What are best practices for building a loyalty program?

The success of your loyalty program depends on how well you motivate your members to advance through program tiers. Here are some best practices for loyalty programs:

Keep your program simple and accessible

Make it easy for members to engage with your program. Members need to understand how the program works, how they can earn points, and how benefits are applied. Provide an explainer page where members can find answers to all of their questions about your loyalty program. Provide a table that describes the potential benefits and rewards available at each tier.

Communicate benefits clearly

Make sure members understand the benefits of each tier and how they can move up to the next. Clearly communicate the criteria for each tier and the rewards associated with them, so that members know what to expect and are motivated to reach the next tier.

Create distinction

Every tier should offer rewards that are unique and desired by your members. There should also be a clear distinction between tiers. Encourage repeat purchases by increasing the value of the rewards as they move up the hierarchy. For example, a brand can offer points for money spent at every level, but only the top-tier members often have access to certain specialized services such as early access to new products.

Create a sense of exclusivity

Humans crave exclusivity. Set clear goals that encourage members to try to achieve top-tier status. The fact that such a small percentage of its loyal members sit in the top tier of the loyalty program makes it exclusive and desirable. Create a sense of exclusivity, for example, by:

  • Offering rewards and experiences that customers only receive by being a member of this loyalty program.

  • Offering diversified rewards at upper tier levels. Data on these members are likely to be more granular, so this enables you to provide rewards that hold special appeal to specific members.

  • Offering a personalized reward store. A digital reward store drives participation in a loyalty program. The availability of rewards depends on the tier to which the member belongs, motivating additional spending by the member to achieve this level of exclusivity.

Get personal

A generic reward system is not an effective way to influence spending behavior. Analyze available member data and create personalized offers that offer specific value to each member. Maximize engagement by tailoring a member’s experience based on their past purchases and other data. By analyzing the data received from a member’s previous transactions (what they buy, when they buy it, how often they shop with your brand, whether they prefer to shop in-store or online, and so on), you can appeal to their unique tastes and specific needs. By storing and analyzing member data, you gain invaluable insights to customer spending habits that enables you to send tailored communications and offers.

Offer experiential rewards

Including experiential rewards and embedding them into different tiers gives the member a reason to climb to the next level. Experiential rewards can build loyalty, while the prospect of receiving them can encourage members to work toward higher tiers. Experiential rewards could include free movie tickets for two, invites to product launches and other private, exclusive events. Focus on creating a memorable experience for the member.

Monitor and optimize performance

Regularly monitor the performance of the loyalty program and tiers to identify areas for optimization. Use data and member feedback to improve the program and make adjustments to ensure it is meeting the needs of members and the business. For example, are members in one tier stagnating in a particular entrance requirement for the next tier? Or, what could be causing members to fail to meet tier maintenance requirements this quarter compared to last?

Test different approaches

Test different approaches to loyalty tiers and rewards to identify what works best for your members and business goals. Iterate on the program over time based on member feedback and data to ensure it remains effective and relevant. Remember, member data is crucial to laser-focusing an appropriate test, so leverage as data-driven decisioning as much as possible when designing, conducting, running and assessing your tests.