Loyalty programs are a cornerstone of customer retention strategies, offering businesses a way to deepen relationships, drive repeat purchases, and foster brand advocacy. To craft a loyalty program that truly stands out, businesses must focus on six key characteristics:
1. Clear Value Proposition
Clarity is key. Customers should immediately understand the benefits of joining your loyalty program. Use clear messaging to communicate what they’ll gain, how they’ll earn rewards, and why it’s worth their time. According to McKinsey, transparency around benefits, combined with ecosystem-driven loyalty partnerships, enhances customer understanding and strengthens engagement.
One of the most famous examples of a loyalty program with a compelling and clear value proposition is Starbucks Rewards. Value Proposition: “Earn stars with every purchase and redeem them for free drinks, food, and exclusive perks.” Members earn 2 stars per dollar spent on purchases using the Starbucks app or a linked payment method. It’s simple to understand: spend more, earn more.
2. Frictionless Enrolment
A seamless onboarding process is critical. Complicated sign-ups or lengthy forms can deter potential participants. Use simple digital enrolment methods, integrate mobile apps, and minimise data collection requirements at the start to create a frictionless experience. This aligns with McKinsey’s observation that intuitive and responsive user interfaces are essential for customer satisfaction and retention.
Amazon Prime’s frictionless enrolment is a model for how to make joining a loyalty program effortless, thereby maximising adoption and participation. Here’s why it works so well:
- Low Barrier to Entry: The free trial combined with a simple one-click process eliminates hesitancy.
- Embedded in the Customer Journey: Enrolment options appear at the most relevant moments, such as when customers are about to pay for shipping.
- No Extra Effort: Customers don’t need to fill out lengthy forms, remember loyalty cards, or perform additional actions.
3. Instant Value Experience
Consumers value immediacy. By providing instant benefits such as sign-up bonuses or first-purchase discounts, you can capture customer interest quickly. McKinsey’s data reveals that upfront value, paired with seamless digital experiences, increases enrolment and engagement, especially in programs that focus on convenience.
At Stampix, our latest collaborations with Attraction Tickets and Landal Greenparks illustrate that these brands are aiming to give new member an immediate value from the program. Offering the gift of free travel photos as a bonus or ‘welcome gift’ upon registration has shown to be more effective than the usual discount.
4. Accumulation Towards Rewards
Accumulation towards significant Rewards is an important feature in loyalty programs because it taps into psychological principles like goal-setting, progress motivation, and the sunk-cost effect. Customers are motivated by the prospect of achieving something valuable, such as a free flight, a luxury upgrade, or significant discounts. Accumulating points toward a meaningful reward makes the journey feel worthwhile. Once customers start accumulating points, they often want to “stick with it” rather than lose the progress they’ve made. This effect increases their loyalty and spending with the program’s provider.
However, if the system is poorly designed, it can end up stuck with a low balance of miles that feels useless, leading to frustration and disengagement. This is what’s commonly referred to as the “Miles Poverty Trap” in many airline frequent flyer programs. This very topic will be tackled in depth during a keynote by Frank De Boer from FlyingBlue (AirFrance-KLM’s loyalty program) at the upcoming Loyalty Day in Ghent on April 1st 2025.
5. Variation and Personalised Rewards
Today’s customers crave personalisation. Offering rewards tailored to individual preferences, whether it’s discounts on favourite products or experiences aligned with their interests, demonstrates that you understand their unique needs. Telecom loyalty programs often excel in offering variation and personalisation due to the nature of the industry. Unlike airlines, hotels or retailers, they don’t have distressed inventory (idle hotel rooms, airline seats, or expiring products) and therefor can’t offer rewards that revolve around the brand’s core offering.
One loyalty program that scores particularly well is Verizon Up, offered by Verizon, the major US telecom provider. Members can choose from a rotating selection of rewards each month, giving them fresh options regularly. The program frequently features high-value rewards, such as exclusive tickets to NFL games or premium concert seats, creating aspirational goals for members. And lastly, members are rewarded not just for purchases, but also for actions like paying their monthly bill or signing up for paperless billing. This ensures rewards feel accessible and attainable.
For more best practices about Telecom Loyalty, we refer to our latest webinar with Vodafone & Salt Mobile.
6. Elements of Surprise & Delight
While predictable rewards can retain customers, it’s the unexpected perks that create memorable experiences. Incorporating surprise gifts, exclusive offers, or unannounced benefits helps evoke positive emotions and keeps your brand top of mind. It is about combining the Heart (Emotional Rewards) and the Head (Transactional Rewards). As Forbes highlights, “Brands that create emotional connections with customers outperform their competitors“. Additionally, research from McKinsey emphasises that emotional (Heart) and experiential benefits outweigh transactional rewards (Head) in creating long-term loyalty.
Programs like Sephora’s Beauty Insider use Birthday gifts, unexpected bonus points and gamified experiences to Surprise & Delight members, offering exclusive rewards that boost engagement. Sephora make clever use of customer data to design surprises based on purchase history or preferences. Example: A frequent makeup buyer might receive a surprise lipstick sample, while a skincare enthusiast might get a premium moisturiser trial.
Why It Works:
- Emotional Connection: Surprises create positive emotional spikes, which strengthen customers’ loyalty and perception of the brand.
- Encourages Exploration: Surprise samples often introduce members to new products or brands, increasing the likelihood of future purchases.
- Differentiation: The element of surprise distinguishes Sephora’s loyalty program from competitors, creating a memorable customer experience.
- Low Cost, High Impact: Offering samples or bonus points costs the company relatively little but delivers a significant boost to customer satisfaction.
Conclusion: Ecosystems & Technology
Future loyalty programs will increasingly adopt ecosystem-centric models, where partnerships amplify value and relevance. Hyatt’s collaboration with Peloton integrates wellness into the guest experience, while Qantas’ program spans 700 partners, generating significant revenue.
Emerging technologies like AI and NFTs are also reshaping loyalty. AI enables hyper-personalised interactions, while NFTs add emotional value, such as commemorating important purchases or events. These innovations, combined with robust ecosystems, position loyalty program as pivotal growth drivers.
By integrating these six pillars into your loyalty program design and leveraging modern insights, businesses can create systems that not only attract customers but also foster long-term engagement and profitability.
Source: Harvard Business Review, McKinsey, Forbes.
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