10 Innovative Customer Loyalty Programs (And How To Start Yours)

Did you know that it can cost between 5 and 25 times as much to acquire a new customer as it does to keep an existing one? If you didn't, you're not alone. Most marketing advice focuses exclusively on topics like growing your audience and expanding your reach. While both of those things are certainly important in building your business, not enough is said about the importance of cultivating brand loyalty with your customers.

In this in-depth blog post, we'll outline the four most popular types of brand loyalty programs and share 10 examples of companies with innovative customer rewards options that we can all learn from. By the end, you'll understand why customer loyalty programs are such an important part of growing an online business and have the tools and inspiration you need to create one of your own.

Why Customer Loyalty Programs Matter

It probably goes without saying that the most important part of creating brand loyalty is to have a quality product that solves a specific problem for your customer. After all, if you were a cafe selling terrible coffee, even the very best punch card program in the world wouldn't be enough to keep people coming back for more.

But if you're confident that your product or service delivers on its promise and is high value for your customer, then creating an accompanying program to reward your clients for shopping with you can be a huge boost to your business. And if you're still not convinced that rewarding your customers for their purchases is a smart business strategy, consider this: according to one study cited by the Harvard Business Review, increasing your customer retention rates by just 5% can increase your profits by between 25 to 95%.

The bottom line is that building relationships is good for business, and creating programs that reward your customers for shopping with you is just one of many ways to create loyalty that lasts.

The 4 Main Types of Loyalty Programs

While the sky's the limit in terms of ways to reward your customers, there are four major types of loyalty programs that most businesses adapt for their own audiences. Let's take a quick look at each one and some of their advantages and disadvantages:

Points-Based Loyalty

The most common option for a loyalty program is a points-based system. Customers accumulate points for their actions and trade them in for various rewards such as discounts or merchandise. While encouraging purchases is great, the best of these programs also offer points for other kinds of actions such as signing up for a newsletter, leaving a review, or sharing about the business on social media.

These programs work well if they are simple to understand and intuitive to use. When people can see their points adding up and know what they're working towards, they'll have a clear incentive to take further action. However, customers can also be cynical about this kind of program, so make sure that yours delivers as promised. You should also ensure that the rewards you're offering are compelling to your customers - if it takes thousands of points just to earn a simple 10% off coupon, your customers probably won't be very motivated to change their behavior.

Tiered Loyalty

In a tiered loyalty program, customers are assigned ranks that net them different benefits depending on their status with your company. These ranking systems are usually based on how much a customer spends or how engaged they are with your brand - the higher their rank, the more rewards the customer receives on an ongoing basis.

Unlike in a points-based system where customers trade in their accumulated points for a one-time benefit, tiered loyalty programs are a gift to the customer that keeps on giving. Once they've earned a particular tier in your program, members will continue to get certain perks as long as they shop with you, which can be a huge incentive for your fans.

The biggest pitfall with this kind of reward system is that it can feel like a money grab if your tiers are based exclusively on how much a customer spends with you. In order for your customers to feel appreciated, it's a good idea to include alternative strategies for folks to reach a higher tier, such as taking part in surveys or focus groups, referring friends to your brand, or joining your online communities.

Paid Loyalty

In a paid loyalty program, customers pay a one-time or recurring fee for access to instant and ongoing perks from a brand. This kind of program is a harder sell, so the key is to offer benefits that clearly outweigh the cost of the membership. Customers are likely to be motivated by features like early access to products or events, customized rewards tailored to them, or the chance to be part of an exclusive community.

Paid programs are also typically easier for a customer to understand and engage with, rather than worrying about how many points they've earned or figuring out which tier they're in. A paid loyalty program offers specific benefits in exchange for a simple fee, and if you're able to convince your customer to join, it's also likely to be more lucrative for your business. One recent report by McKinsey showed that consumers were 62% more likely to spend more on a brand after joining their paid loyalty program.

Value Loyalty

The last type of loyalty program takes a different approach. A value loyalty program doesn't directly reward your customers, but it does allow them to make a greater impact on causes they care about by financially supporting specific charities or nonprofits.

