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Loyalty programs have proven to be one of the most effective tactics for increasing revenue and inspiring customer loyalty. Up to 84% of consumers say they are more likely to stay with a brand that offers a loyalty program. And 66% of consumers say the ability to earn rewards actually changes their spending behavior.

We know that selling to repeat customers costs a lot less than acquiring new customers – which is why brands invest in loyalty and rewards programs.

While effective, customer loyalty programs are nothing new. Most fall into one of four categories: scores, levels, social media, and paid programs. That’s why some retailers want to shake things up and find innovative new ways to create rewards programs and inspire customer loyalty.

Customer loyalty programs reward customers who engage with a brand repeatedly. This is a customer retention strategy that encourages them to buy from your brand rather than from competitors. The more a customer buys or interacts with the brand, the more rewards he earns.

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With a loyalty program, companies can offer points or benefits to customers. And in return, they exchange points for discounts, free products, rewards or exclusive benefits. The aim is to motivate repeat purchases and build trust between the customer and the company.

A recent Yotpo survey revealed that people will go to great lengths for brands they love. Nearly 68% of respondents said they would join a customer loyalty program for brands they like, while 56% are willing to spend more with a brand even if there are cheaper options.

The study also revealed that people want more from free shipping and discounts. They also want early access to sales and new products.

Running a customer loyalty program means you will need to donate something. Discounts, sales, early access etc. But the payoff from having rewards programs is huge:

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However, not all loyalty programs are the same. There are different types of rewards programs you can use to build customer loyalty and earn repeat purchases.

Now that you know how rewards programs work, let’s look at some common types you can adapt for your ecommerce store.

Points programs are the most common type of rewards programs. Free gifts, cashback, benefits, etc. Allows them to accumulate reward points that can be used for Customers don’t just earn points on purchases. They can also earn points by sharing on social media, leaving comments, making a birthday or gamifying.

Body care retailer Blume uses a point system called Blume Bucks in its loyalty program called Blumetopia. Customers can earn Blume Coins by following the brand on Instagram, placing an order or telling their friends about Blume.

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Graded customer loyalty programs are a type of membership in which customers gain different advantages according to their rank. Companies often divide members into groups based on certain criteria such as sales or engagement.

These customer reward programs give customers a goal. The higher the level, the more special and better rewards they will receive.

Bra and underwear brand ThirdLove uses a tiered system for its Hooked Rewards program. Customers simply sign up for the program and start earning rewards right away. The more they spend with ThirdLove, the more benefits they get.

When a customer spends $250 on a brand, he becomes an Enthusiast. This tier gets more benefits with purchase, such as free underwear and special seasonal deals. If a customer spends more than $450 on the brand, they get access to a limited number of free products and product launches.

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Paid Loyalty or fee-based loyalty programs offer customers immediate and ongoing benefits for a fee to join. These fees can be recurring or one-off.

Paid programs may require proof of value to earn enrollment, but the company may derive more customer value from members. A recent McKinsey report shows that consumers are 62% more likely to spend more on a brand after joining a paid loyalty program.

The most common example of a paid loyalty program is Amazon Prime. While it may seem like a difficult model to emulate, paid loyalty can serve many different business models.

The idea behind a value-based loyalty program is to connect with customers on a deeper level. It includes donating a percentage of what is purchased to charity or welfare programs. You can offer multiple options for different charities to choose from, or you can have one that truly aligns with your clients’ values.

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In fact, this program does not reward customers. However, since the awards are used for the benefit of society, they have a special place for them. Brands often use this model to create a hybrid loyalty program.

So for example, if you have 500 points, you can donate $10 to the organization. 1,000 points, $20 donation, etc. It wins.

Don’t know where to start? Ask customers what they want from a rewards program. You can easily run a survey or survey on your customer base to find out. Then create a rewards program accordingly.

Here are our 7 picks for the most innovative customer loyalty programs and what you can learn from each. This will give you some customer loyalty program ideas to get yours started today.

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The Designer Shoe Warehouse (or DSW) has long run a traditional VIP loyalty program that rewards customers with points for every purchase and includes reward tiers that customers can unlock as they spend more.

Your program works perfectly. Customers have no member ID or credit card number to remember – instead, DSW’s online system recognizes customers by name, phone number or payment information.

When rewards become automatic, the danger is that customers forget the program. Customers who forget the loyalty program are not persuaded to spend more to earn more. DSW needed a way to engage its customers with its program and remind them where they are and what they can gain by spending more at DSW stores.

In early 2017, DSW launched an email campaign aimed at reminding customers of its schedule. The campaign consisted of a personalized email detailing:

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It was the level of customization that made the campaign so successful. A loyalty program like DSWs gives the brand access to tons of customer data. DSW has used this to its advantage (along with some reliable email automation) to create hyper-personalized and relevant emails, much different from other general marketing emails that end up in customers’ inboxes.

Sephora’s Beauty Insider rewards program is extremely popular. It has more than 25 million loyal members, and members account for 80% of Sephora’s annual sales. Customers earn rewards for every purchase based on a traditional points system. The innovative part is that members can choose how to use their reward points.

One of the biggest barriers to a wide range of Sephora shoppers is price – Sephora products don’t come cheap. Beauty Insider members can redeem reward points for items like gift cards and discounts, which helps stabilize purchase prices without reducing the value of items. Loyalty members can also redeem points for more exclusive things like limited-edition items or in-store beauty tutorials.

Giving loyalty members flexibility of choice allows Sephora to offer customers the deals and products they really want without cheapening the perceived value of their products.

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It’s now common for retailers to create a mobile app to manage loyalty programs, but when Starbucks launched Starbucks Rewards via the Starbucks app, it was a new idea. Running the program through the app greatly simplifies the job for customers – no punch cards to forget or lose, no login required.

To earn loyalty points (or stars in the case of Starbucks), customers must order or pay with the Starbucks app. Centralizing customer transactions in this way creates a datamine of customer preferences and behavior.

Beverage orders, lifetime customer value, frequent destinations, seasonal favorites – by directing customers to its app, Starbucks can gather insights on all these habits and more, enabling the brand to offer more relevant benefits and communications to its customers.

If a loyalty app is suitable for your online store, it can be a great way to collect and centralize customer data. If not, a capable point-of-sale system can help you gather much of the same information.

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Amazon Prime membership program is a well-known paid loyalty program. For a flat annual fee, Prime members get free two-day shipping on millions of items, along with access to other benefits like Amazon’s streaming service and Prime Day sales.

Amazon faces stiff competition from other retailers like Walmart. You can find most products on Amazon elsewhere as well. Prime is how it differentiates itself and convinces customers to buy products exclusively through Amazon. And it works: Prime members spend on average four times more than other Amazon customers.

For retailers operating in similar industries where products and prices are very similar between competitors, your customer loyalty program can become a difference and a competitive advantage.

Think wholesale clubs like Costco. Give customers a reason to buy in a unique way

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