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2022-10-19 5:00 pm

The Definitive Guide to Loyalty Programs

  • Exclusive tips and insights to take your loyalty marketing to the next level.
  • How to increase brand loyalty through careful planning and strategy?
  • How can Voucherify help you get started with loyalty marketing?
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Must-Have Terms and Conditions for Loyalty Programs in 2024
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Must-Have Terms and Conditions for Loyalty Programs in 2024

Terms and conditions may not sound like the most gripping piece of reading, but they are a necessary part of every loyalty program: useful and beneficial both for the brand and its customers. 

Frequently abbreviated as T&Cs, they are a set of rules that govern the loyalty campaign, including its every detail and legal aspect. They outline the rights and responsibilities of the brand and program participants.

In this article, you will learn why applying smart terms and conditions is a must for your loyalty campaign and what the most common terms and conditions used by top brands are. I will also show you how to make use of Voucherify for this purpose, thanks to our integrations with two leading content management systems: Bloomreach and Contentful

{{The Definitive Guide to Loyalty Programs}}

Why do you need terms and conditions for your loyalty program?

A well-crafted loyalty program cannot go without precisely outlined terms and conditions. By setting out appropriate regulations for your campaign – and publishing them in a clearly accessible place on your website – you will make sure that the program goes as planned. 

Here are a couple of other reasons why drafting correct and detailed terms and conditions is a key must-have for your ecommerce business:

1. Legal compliance

Loyalty programs are subject to various laws, such as consumer protection acts, data privacy laws, and particular business and consumer-related legislation for a given country. By developing transparent and legally compliant terms and conditions which touch upon subjects such as data security, dispute resolution mechanisms, and limitations of liability, you will ensure that your loyalty program operates within the valid legal framework.

2. Clear communication

This may be the most important benefit of loyalty programs’ terms and conditions. Being transparent about the loyalty program rules helps create a fair and trusted environment for both the program provider and the participants. When you openly communicate all the information about the existing limitations and requirements connected with your program, this fosters a positive and rewarding experience for all the parties involved.

3. Fraud prevention

One of the main goals of developing clear and specific terms and conditions for a loyalty program is to prevent fraud and incentive exploitation. By writing precisely what behaviors are allowed and what actions constitute regulations misuse, you will ensure operational security for your loyalty program

4. User experience

Well-written loyalty terms and conditions significantly improve user experience. They are aimed at protecting user rights and interests and they can help make sure your program meets user expectations. This is a sure way to avoid disappointment or misunderstanding – and thus, to enhance the overall experience of shopping with you.

5. Flexibility

Properly created terms and conditions will allow you to adapt and modify your loyalty program as needed. When you include provisions about your right to make changes and adjustments in the program, you will improve the campaign’s flexibility and adaptability.

What are the most commonly used terms and conditions in loyalty programs?

To find out what type of clauses and regulations are most frequently used in loyalty programs terms and conditions, I’ve analyzed TCs published by 30 top brands from various sectors, describing the rules of their active loyalty programs. The data is valid for Q2 of 2024.

As it turns out, there are five types of clauses that feature in all of brands’ terms and conditions. These are: 

  • Earning rules specification – in other words, how points and rewards are earned.
  • Point and reward values – how much points are rewards are worth and how they can be exchanged.
  • Eligible purchases – what purchases qualify for receiving points or what purchases a customer can make using the earned points.
  • Termination conditions – how a customer can cancel membership or how the company may terminate a member participation.
  • Dispute resolution – how any disagreements and claims arising from the program can be legally resolved.
Screenshot of H&M loyalty program benefits
screenshot of H&M loyalty program rules
This is how H&M presents the tiers and perks of its loyalty program

Other popular loyalty clauses include the following:

  • Region-specific – limiting membership eligibility only to people from certain locations, usually a country, mostly done for legal reasons.
  • Not transferable to another person – meaning that you cannot share your loyalty card and points with other people.
  • Not exchangeble for cash – meaning that the earned points or rewards cannot be exchanged for their monetary value. 
  • Redemption limits – setting various rewards redemption limits, e.g., once per visit, three times per month.
  • Specific time limits – making a purchase on a certain day or within happy hours gives double points.
  • Spending threshold – this usually refers to the minimum amount a customer must spend to receive or redeem points.
Screenshot of Penguin Books rewards program landing page
Penguin shows the basic rules of its Reader Rewards loyalty program in a simple and clear image, providing links to more detailed FAQs and T&Cs

Below, you can see a detailed breakdown of over 30 most common points in loyalty programs terms and conditions. Here are the most popular ones:

Earning rules specification 100.00%
Points and rewards values 100.00%
Termination conditions 100.00%
Dispute resolution 100.00%
Eligible purchases 100.00%
Country/region specific 80.00%
Not transferable to another person 80.00%
Redemption limits 70.00%
Not exchangeable for cash 70.00%

The following rules appear less often:

Specific time limits 66.67%
Spending threshold 66.67%
Points deducted for returned items 66.67%
Applied online and in store 66.67%
Personal data protection 66.67%
Points/vouchers/rewards expiration 66.67%
Age threshold 60.00%
Some products are excluded 60.00%
No points given for purchasing a gift card 60.00%
Vouchers/points cannot be used to buy a gift card 56.67%
Discount stacking restriction 56.67%
Fraud prevention 56.67%

And the following are the least common:

Tiers specification 50.00%
Free membership 50.00%
One membership per person and email 50.00%
Membership for individuals only 50.00%
Limited liability 50.00%
App must be used 50.00%
Discount not applicable to taxes, shipping, and fees 33.33%
Tier requalification/expiration 33.33%
Inactive account cancellation 33.33%
Welcome gift 30.00%
Birthday gift 26.67%
Automatic enrolment 26.67%
Payment methods restrictions 23.33%

Terms and conditions clauses you need in your loyalty program

Based on the above-mentioned research, I’ve singled out the themes and provisions that you shouldn’t skip in your terms and conditions to make them useful, functional, and comprehensive.

1. Loyalty membership eligibility

Define in detail who can enter the loyalty program: the basic conditions are the member’s age and location (normally, loyalty programs are valid only in a specific country). Emphasize that the program is open only to individuals to prevent bulk point collection by groups, which may seriously abuse the rewards program. 

Screenshot of Ben&Jerry loyalty program rules
Ben&Jerry gives clear information on how to join its Flavor Fanatics program and takes the customer straight to an easy sign-up form

Include a clause that limits program membership to one email per person to stop customers from creating multiple accounts and using several loyalty cards at once. You may also decide to exclude your company’s employees (or even their family members) from taking part in the program.

SAMPLE CLAUSE:

Membership in the Program is available to any United States resident who is at least eighteen (18) years old and provides valid and accurate personal information when enrolling. Participation in a separate and unique credit or debit card program is not required for a general membership. Once enrolled into the Program, you will enter at the member status level and are entitled to the rewards and benefits of membership as set out herein or in promotional materials.

2. Membership conditions

Inform your customers – the current and future loyalty program members – about particular conditions governing their membership. Let them know whether the program is free, paid, or by invitation, and that inactive accounts get deactivated and deleted. Make it clear if customers can enrol automatically with the first purchase, by filling out a form, or in another way. 

Screenshot of EasyJet Flight Club terms and conditions
To join the EasyJet FlightClub, customers need an invitation, as specified in the program terms and conditions

Provide information on how members can opt out from the program as well. Finally, respond to the most common doubt: is there a loyalty card that goes with the program? If so, is it digital, or physical, or perhaps both?

SAMPLE CLAUSE:

Members must maintain an active Program membership to earn and redeem points. You may opt out of the Program at any time. If you opt out of the Program, you will no longer earn points or be able to redeem points and you will forfeit your unused and unexpired points. Deletion of points is final and cannot be reversed. To cancel a Program membership, please call Customer Service.