This type of program is often offered on a broad scale, such as when companies donate a portion of every sale to a particular organization. But it can also be set up as a hybrid with another type of loyalty program, such as a point-based system, where customers get the option of trading in some of their points for donations to an organization they support.

This kind of program builds deeper trust with your customers, especially if they feel aligned with the causes you're supporting. However, it may not motivate your specific audience, depending on the type of business you run. A value loyalty program will work best for companies with a strongly values-based approach and a clear commitment to social responsibility.

10 Examples of Innovative Loyalty Programs

Now that we've covered the four main types of loyalty programs, let's take a look at some real-world examples. These 10 companies have built intentional loyalty programs that stand out from the crowd, with goals of building trust and rapport with their customers and encouraging repeat purchases.

Blume

The self-care brand Blume has put a lot of thought and effort into designing their loyalty program, which is called Blumtopia. They use a hybrid model that combines points and tiers into one system. Customers rack up points for placing orders, leaving reviews, and even celebrating a birthday, which they can then trade in for special prizes and gift cards. But their overall number of points will also help them to reach "BFF" or "Soulmate" status with the brand, where they'll get access to perks like a private Facebook group, exclusive close friends list on Instagram, birthday gifts, insider access to products, and free shipping.

More than anything, Blumtopia is designed to feel fun and accessible, since customers can earn "Blume points" for actions besides purchases. And Blume advertises their program prominently, linking it right in the main menu on every page - they clearly want customers to take part and be rewarded for their engagement.

ThirdLove

ThirdLove's loyalty program, "Hooked Rewards," is a tiered system based primarily on a customer's lifetime spend with the company. They offer three levels of membership - Admirer, Enthusiast, and Devotee - with different benefits offered at each tier. One key feature that makes this program work well is that it's free to join for new customers. Members start receiving perks like free shipping options and bundling discounts as soon as they join, before they've even spent a dollar with the company.

Another bonus of the Hooked Rewards system is that it's very easy for customers to use and understand. There's no need to worry about their points balance or waste time figuring out how to redeem them - as they spend more with the company, they simply receive more perks, including a free gift with every purchase and exclusive seasonal offers. This simplicity seems to have worked well, since ThirdLove reported a 400% increase in account creation after only three months of implementing their loyalty program.

Sephora

Sephora's Beauty Insider program is notoriously popular, and for good reason. Their tiered, point-based system is free to join, and offers generous rewards to customers at all levels of membership. Members can choose to redeem the points they earn for gift cards, discounts on products, or exclusive in-store beauty tutorials and limited edition items. As a customer's lifetime spend increases, the rewards keep racking up, so it's easy to see how the Beauty Insider program encourages engagement and repeat shopping, especially for beauty enthusiasts.

DSW

Designer Shoe Warehouse (DSW) has elevated their traditional tiered points program in a few different ways. In addition to receiving traditional membership perks like free shipping and birthday gifts, customers can also earn bonus points for donating their gently used shoes, or choose to donate all of their rewards to those in need.

It's also easy for customers to take part without remembering a loyalty number or keeping a card in their wallet - DSW's system recognizes customers based on their name, contact information, or payment method, and applies their rewards automatically to the customer's account. And to keep customers from forgetting about these points, DSW boosts engagement by sending personalized marketing emails targeted to each member, reminding them how close they are to a specific reward and showing them deals they currently qualify for. This combination of simplicity and personalization has been a winning strategy for both DSW and its customers.

Starbucks Rewards

The Starbucks Rewards program is a very simple system that brings huge benefits to both the company and its customers. Using the Starbucks app, customers earn points for all their purchases, which they can then redeem for special drink customizations and other treats.

The app is extremely convenient for customers, who can set up different payment methods, order ahead for pickup, and save their favorite menu items to purchase again. But the app is also useful for the company more broadly, since it generates a lot of helpful information about Starbucks customers and their habits. The company can then use this data to offer shoppers perks and offers that match their preferences, which offers even more incentive for customers to come back and continue to earn points - creating a positive cycle of engagement.

