Types of loyalty programs

Dozens of types of loyalty programs are available to companies — from bonus and ball to cashback and various partners. But which of them will suit your company and help it achieve real business results? All the answers are in this article.

What is a loyalty program?

A loyalty program is a set of marketing techniques and mechanics that help businesses form an emotional connection with consumers and build long-term relationships with them. With proper design and competent implementation, the bonus system closes several important tasks at once:

Reduces customer churn.
Increases the average check size.
Increases customer confidence.
Strengthens the position of the brand in the market due to the developed community.

Optimizes marketing costs.
Ensures organic expansion of customer base through referrals.

For most companies, this looks quite attractive. But when it comes to practice, the questions begin. The first and foremost of them is what kind of bonus system will bring the most profit to a specific business in a specific niche? To answer it, we will consider the most popular types of loyalty programs, their pros and cons, as well as the criteria you should rely on when choosing a program for your brand.

Loyalty program: types, differences and benefits

Before we begin, let's make a point that companies are not limited to choosing one type of bonus system and can use different mechanisms, bonuses and terms of their accrual to increase customer loyalty. We will consider the main types of loyalty programs that are most often used on the market.

Discount

This is the most common loyalty program, which is most often used for fast-moving goods and in low-cost stores, where discounts are really appreciated by customers. Large companies also use such a system, but for a different purpose — to collect the necessary customer data as quickly as possible.

The meaning of the discount program is simple and clear: the client receives a card that gives him a direct discount on the entire assortment or a certain group of the company's products, and he presents them at the cash register every time when shopping.

Separately, it is worth highlighting the loyalty discount program, where the amount of the discount is not constant and varies depending on the amount that the client brought to the business. For example, it might look like this:

5% discount for all customers immediately after issuing the card.

If we talk about the expediency of implementing such a program, then there are nuances. Yes, it has its strengths: it is relatively easy to implement and maintain, and it is also as comfortable and understandable as possible for customers and staff.

7% discount after spending UAH 5,000 or more in chain stores.
10% discount after spending 20,000 UAH or more.

But on the other hand, the business discount system brings rather dubious benefits, and here's why:

Every discount is a financial loss for the company.
A small discount for the moment does not motivate the customer to visit the outlet next time.
Such a system involves regular communication with the audience, so no emotional attachment is formed in it.
You do not take into account the individual preferences of each client.
Discount programs are so often used that they do not cause a wow effect.

Bonus or with points

Bonus programs have a more complex structure compared to discount programs. The meaning here is as follows: every time a customer makes a purchase, bonuses are accrued, which he can spend on paying for other goods or exchange various gifts or additional services of the company, for example, free delivery.

The difference from the discount program is also that you can award bonus points to customers as an incentive: on a birthday, for registering on the website, downloading a mobile application or inviting a friend. All this will motivate the user to interact more often with the brand and participate in various marketing activities.

A loyalty program using points can be not only linear, but also multi-level, where each status has its own privileges. Example:

Entry level: 5% of every purchase is returned as bonuses.
When spending 20,000 hryvnias or more: 7% is returned with bonuses plus 30 additional days of warranty or product exchange.
When spending 50,000 hryvnias or more: 9% is returned with bonuses and 60 days of additional guarantee.

For convenience, points are usually equal to the currency unit that the company uses for calculations. For example, in Ukraine, at large sellers of household appliances, such as Foxtrot, Comfy and Eldorado, one point is equal to 1 hryvnia.

In order to increase the redemption rate — an indicator of the use of points by customers, it is possible to limit their validity period. This motivates consumers to make purchases more often and will bring additional profit to the business.

Advantages of the loyalty point program:

Good motivation of customers to make purchases.
Accumulated points bring customers back and prevent them from switching to a competitor's brand without a good reason.
No direct loss as a discount.
Access to communication with the audience: informing about the number of bonuses, their validity period, etc.
If the client did not use the bonuses, the company does not lose anything.

There are also disadvantages of such loyalty programs, but compared to a discount, they are significantly fewer:

More difficult to configure and implement.
It complicates the control of turnover and balance information, since points are actually the company's debt to customers.
Technical problems are possible during the withdrawal of points.

However, when using specialized loyalty program management systems, such as EfirCards, all these problems are easily solved through automation.

Cashback

This is a return to the client of part of the funds spent on the virtual card. Usually, cashback can be used to pay up to 100% of the cost of the next purchase, which gives the consumer an obvious benefit and increases his loyalty.

Cashback can be provided for all products and services of the company, or only for certain groups. In addition, the percentage of cashback for different products can also differ, which allows the business to increase the sale of the most marginal items.

