8 Types of Loyalty Programs with Examples in 2024

The motivation behind loyalty programs is always the intention to change consumer behavior by influencing their return more frequently or by reshaping their consideration set through operant conditioning or other techniques.

When a loyalty program reaches the tipping point where practice becomes a habit, it is considered successful and effective. Just like Starbucks, where, due to its extraordinarily successful loyalty programs, millions of Americans visit it on their way to work each morning. It is not always their favourite coffee blend they need anymore; it’s the stop – it’s their routine.

Below are the types of loyalty programs:

Points Based Loyalty Program
Tier Based Loyalty Program
Subscription or Membership Based Loyalty Program
Cashback Based Loyalty Program
Hybrid Loyalty Program
Social Values Based Loyalty Program
Game Based Loyalty Program
Partnership Based Loyalty Program

By providing incentives to devoted customers, a customer loyalty program is a rewards system which is intended to promote repeat business.

If you are here to know why to implement loyalty programs, it helps you reduce customer churn when you incentivize customers to remain with your brand instead of exploring your competitors.

So, basically, the aim of all customer loyalty programs is to increase business revenue by increasing customer retention and customer lifetime value (CLV). CLV is the total revenue your business earns from a customer during their relationship with your business.

Below are some of the most in-use and popular loyalty program types. Choose one based on the suitability and health of your business.

1. Points Based Loyalty Program

Point based loyalty programs encourage repeat purchases and are effective for your regular consumers.

It is the most popular type of loyalty program. It allows users to earn points for every purchase they make. These points they can then exchange for discounts, or prizes or freebies. Point based loyalty program type is mostly used by retail and service sectors due to its simple and flexible approach in rewarding customers.

Example of Points Based Loyalty Program

For example, in the Starbucks Rewards Program, customers earn “stars” that they can exchange for free items or upgrades.

One Saas platform that uses points based loyalty program is Adobe Rewards. It provides points based system for purchases, renewals, and exclusive access to beta features and events

One other example of point based loyalty program is the Kris+ rewards program by Singapore Airlines, where users collect rewards for miles purchased through the airline. By using the points in their loyalty rewards program, customers are able to use their miles in the traditional sense to cover their travel costs or convert those miles into rewards that can be redeemed at over 1,000 different partnering brands, making each mile worthwhile.

2. Tier Based Loyalty Program

Tiered loyalty programs encourage greater spending. A tiered loyalty program provides larger rewards with time as customers advance up the loyalty ladder – Higher the tier greater the rewards.

Normally, a tiered loyalty program starts off with a modest reward for the first purchase. This type of loyalty programs work best for businesses with higher commitment and budgets e.g. airlines, hotels, and insurance providers etc.

Example of Tier Based Loyalty Program

Sephora’s Beauty Insider Program has several tiers, including Insider, Very Important Beauty Insider (VIB), and Rouge, each with unique incentives and privileges.

SaaS companies often use a tier system to provide software solutions to customers. For example, Adobe offers Creative Cloud with different tiers, such as “Basic,” “Pro,” and “Team,” each with varying features and pricing.

Here’s another popular brand that’s got its feathers in a row – Chick-fil-A One.

Their loyalty program uses a four tiered system .It allows members to advance from Chick-fil-A One Member to Chick-fil-A One Red Member, and finally to Chick-fil-A One Signature Member. Each tier brings bigger and bolder perks. They offer free food, priority seating, and a behind-the-scenes tour of the Chick-fil-A home office. Don’t mind if I do!

3. Subscription or Membership Based Loyalty Program

Subscription or membership based loyalty programs encourage customer loyalty by becoming a member or subscriber.

Customers are asked to pay a one-time fee that allows them to get around common buying hurdles later on during their stay with your business – remember Amazon Prime?

Customers who participate in subscription loyalty programs must pay a monthly or annual fee in order to receive benefits like free shipping or access to special offers. Thanks to the upfront membership cost, Amazon Prime members don’t have to worry about shipping charges or taxes. In this loyalty program, customers feel invested after paying for the membership.

Example of Subscription or Membership Based Loyalty Program

One example is Uber Eats’ “Uber One“ membership program, which offers users free delivery and exclusive discounts for a monthly fee.

