There are different ways you can go when coming up with your customer loyalty programme.
Points-based
Customers earn points for every purchase, which can be redeemed for rewards such as discounts, free products, or exclusive offers. This type of programme is simple and popular, with examples like Tesco Clubcard and Sainsbury’s Nectar card (redeemable against other brand partners e.g. Argos, eBay, Esso) where shoppers accumulate points with each purchase.
Tiered
These programmes offer different levels of rewards based on the customer’s spending or engagement. As customers move up tiers, they receive more valuable benefits. This approach encourages higher spending to reach the next tier. For instance, a hotel chain might offer bronze, silver, and gold tiers, with gold members receiving perks like free upgrades and late check-outs. Hilton Honors is free to join and categorises tiers based on how many nights you’ve stayed with them: Member (0-10 nights), Silver (10+ nights), Gold (40+ nights) and Diamond (60+ nights) tiers. When you reach a new tier, you unlock extra benefits.
Paid membership
Customers pay a fee to join the loyalty programme and receive exclusive benefits. This model ensures a committed customer base willing to pay for premium rewards. Amazon Prime is a well-known example, offering free shipping, streaming services, and more for an annual fee. You might have also come across nextunlimited (from NEXT), which is a delivery saver pass. For £22.50 (less than the cost of 5 standard deliveries) you can enjoy a year of unlimited free delivery, with no minimum order value.
Cashback
Customers receive a percentage of their purchase amount back as cash or credit to their account. This type of programme provides immediate, tangible rewards, making it very attractive. For example, American Express Platinum Cashback Everyday credit card offers 5% cashback on your purchases (up to £100) for the first three months of card membership.
Punch card
Typically used by small businesses, this programme gives customers a card that gets stamped or punched with each purchase. After a certain number of punches, the customer receives a free item or discount. For example, a nail salon offering a free treatment after 10 appointments.
Referral
Customers earn rewards by referring new customers to the business. This type of programme not only retains existing customers but also helps attract new ones. For example, HelloFresh offers discounts to both the referrer and the referee. The referrer receives £20 credit in their HelloFresh account, while the referee recipes £20 off their first box.
Gamified
These programmes incorporate game-like elements such as challenges, badges, and leaderboards to engage customers. Customers earn rewards by completing certain activities or reaching milestones. For instance, a fitness app might reward users with badges and discounts for completing daily workout challenges. Milestones are a common feature of gamification programmes, from Peloton users receiving certain badges when they reach each milestone e.g. 100th ride (other riders can even give you a virtual high five-!) to Costa Coffee drinkers who can swap points for perks including a free drink after 10 drink purchases, and free cake on your birthday.
Hybrid
Combining elements from different types of loyalty programmes, hybrid programmes offer a more comprehensive approach. For example, a retailer might use a points-based system with tiered rewards and occasional gamified challenges to keep customers engaged and motivated.
Extra tip: Promo codes
Sending promo codes as a thank you to customers is a quick and simple way to reward them for their purchase and encourage them to return! For example, Etsy lets Sellers set up an automatic discount code, which is sent to those following a purchase (or if an item is in their basket but they haven’t checked out yet to encourage the sale).