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.
Let’s begin with Point Rewards Programs, the place it all started and a foundational piece to many loyalty programs. This type of loyalty program is scientifically designed to nudge member behavior along using points and point bonuses. By setting rewards at the right levels, you can generate incremental usage and a much higher ROI than traditional discount programs. To be effective, points programs must be simple and provide immediate value because typically more than 50% of those who join a points program use it just once and never return.
The key to success with a Points Rewards Program is establishing the value up front, and integrating the points program into the overall brand experience vs treating it as a separate promotional silo. The MyMcDonald’s Rewards program shows how a well design points program can rapidly become a pillar of the brand proposition, replacing much more expensive, non-targeted promotions. See our detailed review of this program.
Loyalty Program Partnerships are closely associated with Points Rewards Programs, but seek to increase the relevance and engagement by broadening earning or other benefit opportunities. Coalitions of complementary brands band together to cost effectively achieve increased scale.
A key component of a loyalty program is the value exchange, and this is where CRM Loyalty Programs live, at the intersection of permission/engagement and “benefits”. Benefits can include a wide range of offerings, including more tangible benefits like discounts, as well as softer benefits like access to special events, priority treatment, and personalized communications. Registering for the program can also improve the experience by speeding transactions, keeping purchase history and tracking warranties.
Converting traditional transactions to recurring purchase subscriptions is a major trend, and a Loyalty Program design approach has played a key role. Subscription Loyalty Programs can mix points, recognition or other special perks into the subscription package, creating a hybrid Subscription Loyalty Program. The end goal is maximizing retention and customer lifetime value, and adding in loyalty benefits can make a strong addition to the value proposition.
Personalized Loyalty Programs rely on highly personalized rewards or offers as compared to one size fits all programs. Taking a page out of the airline’s yield management book, incentives are custom designed based on algorithms and business rules. While technically challenging, this approach can deliver a much higher ROI because of the advanced targeting and test/learn approach.
While Tiered Loyalty Programs have been around for years, this program type has ventured far beyond simple VIP benefits into the experiential realm, enabling brands to create amazing experiences for the limited audiences of their very best customers. Tiered programs allocate the most special benefits to customers with the highest spend, usage or other key metrics. These small groups are extremely high value, often spending 5 - 10X more than the customers in the bottom tier.
When structured correctly, Gamification Loyalty Programs maximize engagement and build strong loyalty sentiment at the same time. The best designs propel the customer on a journey across different products/experiences and create true participation in the brand. Game actions may include viewing content, adding content, engaging with interactive experiences, visiting a physical location, making a purchase or a near infinite array of other things.
To help think about the loyalty playing field at a higher level we created a map, arraying each of these 7 options based on the level of engagement they generate, as well as the degree to which they can build loyalty sentiment / emotional loyalty. While each of these programs is designed to drive member behavior, they affect engagement and loyalty in varying ways:
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