Loyalty programs can play a significant role in the longevity of your eCommerce website. When planned and designed well, loyalty programs can help you drive repeat sales by increasing customer retention, and in doing so, increasing customer lifetime value.
This guide will break down the factors to consider when designing a loyalty program, including how to structure your program, and how to design it and we’ll even touch on the key elements of loyalty app design.
What is a Loyalty Program?
A loyalty program is a marketing strategy brands employ to encourage repeat sales, customer loyalty, and even advocacy. Loyalty programs can take many different forms, but typically involve customers earning reward points or rewards for their purchases.
The points or rewards can then be redeemed for discounts, free items, or other benefits.
By incentivizing repeat sales and increasing your customer lifetime value, loyalty programs are easily one of our top marketing tips for any eCommerce including subscription-based businesses.
Loyalty Program Benefits
A loyalty program can help you:
- Increase sales via repeat purchases.
- Grow customer advocacy. By rewarding loyalty, these programs can inspire user-generated content, positive product reviews, and recommendations among your customers, helping you reach new audiences via word-of-mouth.
- Enhance customer satisfaction by offering additional value.
Types of Customer Loyalty Programs
There are three main types of customer loyalty programs: points-based, tiered, and hybrid.
Points-based programs
In a points-based program, customers earn points for every purchase they make and redeem them against discounts or free items.
Points-based programs are popular because they are easy to understand and use. Customers can see how many points they have earned and what they can redeem them for. This type of program is also flexible, as businesses can easily change the number of points required for different benefits.
Tiered programs
In a tiered program, customers move up to different tiers based on their spending. The higher the tier, the more benefits the customer receives.
Tiered programs are popular because they offer more exclusive benefits to high-spending customers. This can encourage customers to increase their average basket value in order to reach the higher tiers and reap more benefits in the long term.
Hybrid programs
Hybrid programs are a combination of points-based and tiered programs. In a hybrid program, customers earn points that determine their tier level. The higher the tier, the more benefits the customer receives.
Hybrid programs are popular because they offer the best of both worlds – the flexibility of a points-based program with the exclusivity of a tiered program.
How Do You Create a Point-Based Loyalty Program?
A point-based loyalty program design is the most common type of loyalty program.
To create a point-based loyalty program, you’ll need to decide on the following:
- The value of each point: How much will each point be worth?
- The minimum amount needed to redeem: How many points will customers need to accumulate before they can redeem them?
- The expiration date of points: How long will customers have to redeem their points?
These are important factors to consider when creating a point-based loyalty program. By taking the time to understand each factor, you can create a program that works best for your business.
Loyalty Program Example
By now you have probably encountered and participated in dozens of loyalty programs.
Here is a quick sketch of a typical loyalty program structure following the most popular point-based system:
- Assign a point to a specific minimum value of a purchase.
- Give your customers a discount for every 10 points they accumulate.
- Give them a free product or service for every 100 points they accumulate.
- Give them a VIP experience for every 1,000 points they accumulate.
- Give them a lifetime discount for every 10,000 points they accumulate.
How to Structure a Loyalty Program?
The basis of your loyalty program design is choosing the right structure.
Each type of program – point-based, tiered, or hybrid program – has its own advantages and disadvantages, so analyze each against your unique requirements and resources to find the best match.
Answering these questions can help:
- How often do your customers purchase from you?
- What is your customers’ average basket value?
- What is the customer’s lifetime value?
Once you understand your average customer’s purchasing behaviors and determine your goals, i.e. how you’d like the loyalty program to affect these behaviors, the right program structure will slowly start to emerge.
Looking to incentivize more and more frequent purchases? Think points based. Looking to increase the basket value? Think tiered program.
Now, before we go into the details of how to design a customer loyalty program, let’s explore the key qualities most successful loyalty programs share.
What Should a Manager Consider When Designing a Loyalty Reward Program?
The rewards structure is one of the most important aspects of any loyalty program. Why? Because it’s the foundation upon which the entire program is built.
There are three things you need to keep in mind when designing the rewards structure:
- The type of rewards you offer: Discounts, free items, exclusive access, etc.
- The value of the rewards: How much are your customers willing to spend to get the reward?
- The frequency of the rewards: How often will your customers be able to earn the reward?
- 5 Qualities of a Successful Loyalty Program
There are five key qualities of a successful loyalty program:
- Relevance: The program must be relevant to the target audience as well as to your business objectives.
- Value: The program must offer rewards that your target audience perceives as valuable.
- Flexibility: The program must be flexible enough to accommodate the changing needs of the target audience as well as your resources and goals.
- Simplicity: The program must be simple to understand and easy to use.
- Sustainability: The program should be reusable and/or scalable over time to optimize investment and results.
After your design, a loyalty program, consider using these as a quality assurance checklist of sorts via survey to collect feedback and finesse your program before roll-out.
What Kind of Rewards to Offer?
The final step before we proceed to the guide on how to design a loyalty program is to determine how you are going to reward your customer loyalty.
There are two categories of rewards: tangible and intangible.
Tangible rewards are physical items that your customers can hold, such as a free product or a discount. Intangible rewards are experiences or access to exclusive content or events.
Both types of rewards have their own advantages and disadvantages. It’s up to you to decide which type of reward works best for you.
