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How to Create a Loyalty Program?

How to design a loyalty program? From loyalty program name, rewards, earning rules, tiers to distribution channels, notifications, and collected data.

How to Create a Loyalty Program?

Table of contents:

  1. Choose a customer loyalty program name
  2. Define the loyalty campaign timeframe 
  3. Define joining conditions 
  4. Define the earning rules of your rewards program
  5. Define the loyalty rewards 
  6. Design the loyalty card
  7. Define the validation rules
  8. Establish the customer loyalty program tiers
  9. Choose the distribution channels 
  10. Design a landing page
  11. Craft engaging messages 
  12. Schedule the loyalty program notifications 
  13. Design the customer waller (cockpit) 
  14. Design the redemption box at the checkout 
  15. Design the process for offline redemptions 
  16. Summary

1. Choose a customer loyalty program name

The rewards program name is probably the first thing your customers will see about your customer loyalty program. It is wise to make it somehow connected to your brand. It can be as simple (and boring) as the XX loyalty program or XX rewards, but you can also be more creative. You could, for example, call it a Club, a Click, or something else, that will make it feel exclusive and special. Sephora Insider is an excellent example of an imaginative program name, as it feels close to the brand and exclusive. 

Sephora Beauty Insider Bazaar Graphic
Source: Sephora

2. Define the loyalty campaign timeframe 

You should decide if your customer loyalty program will run forever or be time-limited (e.g., two years long). It is recommended to try one option first and modify it after some time, or A/B test the rewards program to learn what performs best for customer retention in your particular case. This is why many companies launch short-lived customer loyalty programs and later rename or rebrand them, changing the rules in the process. It is more difficult (also from a legal perspective) to change your existing program where you have some liabilities (like collected points) than to launch a program that by default has an expiration date on both the program and rewards and then launch a new one. The drawback here is that you may lose some of the participants, and you will be forced to collect them from scratch all over again. It is something to think about and consult with your legal department or a lawyer, especially as the country and states regulations vary widely (e.g., in the USA, in some states, it is illegal to have an expiration date on the gift cards). 

3. Define joining conditions 

Will your customer loyalty program be exclusive & invitation-only? Will there be some automation behind it? Easyjet’s rewards program is an example of an exclusive program. Customers are invited only if they spend a certain amount of money on Easyjet bookings in the past calendar year. This is why it is not well-known and not advertised widely. 

If you prefer to make an inclusive customer loyalty program, you also need to define joining conditions. How can your customers join it? Is everyone by default added to the rewards program after the first purchase? Or maybe after spending a certain amount of money in your store? Or after filling out a joining form? Or subscribing to the newsletter? There are plenty of ways to get customers to join your program, depending on your target audience and the behaviors you are trying to foster. 

Starbucks Rewards App join screen
Source: Starbucks

Follow our post about the top 10+ ways to make customers join your loyalty program. 

4. Define the earning rules of your rewards program

Besides deciding on the joining conditions, you need to define how the customers can earn the rewards in your customer loyalty program. Will they be rewarded for joining the program? Will they be rewarded for purchasing your products or services? Are there any other ways they can collect the points or rewards, for example, by engaging with your brand on social media, visiting physical stores, sharing your content, writing reviews online, or referring other clients? You should define the ways they can earn rewards and what they will get for which action. 

Examples of earning rules: 

  • A customer paid for the order.
  • Following the company on social media.
  • Joining the customer loyalty program. 
  • Referring another customer. 
  • Writing a review. 
  • Joining the newsletter. 
  • Sharing company’s content on social media. 
  • Purchasing specific products. 
  • Visiting the physical store (this would be using geolocation and geofencing on the mobile app). 
  • Taking part in a survey. 
  • Filling out their profile. 
  • Shopping at a partner’s store. 
  • A customer entered a particular customer segment.
  • Entering the new loyalty tier. 

5. Define the loyalty rewards 

You need to define which rewards to offer to your loyal customers and in what way. You can offer the prizes directly to the customers by granting them the relevant reward for relevant action, for example, giving them free shipping if they leave one product review. You can also give them points (or other custom currency) initially and allow them to choose the preferred rewards from a broader reward catalog. Sephora and H&M do this, for example, by offering a wide range of rewards. Some companies also let customers collect points and cash them out at the checkout, but they do not do it automatically, only if the customer requests to cash out their points. This is the case of the Carrefour loyalty program in France or H&M Club, for example. 

H&M loyalty cockpit screen
Source: H&M

If you offer points (or cashback), you should define the points multiplier for each customer loyalty program tier. For example,  $1 spent equals 1 point. You should also enlist the possibilities for cashout – can customers cash out any amount of points or only multiples, for example, every 100 points? 

Here are some examples of rewards you can offer in your customer loyalty program: 

  • Free products or samples
  • Free services
  • Discounts & promotions access
  • Points (or other currency)
  • Material rewards
  • Charity donations
  • Priority access
  • Exclusive products
  • Personalized products
  • VIP Experiences
  • Additional services
  • Free shipping
  • Free curbside pickup
  • Better return policy
  • Extended warranty
  • Partnership rewards (coalition rewards)
  • Cashback & store credit
  • Pay with points
  • Giveaway entries
  • Meet & Greet
  • Online community
  • Free try (or try-on)
  • Shopping sprees
  • Have a product named after them
  • Extra service upgrade
  • Virtual rewards
  • An opportunity to do something out of the ordinary with notable figures in your organization
  • Giveaway with instant win
  • Mystery gifts 

You can find more information about each type of reward in our blog post about loyalty rewards ideas for B2B and B2C.

