Which type of loyalty program is right for your customers?

February 9, 2022 | 3 minute read
Jennifer Ajer
Sr. Product Marketing Manager, CX Marketing B2C
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customer loyalty programsCustomer loyalty marketing is a strategic approach to help businesses encourage retention and brand advocacy. At their core, all loyalty programs are value exchanges—the customer is rewarded for their interactions or purchases. 

Reward structures differ between types of loyalty programs. So, if you’re looking to adopt a loyalty program, the first step is to understand your customers’ motivations for purchasing. Companies with loyalty programs often make the mistake of structuring programs based on their own objectives, rather than their customers'. Consider the loyalty program structures below and determine which one would be best suited to your customers’ needs.

What are some common types of loyalty programs? 

Points programs

Points programs enable customers to accumulate points in exchange for purchases or other engagements. Those points are redeemable for rewards. Since points programs are free to join, there’s little barrier to entry when it comes to membership, so they’re an excellent system for gathering opt-ins.

Points programs are well-suited for automation. By gathering data on your customers’ browsing and purchasing habits, you can tailor their incentives according to their interests and needs.

Cashback programs

Much like points programs, cashback programs have a low barrier to entry. In this model, all users receive the same reward: typically, a sum of “cash back” in a coupon or credit that can be used exclusively at the retailer. Cashback programs are among the easiest loyalty programs to maintain, especially with the help of automation. Automation technologies can determine the amount of cashback due and automate processing and disbursement.

Tiered programs

In tiered programs, more exclusive rewards are granted to those members who cross more milestones—the more a member spends, the higher the tier they enter. Better rewards mean members feel more valued and can justify additional purchases. They also incentivize lower-tier customers to reach higher spending thresholds.

Automation technology can help you segment your members into the appropriate tiers and deliver their rewards accordingly. This will provide instant gratification to your members without creating an additional burden for your team.

Premium programs

Premium loyalty programs are the best way to increase loyalty with high-value customers. In these programs, customers pay a fee to become members and access exclusive benefits.. 

According to a McKinsey study on various types of loyalty programs, premium program members are 60% more likely to spend more on your brand, versus programs like points and cashback that increase that likelihood by 30%. However, their pay-to-play structure can be a barrier to entry for customers on a budget.

Regardless of the type of loyalty program you choose to provide your customers, the key is listening to what they are genuinely asking for and structuring your program around that. It may require a very specialized vendor, but the results can be tremendous when executed properly.


Ready to learn how can a loyalty program create an impact for your business?

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Jennifer Ajer

Sr. Product Marketing Manager, CX Marketing B2C

Jennifer Ajer is a seasoned cross-channel marketer who has ten years’ experience in various marketing roles. She is currently a Senior Product Marketing Manager for Oracle Marketing Cloud's B2C products.

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