3. Expiration dates

Specify validity periods for earned points, activated rewards, and tiers entered by the loyalty program member. Make sure the rules are clear, but if necessary, establish individual time limits for particular elements of the program. 

Screenshot of North Face loyalty program earning points and rewards rules
North Face defines specific time windows for earning points and getting rewards in its loyalty program

You can also choose to resign from setting expiration timeframes on the rewards program incentives or to grant lifetime tier access once the participant reaches a certain level of points, but this may infringe your budget margins.

SAMPLE CLAUSE:

Points have no monetary value and they will not expire if you make at least one purchase every 12 months. Points expire after 12 months if you do not make any purchase in the 12 months after earning them.

4. Eligible products or services

Let the loyalty program participants know what the qualifying purchases are: which products and services they buy from you give them points and which are excluded from the rewards scheme. Provide such details also for items which can be bought with points or redeemed as rewards.

Screenshot of Lancôme loyalty tiers and rewards
Lancôme shows which products are eligible as rewards for different tiers in its loyalty program

Non-eligible purchases usually include gift cards, on-sale items, or limited product editions. Don’t forget to mention that the earned discounts cannot be used towards previous purchases. You may, however, enable users to earn points from previous purchases from a specified period.

SAMPLE CLAUSE: 

Please note that points cannot be earned for: any purchase made using a reward coupon; store credit or merchandise credit; charity donations; purchase of a gift card; or the value of any gifts-with-purchase. All other purchases will be qualifying purchases. 

5. Purchase requirements

Define the minimum and maximum purchase requirements that qualify an order as participating in the loyalty program. You may decide that points are earned only if the customer has made a purchase of a minimum amount or set a maximum annual value of purchases that qualify for the rewards program. 

Another option to consider is to specify a minimum purchase threshold the customer must cross to enter the loyalty program at all. Also make sure to mention if the loyalty program covers purchases completed in all your points of sales (physical stores, online stores, via app) or only in selected ones. 

Screenshot of Burger King Royal Perks loyalty program
On its loyalty program landing page, Burger King offers a sum-up of all the important details about purchase requirements and illustrates the program terms with icons

What’s more, in some loyalty programs, different payment methods condition the way points are calculated – remember to refer to this case as well.

SAMPLE CLAUSE:

A minimum merchandise purchase of $5.01 (excluding taxes and shipping charges) is required in order to redeem your reward coupons.

6. Promotion stacking

Give information about promo stacking opportunities. You may eliminate this possibility whatsoever, stating that the discounts earned from the loyalty program cannot be combined with other bonuses and incentives available in your ecommerce store, or allow for certain circumstances that enable buyers to combine their earned discounts and perks.

Screenshot of Bath&Body Works loyalty program rules
Bath&Body Works permits some combinations of rewards and discounts in its loyalty program

SAMPLE CLAUSE:

You can only use one voucher at any one time when making a purchase, and it cannot be combined with any other vouchers or discount codes or be applied to discounted items. The voucher will only apply to the product price and will not apply to any delivery costs.

7. Redemption conditions

Specify rewards redemption conditions for your program: how points can be exchanged for rewards, how to redeem and collect rewards, what the earned discounts and rewards apply to. You may, for instance, highlight the fact that the pay-with-points reward cannot cover the shipping costs and handling charges, or that it is impossible to return rewards once claimed. 

Screenshot of Converse rewards program redemption and payment methods
Converse offers payment with points as one of the rewards and available payment methods

A popular clause to include in your terms and conditions to protect the margins of the program is that points are deducted from the credit balance in case of order return or cancellation.

SAMPLE CLAUSE:

Each reward may be redeemed for only one item and will be applied to the most expensive eligible product in the transaction. Products eligible for Reward redemption must each have a regular retail unit ticket price equal to or under sixteen dollars and ninety-five cents. This means that products that have a regular retail unit ticket price that is above sixteen dollars and ninety-five cents are not eligible for Reward redemption. You must identify yourself as a Participant at the time of transaction to redeem the Reward. 