6. Design the loyalty card

You should design your loyalty card, both from a visual and practical perspective. Will your loyalty card have a pin code? That may be necessary if the points act like cash when paying. Will your code (barcode) have a particular pattern or length? Should it be possible to use it both online and offline? Will you add it in a digital form to your mobile app? There are plenty of considerations you should make before printing your first-ever loyalty card. 

7. Define the validation rules

You should define additional limits for your customers that will be checked before triggering points assignment. 

Validation rules can limit, for example, the earning rules to specific customer segments, cart structure, or other buying circumstances of your choice. You could say that only customers from a certain country can get a specific type of reward but others not. For example, giving only USA-based participants cinema tickets as one of the available rewards because you have a deal with a cinema company there. Or you could make a rule that everyone who adds a certain product (for example, a product from the perfumes category) will get double points for the total order value. You should think of additional limitations you would like to add to your program. 

8. Establish the customer loyalty program tiers

Tiers are optional membership levels of your loyalty campaign. They can help you differentiate between less and more loyal customers and those with lower and higher CLV (customer lifetime value). You can set up tiers based on the number of purchases made, amount of $ spent, years of being a regular customer, or whichever factor you like. The most common type is to define levels based on the annual spending or points collected. 

Marriott Rewards exclusive tiers display
Source: Marriott

Different tiers can differ by types and values of rewards available. You could choose to offer different rewards only to VIP customers, for example, special services, early access to new products, access to limited editions of products, etc. You can also vary the number of points you give for $1 spent for every tier. For example, $1=1 point for the basic tier, $1=2 points for the advanced tier, and $1=3 points for the VIP level. 

9. Choose the distribution channels 

You should think about how you would like to inform your customers about your customer loyalty scheme. Probably you will have a landing page with the program conditions. Where else would you like to advertise your program? 

Distribution channels worth considering: 

  • Social Media 
  • SMS messages
  • Push notifications, web and mobile 
  • Banners on the web & mobile 
  • Dedicated mobile app 
  • In-app messages 
  • Email 
  • Chatbot 
  • POS materials like posters, POS in-store

10. Design a landing page

You will need a medium to cover the customer loyalty programs’ rules and conditions and possibly even add a subscription form, if your rewards program requires it. A landing page is great for that, as you can add everything there – from the information about the program through the subscription form to the legal Terms & Conditions. You should design it to be visually appealing and preferably sticking to your brand guidelines. 

11. Craft engaging messages 

If you use distribution channels like email, SMS, or other messages, you should craft an appealing copy and visuals to encourage customers to join the program and earn the rewards. You can prepare a couple of versions and A/B test them to see which one has the highest open and click-through rates. 

Dominos loyalty program onboarding email
Source: Domino's

12. Schedule loyalty program notifications 

Besides messages advertising your customer loyalty program, you should also think about the notifications for the existing program users.

You could notify them about: 

  • Joining the program. 
  • Sending a loyalty card code. 
  • Any special deals and offers within the program. 
  • Their progress in the program, like rewards earned and milestones (entering a new tier, for example) reached. 
  • Rewards expiring soon. 

You should design the messages, choose the channels and decide on their triggers and frequency. 

13. Design the customer waller (cockpit) 

The customer cockpit is where customers can see all available rewards and points, promotions and offers, and expiry dates. They could also present there their purchase history, links to track their orders, information about their current rewards program tier level, and more.

Offering a customer cockpit to customers is a great way to keep them aware of their available deals and rewards and, therefore, make it easier for them to use them (and bring you more revenue in the long run). 

As with all customer-facing communications, it would be good if your branding stays consistent throughout all channels, including the customer cockpit. 

14. Design the redemption box at the checkout 

If you let customers use their rewards or their loyalty points on their loyalty card to pay for their orders, you should design a box for inserting coupons, gift cards, and loyalty card codes at the checkout in your online stores, both on web and mobile apps. 

Zalando checkout view
Source: Zalando

15. Design the process for offline redemptions 

If you have brick-and-mortar establishments where customers can redeem rewards or points, you should think of the logistics of redeeming their rewards offline. That could be, for example, through using a physical, plastic loyalty card or with the use of a mobile app that works offline with downloaded content. Whichever way you choose, remember to always inform the customers clearly about the possibilities of redemptions – both the limitations of it and the way to do it – to avoid unnecessary frustration and customer call center calls. 

Summary

Designing and creating a customer loyalty program is a lot of work. It needs a lot of customer research to define the best program conditions and rewards and internal alignments to satisfy all parties within a company. Building a loyalty program management system is yet another task that is even bigger and may take months or even years of work if you decide to build (code) it internally. 

Voucherify can help you speed up launching a loyalty program and testing out various program rules and rewards. Voucherify is an API-first, headless loyalty platform that can be integrated within weeks and that allows you to create and launch customer loyalty programs with a couple of clicks within a marketer-friendly dashboard. Once Voucherify is integrated, launching and tweaking the loyalty program can be done by non-technical staff like marketers or sales reps. It takes the burden off your IT team and speeds up the process of creating customer loyalty programs. We also offer messages and landing page designers so that your teams can work entirely independently from the IT development team. 

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