Amazon Prime

As we mentioned earlier, paid loyalty programs can be a tougher sell for customers. But Amazon Prime is a great example of a paid program done right. Customers pay a flat annual fee and get access to tons of perks like free two-day shipping with no minimum purchase, access to Prime Video, and special Prime Day sales.

For most shoppers, the price of the membership pays for itself many times over each year in the savings they receive, which makes the fee a worthwhile trade-off. But it's also great for Amazon's business, since Prime members spend an average of four times more than other Amazon customers. The key to Amazon's success with Prime has been to offer truly valuable rewards to members that go above and beyond what most other loyalty programs can offer.

The North Face

The North Face's Explore Pass program is a great example of a loyalty program designed with its ideal customer and company values in mind. While customers do earn points for each of their purchases, they're also rewarded for values-based actions like bringing their own reusable bag to the store or going out and exploring national parks.

The Explore Pass also offers cool perks that appeal to their adventurous target audience, such as being able to field test new products before they're publicly available or getting to trade in their used gear for gift cards. A previous version of this loyalty program even offered members the chance to redeem their points for special travel experiences like hiking and climbing trips. It's inspiring to see how The North Face is using their customer insights to create a program that is specifically tailored to their fans.

Nike

Nike's mission is to "bring inspiration and innovation to every athlete in the world" - with the caveat that anyone with a body is an athlete. Their free membership program embodies that mission by providing benefits that encourage customers to stay active, positive, and healthy.

After signing up, members receive perks like free shipping, 60-day wear tests, and access to exclusive collections. But even better, all new members also get instant access to the Nike Run Club and Training Club apps, which offer free workouts for all fitness levels and invitations to exclusive local Nike experiences. This program doesn't use traditional points to monitor a customer's status, but the more that members spend and engage with the brand, the more perks they'll unlock inside their membership.

By aligning their member benefits with their company values and their customers' goals, Nike has created a virtuous cycle that encourages greater loyalty and engagement from their members.

REI Co-op

The outdoor goods company REI is a member-owned cooperative, which means that their customer loyalty program is baked right into their business model. Every year, more than 70% of their profits are invested back into the outdoor community through dividends to their members, employee profit sharing, and other investments.

For a one-time fee of $20, customers become part of this global community of more than 20 million lifetime members. REI believes that a life outdoors is a life well-lived, and their member rewards reflect those beliefs. In exchange for their co-op fee, members get tons of benefits like cheaper rentals on camping equipment, limited edition gear created exclusively for members, and special member pricing on REI adventure trips around the world.

Apple

We're including Apple on the list to illustrate a specific point, because Apple actually doesn't have a loyalty program - and yet we all know that this company has a hugely loyal following of devoted customers. They achieved this by, in a sense, treating all of their customers as if they were members, instead of enrolling shoppers into a formal program.

The company extends the same benefits to everyone - high-quality, beautiful products; constant innovation and new features; and excellent customer service. Everyone can also access perks such as free engraving or trade-in programs, and they'll often bundle certain products together, such as including an Apple TV subscription with an iPhone purchase. By making all these benefits an integrated part of the company at every level, Apple creates intense engagement with customers without the need for a traditional loyalty program at all.

Start Building Your Own Loyalty Program

While you may not be able to offer all of these kinds of benefits in your own business right away, the key thing to note with these examples is that the best loyalty programs draw inspiration directly from each company's mission statement. Instead of offering boring discounts or stingy perks, the best brands ensure that their rewards align with both their own values as a company and their customers' goals.

If you want even more guidance in building trust with your audience, be sure to check out Shopify's Store Trust Checklist. This free resource is based on in-depth interview research done by the Shopify team to learn the essential trust-building elements of an online store experience. Download your free checklist using the link below while supplies last.

There are endless ways to connect with your customers and create more brand loyalty, so instead of seeing these examples as exact recipes to follow, use them as a jumping-off point to create a program that is perfectly suited for your customers. I'd love to hear in the comments below how you plan to reward your audience and continue to build up those relationships over time.