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10 Best Rewards Programs for Loyal Customers

Customer Experience, CS Tips, Customer Service

Consumers today have virtually endless options for purchasing any product or service they set their heart on. Taking that a step further, they are able to do so from the ease and comfort of their own home. So, when a customer returns to the same brand more than once, that company has the unique opportunity to build a lasting and genuine relationship. 

Over the past several years, it seems companies have focused increasing effort on encouraging customer retention programs, and for good reason. Studies show it costs companies 5-10x more to acquire a new customer than to keep an existing one. But which loyalty rewards programs are actually the most rewarding?

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Here’s a run-down of the best rewards programs for loyal customers:

1. Tiered Reward Programs

The common pitfall of the ever-popular points-based reward system is that customers lose interest and forget before earning their first reward. To combat this, many companies have moved to a tiered reward system. The first reward is redeemable within a short time frame, giving the customer instant gratification and making them feel valued as a member of the program. 

Instead of just collecting loyalty points indefinitely, customers receive a loyalty status that allows them to feel special. When customers feel special, they become more invested in the brand. It also provides a goal to work towards, which increases the desire to continue their interest in your brand.

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Maslow’s Hierarchy of Needs is a great way to look at the benefits of Rewards Programs. Maslow’s Hierarchy of Needs is a motivational theory in psychology often depicted as a pyramid that displays a five-tier model of human needs. According to Antavo, a tiered reward program satisfies the top three needs of Maslow’s Hierarchy of Needs.

2. Subscription Programs

Subscription businesses have been growing during the past few years. As of 2016, there were over 2,000 subscription box services, and it is estimated that the industry as a whole has been growing at a rate of 200% per year

Customers value convenience. According to a McKinsey survey, convenience was among a customers’ top consideration when deciding to continue with their subscriptions. 

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A perfect example is Dollar Shave Club. When men started subscribing to the razor subscription service in droves, many were skeptical. Instead of paying an arm and a leg at the supermarket for razors, men across the United States were opting for a subscription service where they are charged only $3 a month for five fresh, quality razors. Companies like this are not only saving money on retail overhead, but they’ve managed to build a customer retention program right into their business model. In DSC’s case, the system seems to be paying off: they just sold off their startup brand for a tidy sum of 1 billion dollars.

3. Cash Back on Purchases

Nothing speaks to the average American consumer like the almighty dollar, especially during particularly difficult economic times. Economic uncertainty means cash is king. Whether it be attached to a specific card or generally available to all customers, cash back creates added-value. 

In February of 2019, Level, a bank app, began giving customers 1% cash back on debit card purchases, which became only more popular during the pandemic-driven economic anxiety.  

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Brands who offer cash back on purchases represent a growing customer retention program by which customers who would normally pick up their items from anywhere will return again and again to the same retailer or online marketplace in order to get more bang for their buck. Cash back also works to drive sales. Brands see an increased revenue via rewards at 36% compared to 28% from discounts. 

4. Up-Front Fee Membership Programs

In the loyalty program world, a premium loyalty program is a program where members pay a recurring fee for benefits they can use right away. Consumers are able to reap the rewards of the program upfront, rather than transactions first, rewards later. 

And the odds are in a brand’s favor on this one. According to a study by McKinsey & Company, a whopping 64% of consumers pay for at least one loyalty program

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While it may seem pretty bold for a company to expect customers to pay a fee to become members of a loyalty program, a quick glance at Amazon’s Prime member program proves that it is one of the best rewards programs out there. Customers pay $60-99 a year to become a member, but the perks of that fee bring members back again and again, spending 58% more than the casual Amazon user. The best-loved Amazon Prime perk? Free two-day shipping on millions of items with no minimum purchase.

5. Service Short-Cuts

Companies that want to provide outstanding customer service can save loyal customers time by giving them a direct line to a representative or a key-in code that gets them to the front of the line faster. Customers feel like they have exclusive access to agents and are more confident with future purchases as a result. 

