The retail industry is booming, but it's never been more competitive. After getting tanked by the pandemic and supply chain disruptions, the retail industry is slowly stabilizing. But stabilization doesn’t mean it is slowing down. Quite the contrary – retail brands can thrive only if they are able to keep up with innovation and rich ecommerce and in-store experiences.
Loyalty programs have been a surefire way to secure customer wallets long-term. Focused on savings and member benefits, consumers are eager to join loyalty schemes and reap their rewards. Retaining customers in times of significant price increases is one of the most critical sales challenges for retailers today, and loyalty programs pay off. Here are the most note-worthy benefits of a retail loyalty program that will help you move the KPI needle:
Read on to discover the most popular types of retail loyalty programs and see how customer-oriented retailers build brand loyalty with personalized offers.
Learn more: Explore Voucherify's Open Source Loyalty Accelerator
Various loyalty mechanisms are used in modern loyalty programs. While building an appropriate loyalty strategy, the most important business goals should be subject to detailed analysis. Automatic discounts, promo codes, and the ability to reach new levels of membership with tiered programs are some of the most desirable loyalty features today. Here are the most popular structure for retail rewards programs:
In this type of program, members earn rewards through exchanging points. Typically, members earn points for every dollar spent. Point programs are simple to use and quick to build instant gratification. They prompt continuous engagement through repetitive behavior and repeat purchases. The most common drawbacks are unresolved liabilities and cheapened brand image.
Customers get access to specific program benefits based on the tier they are placed in. Tiered loyalty programs create exclusivity and encourage long-term engagement. Granular segmentation allows brands to run other promo campaigns and offers on top of level-based filters. The biggest drawback are limitations related to changing program rules and mechanisms.
Cashback is an instant monetary reduction that generates a sense of gratitude and excitement due to the surprise effect. Cashback programs incentivize specific actions and encourage brand preference with low-effort rewards. Depending on the cashback level, it might be hard to generate positive ROI from low AOV orders.
Learn more: How to launch a cashback loyaty program?
Paid programs provide members with loyalty benefits in exchange for an annual/monthly or one-time fee. These programs are still considered controversial. However, customers tend to value the brand more and shop more often once they decide to pay a membership fee – this is why a proper value demonstration is required to generate sign-ups.
Learn more: Everything you need to know about paid membership programs
Type: Paid loyalty program.
Reward actions: Monthly ($14.99) or annual fee ($139).
Rewards catalog:
Even if you don't shop on Amazon, there is a good chance that you’ve heard about Amazon Prime. It is a monthly subscription loyalty program that can be cancelled at any time. Besides shopping perks, better deals, and expedited shipping, Amazon Prime members also access Prime Video and Prime Gaming platforms. Making consumers pay a membership fee to join your rewards program is controversial but not that uncommon. Paid loyalty programs work best for retailers who see high levels of repeat and frequent purchases. As reported by Statista, Prime members spend a lot more than non-Prime customers.
Many of the products and offers on Amazon are marked with the program logo, suggesting that subscribers to this service can count on something extra when shopping. For example, some of the attractive sales promotions on Amazon are completely reserved for Amazon Prime members.
“Prime services have enticed an estimated 70 million-90 million new customers to sign up for membership, though the company doesn’t reveal the exact number of Amazon Prime members. It did, however, report that in 2017, Amazon shipped more than 5 billion items worldwide via Prime, and it signed up more new paid members throughout 2017 than in any previous year.” – Forbes
What made the Amazon Prime program a success?
It is important to note that Amazon Prime is not a loyalty program in the traditional sense of earning points and redeeming rewards. Instead, loyal members need to pay a small fee for these privileges. This approach gives customers a sense of ownership over their membership, increasing the program's value in their eyes.
Type: Paid loyalty program.
Reward actions: Monthly ($12.95) or annual ($98) fee.