8. Tiers specification

Include detailed information about the way tiers work in your loyalty program – if a tiered loyalty program is what you’ve gone for. Let the customers know how many tiers there are, what their names are, how many points a user needs to enter a tier – or what other conditions must be met to move from tier to tier are. Explain for how long a customer remains in a tier, if there are any time limits to them, and how tiers get requalified after their validity is over.

Screenshot of Booking Genius loyalty program rules
This is how Booking explains the tiers and discounts available in its Genius loyalty program

SAMPLE CLAUSE:

The tier level of your membership is based on the points earned during the current or previous Membership Year whichever is the highest. If you are a new member, or do not have sufficient points to qualify you to the second membership tier level, your membership tier level will start at the first tier. If you reach the second tier during a Membership Year you will stay at the second membership tier level during the rest of the Membership Year and the following Membership Year. If you during the Membership Year do not accumulate sufficient points to qualify you to the second membership tier level, you will return to the first tier for the following Membership Year.

9. Fraud prevention

Make sure to include various fraud prevention measures in the terms and conditions for your loyalty program. Some of them have been mentioned before: limiting membership to one account per person (meaning also one email and one card per person); prohibiting combined use of a single account by a formal group such as an association or company; or limiting access to the program to persons connected with the brand

Screenshot of Claire's loyalty program terms
You may go for straightforward clauses preventing fraudulent activities like in the case of Claire’s

You may also declare that points will not be awarded on fraudulent transactions and include clauses that prevent multiple redemptions of the same reward and unauthorized use of points.

SAMPLE CLAUSE:

We reserve the right to cancel or suspend your participation in the Program or any Rewards earned and not yet used in the event of fraud, abuse of rewards privileges, violation of these Program Terms and Conditions, or at our discretion. 

10. Limited liability

This is an important clause that limits your liability and thus safeguards your legitimate interests. Remember to write in your T&C template that you will not be liable for any failure or malfunction of the loyalty program and the related systems, for losses or damages arising from possible changes, or for any expenses and inconveniences resulting from the use of points or rewards.

SAMPLE CLAUSE:

To the fullest extent permitted by applicable law, no responsibility or liability is assumed by the Sponsor for technical problems or technical malfunction arising in connection with any of the following occurrences which may affect the operation of the Program and/or Site.

11. Personal data protection

Personal data protection and privacy is a burning issue these days, so clauses which outline how your company protects personal information users provide as part of the loyalty program simply cannot be omitted from terms and conditions. 

Screenshot of IKEA Family program FAQs
This is how IKEA approaches personal information terms and conditions in its Family program

You have to explain how the members’ personal data is processed and protected and what kind of entities have access to it and to what extent. Moreover, customers have the right to withdraw their personal information, and this must also be stated in the T&C documentation.

SAMPLE CLAUSE:

You consent to the collection, use, and disclosure of your personal data by the Company, the Loyalty Program, Participating Properties and Partner Programs, and their authorized third-party agents and licensees in accordance with the Company’s Privacy Statement.

How to create the most effective terms and conditions for your loyalty campaign?

Now that you know what type of clauses must be present in your loyalty program terms and conditions to make them exhaustive and accurate, let’s delve into other practical pieces of advice that you may use to create T&Cs for your loyalty promotions. All of them are focused on increasing user experience, streamlining the loyalty campaign operation, and protecting your business objectives and interests.

1. Prevent confusion

To avoid any risk of ambiguity and misunderstanding, use clear and precise language to describe the regulations that govern your loyalty program. Simple and plain English is recommendable. You don’t need to sound like a lawyer to pen terms and conditions that are legally correct and binding. 

