver richer, more personal customer experiences at scale.