Rewards catalog:
“We are a company committed to meeting our customers’ needs. Customers know they can trust us and depend on us, and we’ve designed this program as the ultimate life hack for them. Walmart+ will bring together a comprehensive set of benefits where we see the greatest needs from our customers and where our scale can bring solutions at an unprecedented value.” – Janey Whiteside, chief customer officer of Walmart
To compete with Amazon, Walmart, another giant US retailer, launched its new subscription loyalty program in 2020. The program is a fantastic alternative to Prime (and also cheaper) for consumers who already shop at Walmart regularly.
Operating in a price-sensitive environment, Walmart decided to incorporate Walmart Rewards and gas savings as program perks. The retailer boasts that the club member can save over $1,300 each year. The program operates both in a dedicated mobile app and a web app, allowing for an omnichannel loyalty experience.
This way, Walmart's loyalty program caters to both traditional shoppers and a mobile-only customer base. By offering low prices, flexible cashback, and convenient locations across the US, Walmart's marketing plays well to the top loyalty benefits that both new and existing customers expect and value most.
Type: Hybrid program – tiered point-based loyalty system.
Reward actions: Placing orders – membership levels are based on annual spending.
Rewards catalog:
Sephora is a giant French cosmetics retailer. They have made a name for themselves in the sphere of customer loyalty with their Beauty Insider loyalty program. The program's rules differ from those of Amazon or Walmart, yet it still proved to be highly effective in acquiring loyal members and reducing customer churn. Sephora’s rewards program lets customers choose the loyalty benefits they prefer. All members earn 1 point for each $1 spent. Collected points can be redeemed for gift cards, exclusive products, and extra perks (such as beauty tutorials).
Membership perks widely vary based on the membership level (Insider, VIB, Rouge). The program is available both in-store and via a dedicated loyalty mobile app.
Sephora’s Beauty Insider program has grown wildly popular. The program has more than 20 million loyal members that combined make up as much as 80% of Sephora’s annual sales. The success of the program lies in its individual approach to customers. Sephora’s clientele does not shop out of necessity but rather for pleasure. Following this logic, Sephora decided to add a feeling of exclusivity to its loyalty program with non-monetary perks and gamified level structure.
A 25% off discount for the first purchase as a member also helps to incentivize members to sign up. To protects themselves against piling liabilities, all points expire after 12 months of members' inactivity.
Learn more: How to incentivize loyalty program sign-ups?
Type: Cashback loyalty program.
Reward actions: Making eligible orders.
Rewards catalog:
Kohl's is an American retail chain. Having to compete with giants like Walmart, this retail brand opted for a transaction-based program and attractive discounts to drive sales and attract customer loyalty. The mechanics behind their rewards scheme are straightforward – customers earn 5% on every purchase, called Kohl’s Rewards. The balance is converted and issued in $5 Kohl’s Cash increments on the first day of the following month. The monetary reward is available for 30 days. To increase engagement and stay top of mind, Kohl’s uses push notifications to notify users about unspent rewards.
“We will maximize value for our Kohl’s customers nationwide with the launch of Kohl’s Rewards by rewarding them with more Kohl’s Cash every day. Following a successful pilot that resonated so well with our customers, we are excited about this next evolution of loyalty at Kohl’s. It’s unlike any other program, benefitting every rewards member – whether they are just getting to know us or shopped with us for years.” – Greg Revelle, Kohl’s CMO.
To make the loyalty program more engaging, Kohl’s has introduced a special period where members can get $10 Kohl’s Cash for each $50 spent. The success of the program can also be attributed to its well-planned implementation. Members of the previous program, Yes2You, have been automatically moved to the new program. Their rewards have also been converted into a new currency, ensuring consistency and no hard feelings on the customers' side.
Type: Hybrid program – tiered point-based loyalty system.
Reward actions: Making orders and subscribing to Ulta's email and app notifications.
Rewards catalog:
Ulta Beauty is the largest American network of beauty shops, with a wide range of makeup and skincare products. Ulta launched its rewards program in 2003 and has since tweaked the program plenty of times to reflect changing retail trends.