Membership based customer loyalty programs can be an effective way to build customer loyalty and boost revenue.

4. Cashback Based Loyalty Program

Loyalty Programs Based on money back offers encourage higher engagement. Customers who participate in money back programs receive a part of their purchases returned in the form of store credit or cash. These loyalty programs are encouraged by customers who value quick, observable benefits are drawn to this kind of program.

Example of Cashback Based Loyalty Program

Kris+ by Singapore Airlines offers money back on purchases made with partnering businesses.Paytm cashback is another example of how companies keep customers engaged and connected to their brand through money back loyalty program.

5. Hybrid Loyalty Program

To develop a distinctive and more effective loyalty program, brands use components from their several loyalty schemes and create a new way to experience their brand.

Example of Hybrid Loyalty Program

Nike, for example, uses NikePlus to mix events, exclusive content and special product releases with a points-based system. NikePlus offers unique experiences rather than simple discounts. They provide exclusive shopping events, training programs even when they are not a fitness brand, and early access to new collections. They have built a lifestyle around their brand for their customers and are not just sporting its gear.

Under value-based programs, your business can offer to donate a percentage of its earnings from every transaction to a cause that appeals to your clientele – it can be a social cause like charity or a political cause.

Two-third of customers are more willing to invest in brands that own a stance on social or political issues the customers care about. This spirit of generosity can be tapped into by using social values based loyalty programs.

With initiatives like TOMS’ One for One model, where every purchase helps provide shoes to individuals in need, this approach works well for socially minded firms.

Similarly, Target Circle Community Giving is a loyalty program that allows members to vote for local and national nonprofits that Target donates to.

7. Game Based Loyalty Program

This approach gives a more interactive experience. It encourages customers to participate and receive incentives by introducing game-like elements such as challenges, badges, and milestones.

Example of Game Based Loyalty Program

Duolingo uses this approach. It promotes language learning via streaks and levels used in its engaging design that has video game like interface. This approach makes learning more fun and effective for the language learners. Users progress through levels within each language course. This brilliantly designed interface is the reason that the company’s financial report shows a revenue of $167.6 million and a net income of $27 million.

User Metrics	Q1 2023	Q1 2024	YoY Growth
Daily Active Users	20.3M	31.4M	54%
Monthly Active Users	72.6M	97.6M	35%
Paid Subscribers	4.8M	7.4M	54%
Paid Subscriber Penetration (%)	8.00%	8.60%	-

Financial Metrics	Q1 2023	Q1 2024	YoY Growth
Daily Active Users	20.3M	31.4M	54%
Monthly Active Users	72.6M	97.6M	35%
Paid Subscribers	4.8M	7.4M	54%
Paid Subscriber Penetration (%)	8.00%	8.60%	-

Check out Holiday season Rewards to give to your loyal customers here.

8. Partnership Based Loyalty Program

Consider partnering with other companies that would be a good fit to your business. For example if you are in umbrella making business, you can consider partnering with travel agencies. If a customer purchases an umbrella, they get discount on traveling via certain travel agencies. Or the travel agencies might offer the umbrella as a perk for booking with them.

Such loyalty programs show that your business really cares and understands the needs of its customers and goes beyond what your organization can provide on its own.

Example of Partnership Based Loyalty Program

Adobe Creative Cloud is an excellent example of partnership based loyalty program. It has partnered with other companies like hp, dropbox, zoom etc.

Final Thoughts

Choose a more proactive approach instead of reactive approach when opting to design and create a loyalty program for your customers. Reactive touch points respond to specific customer actions whereas proactive ones anticipate needs and preferences based on customer data and behavior patterns.

Magic in loyalty programs is when you get away from reactive touch points.

Column 1	Column 2
REACTIVE APPROACH	PROACTIVE APPROACH
You reached $500 points, so here’s a $10 discount coupon.	You shopped last Saturday, so here’s a deal you might like this Saturday.
It’s your birthday month; enjoy a penny preroll.	Based on your purchases, we think you’ll love this new product - get it before everyone else.
You left an item in your online cart; here’s a $5 off reminder to complete your purchase.	Your next loyalty tier is close! Here’s a challenge: complete these two actions in 30 days to reach the next level and unlock new benefits.

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8 Types of Loyalty Programs with Examples in 2024