The Four Main Types of Loyalty Marketing Programs

Posted by Krista Lessard on Wed, Aug 20, 2014 @ 09:06 AM

 Tecmark loyalty So, you're thinking about starting a loyalty rewards program for your business, but you're not sure where to start. There are four different types of loyalty marketing programs most commonly used. Each one has their own pros and cons to weigh when deciding which program may be right for your particular business.

  

 1. Rebate/Cash Back Program

Rebate programs allow customers to earn money back from prior purchases and redeem them after a certain amount of time or set amount. The rebate is often a percentage of the total purchases within a period of time. This is usually done in some form of gift certificate in order to bring customers back into the store, but can also be in the form of cash.

Pros:

  • It is usually very easy to understand and explain.
  • If it is in the form of gift certificates, it drives customers back into the store.
  • Customers often feel like they are accruing value.

Cons:

  • There is no instant gratification.
  • It can be expensive.
  • It may not appeal to infrequent shoppers.

 

2. Discount Program

A discount program offers a certain percentage or dollar amount off of a purchase. This can apply to a specific product or an entire purchase. This program usually applies instant benefits to customers during check out.

Pros:

  • There is instant gratification.
  • It is easy for consumers.
  • It is easy for businesses.

Cons:

  • It implies that regular prices are too high and lowers the value of the product.
  • It rewards infrequent shoppers.
  • Gives away margin.

 

3. Frequency/Club or Punch Card Programs

Everyone knows these programs - buy 10 and get the 11th one free.  Many businesses still use the paper punch card process for this type of loyalty marketing program.  Pros and cons include:

Pros:

  • Easy for the customer to understand.
  • Low cost - just print up cards and hand them out

Cons:

  • Sometimes it is difficult to prevent fraud - people stamping more than they have purchased.
  • Customers have to remember to carry the card.
  • Don't capture any information about the customer
  • Have no idea if other items have been purchased or how much the customer spends with you.

Utilizing loyalty software for your frequency/club program eliminates the fraud risk and allows you to capture the customer information so that you can send emails or texts to get them back to the store.  In some cases you can implement a frequency/club program and still track total purchases so that you know who your best customers are.

 

4. Points Program

For this program, points are used as currency in order for customers to keep track of their rewards. Customers usually earn points based on the amount they spend with the company.

Pros:

  • It is easy for customers to understand.
  • It avoids price discounting.

Cons:

  • There is no instant gratification.
  • Customers may need to be reminded of their status in the program.

Tip: There is the option of using some combination of all three of these loyalty marketing programs. Loyalty rewards programs, in general, have pros and cons.

Pros:

  • They allow for the collection of customer data for promotional opportunities.
  • They can all be measured in terms of success and real results.
  • They are all fairly easy to implement.
  • They all give customers a reason to keep coming back.
Cons:
  • Takes time and commitment to implement well.
  • Competition can copy your loyalty structure.
 
Thinking about a loyalty program? Download our free whitepaper for the answers to 8 Questions to Ask Before Starting a Loyalty Program.
 
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Tags: Loyalty Marketing