Club members spend about $1700 per person each year on the brand, making the program one of the best retail loyalty programs to date. Ulta was also one of the first beauty businesses to provide an omnichannel experience, making it easier for customers to redeem points both online and in-store. The program also comes with a dedicated mobile app making it easy to check point balance, activate rewards and get the lastest updates.
The loyalty program combines the best elements of point-based programs and tiered programs. In short, Ulta rewards customers for every dollar spent and offers discounts as rewards that can be used towards any future purchases without forcing customers to redeem predefined product samples and material rewards. Their tier-based structure with better perks on top incentivizes members to continue shopping to reap high-value rewards. Similarly to Sephora, Ulta also has three membership tiers based on annual spending (Member, Platinum, Diamond).
Type: Perks loyalty program.
Reward actions: All it takes is joining the program for free.
Rewards catalog:
IKEA Family is one of the largest loyalty communities, with over 110 million members worldwide. Club members get access to exclusive discounts, free hot drinks with every visit and other perks, including member-only newsletters, access to a member community to share interior design tips and an "Oops-assurance" if something breaks during transport or whilst assembling furniture.
IKEA also offer a digital card and a mobile app that, upon scanning, gives members access to other discounted inventory. IKEA uses cards to track customer behaviour and preferences and adjust their offer to individual members.
Type: Cashback loyalty program.
Reward actions: Making eligible orders.
Rewards catalog:
Launched in 2019, the Target Circle loyalty program boasts more than 110 million members. Contrary to its competitors, Amazon and Walmart, Target runs a free loyalty program that underlines instant savings and incentivizes bigger orders instead of offering extra perks such as same-day delivery or exclusive access to pre-launch products. Members earn a 1% discount when they shop or a 5% discount with Target RedCard.
Program members also have access to birthday gifts, charity donations and special early access to partner-only products and events. The convenience of adding discounts automatically at checkout, with no extra redemption steps, keeps Circle top of mind. And all that with no extra annual fee, unlike Walmart or Amazon.
Type: Point-based loyalty program.
Reward actions:
Rewards catalog:
PetSmart Treats is a point-based program with an interesting take on reward actions and rewards. Loyal customers earn points for every $1 spent. Besides making orders, PetSmart also rewards customers for using the services of partner locations, such as grooming salons and donating to PetSmart Charities.
The rewards catalog is focused primarily on discounts and savings. However, members get access to unique features such as free shipping on orders over $49 and a free surprise gift on a pet's birthday. PetSmart adds a gamification element to its loyalty program by offering bonus and double points days and other personalized offers.
Type: Perk loyalty program with cashback functionality.
Reward actions: Sign up for free.
Rewards catalog:
MyWalgreens is the largest US health-centred customer loyalty program, with more than 100 million members. The program provides customers with several perks, including the fastest same-day retail pickup options. The program comes with a new loyalty mobile app that allows members to not only make orders but also reap other benefits of the membership, such as a 24/7 pharmacy chat, access to medical care and vaccination appointments, personalized health advice, and more.
Type: Perks loyalty program.
Reward actions: Sign up for free.
Rewards catalog:
There are four key aspects that make Nike Member Program a fantastic loyalty case study – exclusivity, omnichannel, personalization and community. The single biggest benefit of joining the Nike customer loyalty program is access to member-exclusive perks, events and experiences and loyal Nike customers perceive this to be the biggest advantage of the program.
The Nike loyalty app works pretty much like a social media platform where loyal customers can stay in touch with other Nike and sports fans. The final pillar of Nike's success is the loyalty technology that ties it all together – by building a frictionless omnichannel experience, the brand motivates customers to keep engaging with the program across all touchpoints, securing customer loyalty long term.
Retailers have plenty of opportunities to grow customer loyalty. After all, their business model is primarily customer-centric. With a great customer loyalty program in place, you can collect first-party data and craft memorable experiences across any channel, both offline and online. With customer acquisition costs skyrocketing, focusing on customer retention is more important than ever.
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