Discounts
One of the most popular types of loyalty program rewards is discounts. These are a cost-effective way to incentivize repeat sales as, unlike freebies, discounts bring in revenue.
To implement a discount-based reward, you’ll want to assign a discount value or percentage to a certain number of points or the tier your customer achieves.
If you decide to go with discounts, make sure they are significant enough to be perceived as rewards.
Free items
Another popular type of loyalty program reward is freebies.
To implement a gift-based reward, you’ll want to assign gifts to a number of points or tiers based on their value.
Similarly to discounts, you want to make sure that your gift(s) are relevant and valuable enough to the customer to be perceived as a reward.
Exclusive access
Finally, consider offering exclusive access to events or content as a reward.
To be perceived as a reward, this content should contain a unique value, be it a website with renowned experts or a study that provides unique data and insights.
Basics of Loyalty Program Design
Once you have decided on the rewards, define these four basic elements as a blueprint for your loyalty program:
- The customer profile: Who are your target customers? What do they want from a loyalty program? How can you reach them?
- The value proposition: What value will your loyalty program offer to your target customers?
- The program structure: How will your loyalty program work? What are the rules and regulations? What is the loyalty program design framework?
- The implementation plan: How will you launch and promote your loyalty program? Who will be responsible for managing the program?
What Are the Design Characteristics of an Effective Loyalty Program?
Before it goes to design, evaluate your loyalty program type, structure, and blueprint based on these characteristics:
- A clear and simple program structure: The program should be easy to understand and use.
- A focus on the customer: The program should be designed with the customer in mind.
- A focus on customer engagement: The program should be designed to engage customers and encourage them to participate.
- A focus on customer retention: The program should be designed to retain customers over the long term.
- A focus on brand building: The program should be designed to build brand awareness and loyalty.
However, the best way to ensure your loyalty program’s effectiveness is to keep track of progress and analyze the data frequently. If you aren’t satisfied with the results, make sure to troubleshoot and optimize or re-design your loyalty program.
How to Design a Loyalty Program?
When talking about loyalty program design, we typically refer to a landing page, microsite, or loyalty app. The best way to design a loyalty program is to issue an eCommerce RFP, find eCommerce experts to partner with and work with them to create a fully optimized digital experience. Also, you can seek help from website designers in San Francisco to give you tips on loyalty program design that will fulfill your business goals.
These experts will analyze your consumer base and target audience, their purchasing behaviors, your revenue goals, and your resources to help you define and set realistic goals for your loyalty program.
These will become the basis of further design processes.
To design a loyalty program, experts would typically start with the most prominent elements such as the program name, choosing the environment to host it in (think landing page, microsite, app, or third-party platforms), information architecture and wireframes, and finally UI elements like color palettes and visuals.
All elements of your loyalty program design should be in line with your brand’s identity because, after all, a loyalty program is an extension of your brand.
Let’s look at a few key ones:
- Your loyalty program’s name should be short, ideally creative, and easy to remember. Consider choosing a name that reflects the theme and values of your program.
- When deciding on and setting up the digital environment, first consider the complexity and scale of your loyalty program. We always recommend starting simple and starting small. Invest in a simple landing page and reward application process. If you start noticing value and results, consider scaling up to a microsite, web app, or loyalty app.
- UX and UI design should be in line with its host environment if it uses an owned platform such as your website or app. In these cases, look at your key landing pages including product page design to visual consistency in your brand’s digital presence.
You may also want to create a unique logo for your program. We typically recommend this for programs that are tried, tested, and proven to bring business results.
Loyalty Program App Design
Large investments they are, costing tens of thousands of dollars, apps are advisable mainly for tried and tested loyalty programs. In other words, if you are just launching a loyalty program or you have not seen a significant impact on your bottom line from your existing program, investing in an app is probably not the best idea.
In this case, you may want to consider third-party loyalty software and apps including Glue Loyalty, Candy Bar, Preferred Patron, and Loyalzoo.
On the other hand, if you are looking to take your successful loyalty program to another level and provide an even more immersive digital experience to your loyal customers, a loyalty app could hit that home run.
Now let’s talk about designing your own loyalty app!
There are a few key ingredients to consider:
- User flows: How will the user navigate your app? What is the relationship between the main screens?
- Dashboard: How will the user track their loyalty status?
- Rewards: How will the user redeem their rewards? How will this app interact with your eCommerce website for these purposes?
- Stickiness: How will you continuously reengage your user? Will you have a notification system in place? What automated email flows and email campaigns will you run?
- Other features: Will you offer additional features such as quizzes, user-generated content rewards, social media integrations, and similar, to incentivize user retention?
- User interface: Once you plan the user flows and each screen of your app, how will you apply colors, typography, and other visual elements to ensure consistency with your parent brand?
The Bottom Line
Designing a loyalty program is 80% planning and 20% actual design.
From setting clear program goals to choosing the right structure and digital environment, be ready to invest time, effort, and money into strategy before seeing the first sketch of your loyalty program’s web page or application screen.
Author bio
Travis Dillard is a business consultant and an organizational psychologist based in Arlington, Texas. Passionate about marketing, social networks, and business in general. In his spare time, he writes a lot about new business strategies and digital marketing for DigitalStrategyOne.