Agents are a customer’s direct connecting point to a brand. Leveraging  customer service agents as a form of loyalty rewards can encourage a more positive attitude towards a brand because it is merging the two together. Agents can also create upselling and cross-selling opportunities once they have the customer on the line. 

A Look Into The Future of Call Center Customer Service

Providing that extra level of customer service helps to differentiate a brand on a deeper level. Every interaction and moment is an opportunity to further reinforce brand loyalty with the customer. According to Calabrio, 74% of consumers claim they are more loyal to a business that provides them with direct access to speak to a human, than only digital or self-service support channels. 

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6. Free Stuff

Everybody loves free stuff. Customers are already expecting the best of the best customer service and product offerings from your brand. Offering freebies through loyalty programs are a great way to provide an additional perk without costing a company anything extra. 

Starbucks has one of the best rewards programs for loyal customers because it offers many opportunities for customers to obtain free perks. Members not only get a free drink on their birthday, but purchases over time accumulate to  additional freebies: flavored shots, milk upgrade options, and free refills. (To name a few.)

7. Referral Incentives

Customers tend to become even more loyal when their friends and family are loyal, too. According to Nielsen’s Trust in Advertising report, 84% of those surveyed said they considered referrals to be the best and most trustworthy source when making a purchase.  

Referral incentives have some of the strongest potential to encourage loyalty in existing customers (people tend to stand behind a company they’ve vouched for in the past) while also bringing in new customers that are likely to become loyal themselves.

For example, file-hosting service Dropbox, grew their user base from 100,000 to an unbelievable 4 million after 15 months. Their secret? No secret at all. They implemented a strong referral program. When one person who has Dropbox refers someone else to join, they both get 500MB of increased space, pending the signup. 

8. Exclusive Access

In many cases, loyalty and exclusivity go hand-in-hand. As mentioned earlier, premium loyalty programs are attractive to customers because they allow the customer to feel special. Exclusive access creates the same sentiments in consumers. 

Companies can offer their loyal customers exclusive access to goods and services that others miss out on, making loyalty program enrollees feel like members of the company’s inner circle.  

Two great examples are Nordstrom and Sephora. Nordstrom rewards customers with early access to its anniversary sales through their Nordy Rewards program. Sephora offers Beauty Insider members exclusive access to professionally selected beauty sets and pre-release specialty products. And the numbers do not lie to back these programs up: 94% of American consumers reported that they would take advantage of an exclusive offer

9. The Element of Surprise

Some of the best rewards programs are not just about accumulating points and reaching thresholds, but about creating a memorable customer experience. Many companies are beginning to embrace the “surprise and delight” strategy of loyalty rewards.

Surprise and delight is a strategy that aims to attract and nurture customer relationships by providing them with unexpected rewards and perks. According to CrowdTwist, 67% of customers said surprise gifts and perks are important to their overall experience with a brand. 

Caribou Coffee has successfully mastered this strategy. Customers who are registered to their loyalty program are surprised randomly with rewards such as size upgrades or 50% off their next cup. 

10. Profit Sharing

A truly loyal customer delights in the success of his/her favorite brand or company. The ultimate customer service experience is uplifting the customer and valuing their wants and needs. This creates lasting loyalty. 

REI taps into this through their purpose-driven strategy and member-focused culture. The brand prides itself on Trust, Customer Loyalty, Inclusion, and Social Responsibility. They support passion before profit, which is evident in their member dividends offering.

During March of every year, members receive what the company considers to be their portion of the profit in the form of roughly 10% back on eligible purchases. Members can spend this money on any REI merchandise online or in-store, thus reinforcing their already-loyal habits. According to Bicycle Retailer, in 2016, more than 6 million members nationwide received more than $185 million dollars through their dividends program. 

Companies who invest in their existing customer base by offering quality rewards programs are spending their time and money wisely. Not only is it less costly to support an existing customer than to acquire a new one, but repeat customers spend on average 67% more than their first-time counterparts.

The best rewards programs for loyal customers are those that offer both short and long-term perks to the consumer, and those that treat their customers to the exclusive and the unexpected.

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