Advantages of this type of loyalty program:

The customer receives a clear and obvious benefit in the form of real money, not points.

Helps business to increase demand for specific groups of goods.
Easy to implement and manage.

Cashback also has disadvantages, but they are relatively few:

He is not always trustworthy.
It is necessary to communicate with the audience in a timely manner: inform about the change of the rate, inform about various restrictions, etc.
High competition - recently, cashback has become frequently used by companies in various fields.

Partnership

Several companies usually participate in such programs: when paying for goods or services in one of them, the client is credited with bonuses that can be spent in any other partner companies.

For example, a travel agency, an airline, a chain of hotels, restaurants, and a car rental service can participate in the partner loyalty program. This will mean that the client only needs to issue one bonus card, which he can use at all stages of the trip and save money.

The advantages of such a loyalty program:

Helps partner companies expand their customer base.

Increases visibility of companies on the market.
Motivates customers to use the offers of one partner network.
Minimal financial losses.

The main disadvantage of partner loyalty systems is the complexity of implementation. The fact is that for this it is necessary to develop a single ecosystem that will be profitable, convenient and attractive for all participating companies.

For this reason, such programs are mainly used by banks and large companies.

Print

For each purchase of a product or service, you put a stamp on the client's virtual card, and when you accumulate a certain amount, give the consumer a valuable gift. The content of such a bonus can be different and often depends on the field of business. For example, a fast food restaurant can give coffee, a beauty salon - a discount for such a service, a taxi - a free ride.

Such a loyalty program works effectively in small businesses for which it is important to attract and retain regular customers without high costs for technical implementation.

Advantages:

Easy to implement and maintain.
Simple and clear conditions.

Good at motivating customers to repeat purchases.

Disadvantages:

Every gift is a financial loss for the business.
Limited flexibility and functionality.
Does not allow segmentation of the target audience.
Lack of individual approach to each client.

How to choose a suitable program

Choosing the right loyalty program depends on many factors, including your business niche, customer characteristics, budget, available technology, and company goals. Here are some steps to help you choose the optimal program:

Assessment of business needs.

First of all, define the goals and needs of your company. What do you want to achieve with a loyalty program? For example, it can be an increase in attendance, an increase in the average check, customer retention, and others.

Study of the target audience.

Understanding the preferences and behaviors of your target audience will help you determine which types of loyalty programs will be most attractive and effective for your customers.

Market research.

Conduct a market analysis and study the loyalty programs used by competitors - their features, cost and user feedback.

Compare different options to choose the most suitable option for your business.

Create a budget .

Estimate how much you are willing to spend on a loyalty program, taking into account the initial implementation costs and subsequent operational costs. Note that successful companies usually invest as much in retaining existing customers as they do in attracting new ones.

Testing and analysis.

After implementing a loyalty program, carefully monitor its effectiveness and analyze the results. Based on customer feedback, you'll be able to make the necessary adjustments, add new mechanics, and remove inefficient ones to achieve better results.

How you can improve any loyalty program with EfirCards

EfirCards's innovative service helps companies develop and implement the most flexible, automated and managed loyalty programs of various types using functional virtual cards. Such cards do not need to be carried with you - they are stored in Apple Wallet and Google Pay, so they are always easily accessible on your customers' smartphones.

Efir electronic cards allow you to implement almost any loyalty program, and make it simple and convenient for end users. Let's see how it works:

Discount cards are ideal for companies with a loyalty discount program. You set the desired size of the discount and the conditions for its provision, after which customers will be able to purchase products at a reduced price by scanning a card installed in Apple Wallet or Google Pay at the checkout.
Discounts with accumulation - work similarly to simple discount cards, with the only difference that the amount of the discount given is calculated for each customer, depending on how much money he spent in your company. You specify the size of the discount and the conditions for its increase yourself in accordance with the needs of your business

Cashback cards are used to accrue, store and use cashback. The accumulated amount is displayed directly on the card, thanks to which your customers can easily track their benefit, and accordingly, their loyalty to the brand will increase.
Stamp cards are designed to implement loyalty programs using stamps. They display the number of already received and missing marks for receiving a gift, which motivates users to return to you again. You can change the required number of stamps and the style of visual design in a few clicks.

The EfirCards service also provides the company with relevant real-time analytics, so you can track audience engagement, test new mechanics, and optimize your loyalty program to achieve the desired financial results.

How much does it cost to use EfirCards?

Complete a short registration and get unlimited access to the functionality of EfirCards, which we automatically provide to all new customers. You can find detailed instructions on using the service on our website, and if you have any questions, contact our technical support team.

Start using ours

service already now

Create an account