Screenshot of Pomelo loyalty program conditons
Screenshot of Pomelo Perks T&Cs
Terms and conditions can be explained in simple and short phrases, like Pomelo has done

2. Make it easy

Readers shouldn’t be forced to scroll through your page up and down to find the program terms and conditions, hidden somewhere at the bottom in fine print. The T&C file or page should be distinctive, easy to find and understand. The form of presentation is important here. Many brands have implemented a very good practice: apart from providing a bulky and official T&C text, they summarize it in simple and clear FAQs, usually available on a separate loyalty program page.

Screenshot of My Pandora program landing page
Screenshot of Pandora Club benefits
Pandora presents the tiers and benefits of its loyalty program in a user-friendly way using clear and pretty icons

3. Include all the necessary information

Leave no possible use cases, issues, and circumstances without explanation. Cover all the relevant rules, restrictions, and legal clauses. Any details that pertain to your program should be accounted for: from the way points are earned and loaded in the account, to available rewards types and redemption methods.

Screenshot of Uber loyalty program FAQ
Like Uber does, you can include the most important information about the program in the FAQ section and then link to more detailed terms and conditions

4. Make room for changes

Your loyalty program will surely change as your business needs develop and customer expectations evolve. Leave room for possible terms and conditions alterations by including clauses that give you the right to do so. This way, you will be able to adjust the earning and redemption rates, add or remove program benefits, or terminate the program entirely, if need be.

Screenshot of Lego VIP program terms and conditions
Reserving your right to introduce changes to your loyalty program terms and conditions, like Lego, is a good idea

5. Communicate with the loyalty program members

If you introduce any modifications to the terms and conditions of your rewards program, don’t forget to inform the program participants about any changes. They have the right to know what alterations have been introduced, and by sending them proper notifications about the program updates, you will create a sense of trust and reliability that will sure increase their engagement.

Screenshot of Zappos VIP program Dashboard
Like Zappos, you may use a special customer dashboard or cockpit to communicate with your loyalty members

6. Check the local legal requirements

Depending on where your ecommerce business is registered, you may encounter specific legal requirements and particular laws related to loyalty programs. Double-check whether you’ve included all the information required by law in your terms and conditions. If your store is EU-based, you will have to follow the promotion transparency requirements of the Omnibus Directive, while US-based retailers must include arbitration and waiver clauses. After drafting your T&Cs, it’s a good idea to verify their correctness with a lawyer.

Voucherify integration with Contentful and Bloomreach

Contentful and Bloomreach are headless content management systems which can be used to create and store certain assets and pieces of content, such as terms and conditions. As Voucherify is soon going to be integrated with these CMSs, you will be able to link these assets to your loyalty campaigns built with our promotion engine.

Thanks to the API-based integration, you will have access to a variety of functionalities, such as call-ups of promotion-related content, including loyalty programs terms and conditions or other rewards campaign rules and regulations. Since asset IDs are assigned to metadata in a campaign, you can connect it with the content stored on CMS platforms and display them using your own frontend. As a result, you will be able to ensure the legal compliance of your loyalty campaign and its terms and conditions, at the same time maintaining the flexibility of your business and offering the best ecommerce experience to your customers.

By integrating CMS and promotion software, you can combine loyalty campaign design with the creation of the necessary digital content, such as terms and conditions or frequently asked questions. Voucherify gives you a number of promotional opportunities that reflect the terms you include in your loyalty program. Using the promotion engine, you can take care of fraud prevention measures, set the right redemption limits, spending thresholds, and timeframes, exclude certain products from a promotion, coordinate discount stacking, and introduce geofencing restrictions.

Summary 

Creating a functional and sales-driving loyalty program comes with a certain responsibility. A well-prepared rewards program must be accompanied by a set of carefully planned terms and conditions that secure your interests and finances, protect the rights of your buyers, and clarify all the rules in a way that leaves no room for doubt.

With the examples of the indispensable terms and conditions clauses presented above, I hope that drafting your own loyalty terms and conditions will not be a problem anymore and you will not lack for ideas and inspirations for what your unique loyalty program needs. 

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