How to Design a Loyalty Program in 4 Steps

Are they existing customers or potential customers? Other important aspects to keep in mind are age, gender, and nationality, but you can also include other segments based on spending power, lifestyle, product preferences, etc.

Different industries have different customers, and different customers have different spending habits: you should keep those in mind to design the perfect loyalty program for your brand.

If you want to increase repeat purchases, you’ll want to consider a loyalty program that incentivises those, while low-frequency industries require you to be straightforward with your reward system.

Decide which channels will be involved in the loyalty program and which won’t, or which will be included right from the beginning and which will be introduced later - and consider the benefits of creating an omnichannel loyalty program.

Decide which currencies should be included in the loyalty program as this will impact important elements early on, such as point value and currency conversion.

• Customer retention: one of the main goals of a loyalty program, everyone knows that acquiring new customers is more expensive than retaining existing ones so it makes sense to design a loyalty program with the main goal of engaging customers and keeping them coming back for more.
• Engagement on social media: do you want to focus on engagement metrics such as likes, shares, and comments? You might want to implement a social media engagement module to make sure you can foster brand loyalty through networking, communication, and community-building. You can encourage customers to share their rewards or experiences to increase brand visibility and attract new customers.
• Increase in engagement: another key goal of a loyalty program can be increasing customer engagement, purchases, and overall interaction with the brand. A loyalty program can also lead to increased conversion rates.
• Increase in order value: a well-designed loyalty program can drive sales growth by incentivising customers to make additional purchases or spend more money per transaction.
• Website traffic: do you want to focus on conversion metrics such as click-through rates, conversion rates, and revenue generated from website traffic? Or maybe on click-through rates in emails and mobile push notifications?

It’s usually better to require only essential information during sign-up, just in case your customers decide a long enrollment process is not actually worth it.

Focus on must-have data such as name, email, gender, location (decide if you want to include phone number, age and address) and keep in mind that any additional data can always be collected afterwards, with easy-to-win points awarded for providing additional data.

If you want to know more about how to design a great sign-up form, we have a dedicated guide on how to improve the UX of your loyalty program that covers this topic and many more!

Some of the most common results brands might want to track to measure the effectiveness of their loyalty program design are: redemption rate, customer lifetime value, net promoter score (NPS), reward redemption, return on investment (ROI), adoption rate, repeat purchases, and churn rates.

Remember that data is only useful if it’s easily accessible and understandable: White Label Loyalty analytics system allows you to create charts by combining data from across the system and lets you have all the insights you need in one place.

There are many possibilities when it comes to designing a loyalty program, and deciding a type is maybe one of the first things that come to mind, as there is no one-size-fits-all when it comes to loyalty programs.

• Points-based loyalty programs: these are one of the most common types of loyalty programs, founded on the premise of collecting points for purchases. These points can later be exchanged for various rewards.
• Tiered loyalty programs: these loyalty programs are designed to reward different segments of consumers in distinct ways, typically following a hierarchical structure, with each tier offering increasingly valuable benefits or incentives. They incentivise and reward certain behaviours by moving you up the levels and help with segmentation, as consumers feel very comfortable with them.
• Paid VIP loyalty programs: these loyalty programs offer rewards so exclusive that customers actually want to pay for them - the most well-known example is Amazon Prime. If you want to choose this reward scheme type, make sure your brand has enough engagement to keep loyal customers around.
• Spend-based loyalty programs: these are similar to points-based loyalty programs, as members of a spend-based loyalty program are rewarded based on their purchases. However, this type of loyalty scheme is more overtly transactional and accentuating how much being a loyal customer is costing your members is a great idea for brands in the B2B space, and for phone and utility providers.
• Multi-tenanted (coalition) loyalty programs: these are a great way for different brands to reward their common customer together and for franchise businesses that want to unify marketing efforts. Brands can leverage partnerships, using the brand power of their partners, and greatly increase engagement if they have a low frequency of purchase.

Come up with a name for your loyalty program that truly reflects your whole brand and the theme of the rewards scheme. Think about a name that can truly connect with your members, not just adding “Loyalty Program” after your brand!

Does your loyalty program follow a points-based system? If so, what is the value of one point and how does one point translate to your baseline currency? For example, you could decide that $1 equals 1 point, or that $1 equals 10 points.

Do you want to design a tiered loyalty program? Decide how many tiers you want, what name they’ll have (apply the same reasoning behind choosing the name of your loyalty program), and what does it take for members to rise from one tier to the next.

To truly engage and retain customers, brands need to use an event-based system, which allows them to reward customers for any activity. Think of ‘event-based’ technology as ‘interaction-driven or ‘behaviour-driven’.

For example, you can incentivise eCommerce purchases with digital coupons and gamification, or incentivise good behaviours - such as paying bills on time, if you’re a brand in the financial industry - with rewards and gift cards.

We already spoke about encouraging customers to provide valuable data by rewarding them when they complete their profiles, but you can also incentivise valuable content by rewarding customers when they write reviews.

Want more promotional opportunities and exclusive tips for your loyalty program and loyalty campaigns? There’s still time to check out our free 2024 Loyalty Promotion Calendar! 

Transactions aren’t the only way to engage with customers: user-generated content (UGC) makes your customers the stars of the show and turns them into brand advocates.

Incorporating UGC into loyalty programs means your customers get more opportunities to engage with their favourite brands and you can harness the power of word-of-mouth and social media.

Launch a comment contest offering rewards for the best comment on your social pages, set up a specific hashtag on Instagram and reward members for writing reviews. Did you know that 59% of consumers indicated they’d gladly write reviews if they received loyalty points in exchange?

If your customers are happy with your product or service, they'll tell their friends and family about it - this is a really easy way to acquire new customers, and people trust their friends more than they trust ads.

Reward customers who invite their friends and family and encourage influencers to engage by offering incentives and rewards.

You can use gamified surveys with engaging visual elements to get more valuable data from your customers, and online treasure hunts to encourage members to explore your website and build stronger relationships.

You can also use challenges to drive recurring behaviour: reward the customers who complete a task or challenge and give them badges and certificates… who doesn’t love a shiny badge or certificate to show off their accomplishments?

Use leaderboards to identify your most loyal members and tap into your customers' innate desire to outperform others and claim the top spot.

Want some more ideas on how to design a loyalty program? Here are 10 powerful gamification strategies you can use in your loyalty program to boost engagement.

You can use physical rewards, digital gift cards from popular high street brands, coupons and discounts for budget-conscious consumers, and card-linked offers for customers with established purchase behaviours.

Financial or monetary benefits such as instant cashback are a great solution for B2B companies, while events and exclusive experiences can be an amazing idea for brands in the travel and hospitality sectors.

Or you can simply choose from our 1,000s pre-integrated rewards waiting for you at the click of a button, if you want to make things easy for you!

Offering permanent benefits to all members of your loyalty program (or just specific tiers, if you’re planning on designing a tiered loyalty program) can be an amazing strategy to keep your customers satisfied and hooked for more.

Think of benefits such as free shipping, extended warranties or double points when shopping during specific occasions or times of the year.

Clearly state any condition that has to be fulfilled in order to redeem each reward: do your customers have to reach a minimum order value? Are the rewards available only during an exclusive time period?

Always make sure to be clear and straightforward in your communications to avoid any issues with your customers.