Back to All Posts
Loyalty Programs

What Makes a Good Loyalty Program?

Written by 
Brad Davis
November 18, 2022
Want a quick, 40-second summary? Watch the video below if you're short on time!

What makes a good loyalty program? Is it the rewards themselves? Is it the process of building a relationship with the customer? Is it the community of people who share exclusive access to VIP perks and benefits? Actually, it’s all of these things and more.

While there are some key components to creating an engaging loyalty program that holds customers’ interest and keeps them coming back again and again, there is no “magic recipe” to what makes a good loyalty program.

In order to successfully retain more customers and build brand loyalty, a decent rewards program should provide customers with the following five key attributes.

1. Value

value is what makes a good loyalty program
Great values make a great loyalty program

First and foremost, customers join loyalty programs because they want value. Perhaps they already patronise your business regularly, and they figure they might as well reap the benefits of their repeat transactions.

Or maybe you are competing with another shop for the customer’s business, and it boils down to “which loyalty program offers the better discount/reward?” Whatever their motivation is, your loyalty program needs to be worth a customer’s time and investment.

Our cofounder Shannon Magowan was once invited to join a bicycle shop’s loyalty program, which offered $5 off with every $500 spent.

“Seriously, a 1% discount for my loyalty? Not only does the reward fall disproportionately short of the investment required to attain it, but it actually tells the customer how little you value their loyalty.”

Rewards programs aren’t a way for customers to show their loyalty to a brand, nor are they a way for brands to show their loyalty to customers – they are a mutually beneficial arrangement that everyone gains from. The spend vs. reward ratio must reflect this, otherwise customers won’t see the value in your loyalty program.

2. Excitement

excitement is what makes a good loyalty program
Excitement contributes to a great loyalty program

Back in the days of paper punchcards with “Buy 6 and get your 7th free” deals printed on them, the promise of a free item was exciting enough. These days though, there is so much more you can do with your rewards program.

Restaurants can gamify customers’ loyalty experience with fun and quirky menu challenges, and clothing stores can invite VIP members to exclusive pre-season sales or fashion events for a more experiential customer journey.

Even a car wash could throw a spontaneous barbecue just for loyalty program members, while a hair salon might treat its rewards members to a monthly workshop on trendy ways to style your hair, for example.

There is no shortage of ways to surprise and delight customers with exciting treats to enhance their experience, strengthen their connection to your brand, and create some hype around your loyalty program.

Excitement is the element that turns your rewards program from a simple transactional process to a more wholesome interaction between your brand and its customers.

3. Convenience

convenience is what makes a good loyalty program
Convenience in using the program

You can have the best loyalty program in the world, but if you make it too difficult or tedious for customers to engage with it, they won’t.

The idea is to make it as easy as possible for customers to develop a bond with your brand; from initial signup through to accumulating points, redeeming rewards, interacting on social media, participating in side-promotions and more.

A recent KPMG survey revealed that 69% of Millennials find loyalty programs too difficult to join and/or earn rewards (vs. 49% of older generations). The moral of the story is, don’t put customers off with a tedious or long-winded registration process.

Depending on what type of business you have, all you really need from a customer is their name and email address – the rest of the information will collect over time, based on the accumulated data from their previous purchases and brand engagements.

This is called personalization, and it allows you to tailor a customer’s experience to cater for their specific preferences. But to get started, less is more – name and email address, immediately followed by a “welcome to our rewards program” email.

If you’re serious about signups, you’ll even offer an enticing upfront signup reward, like a free coffee or a discount on today’s purchase. Once a customer has joined, keep the convenient experience as a consistent theme throughout their journey.

Loyalty points should be awarded instantly with each transaction, and eligible rewards should be easily redeemed with the click of a button. In an age when we are so accustomed to instant gratification, convenience is what makes a good loyalty program.

4. Simplicity

simplicity key to customer loyalty
Keep it simple

Not to be confused with convenience, simplicity in loyalty refers to a rewards program’s imagery, interface and communications.

It’s very easy to overwhelm customers with endless spiels about Offer X vs. Offer Y, and loyalty points from last month don’t carry over to this month, and online purchases equate to more points because shipping is included, and so on… keep it simple.

Customers respond much better to clarity; and a loyalty program with an uncluttered aesthetic design, straightforward rules and a simple rewards structure always achieves results.

Netflix, ALDI and Google are just a few examples where simplicity = loyalty. The fact that fast food restaurants have increasingly shrunk their menus in recent years also demonstrates the importance of simplicity in loyalty.

5. Social Currency

social currency is what makes a good loyalty program
Friends socializing

When was the last time you saw one of your friends post an image of a completed punchcard, with a caption along the lines of “ready for my free smoothie”? Probably never, because a free or discounted physical item doesn’t translate to good social currency.

But treat that same customer to free movie tickets or a kayaking tour, and you can guarantee they will share this experience with their friends and family via Facebook, Instagram and other social media channels.

People crave experiential rewards, and the more you can incorporate this into your loyalty program, the better. Brands like Nike are extremely good at this process, using events like product launches and community action projects to transform their loyalty program into a lifestyle that transcends simple discounts and the occasional freebie.

It’s worth regularly brainstorming creative new ways to entice and reward people with social currency.

Case Study: Quest Coffee Roasters

bags of quest coffee lying on coffee beans
Quest Coffee Roasters

The friendly team at Quest Coffee Roasters in Australia’s Gold Coast have been brewing delicious coffee for more than 10 years now, as well as supplying bags of coffee beans, boxes of tea and other goodies.

Eager to replace their paper punch cards with a safer and more hygienic system in light of COVID-19, Quest Coffee Roasters opted for a digital loyalty program where customers accrue points and redeem rewards using a convenient mobile app.

However, in addition to switching to a contactless, COVID-friendly loyalty system, Quest also gained access to the following perks and benefits:

  • Keep the Quest Coffee Roasters brand front-of-mind for existing customers, who now have a dedicated mobile app on their devices
  • Automated access to valuable customer data, which provides actionable insights to customer profiles and purchase behaviors
  • The ability to send targeted communications and promotions directly to customers’ phones for a more personalised and engaging experience
  • The ability to hold bonus promotions and other fun campaigns to keep customers engaged all year round

Whether you’re buying a takeaway coffee, bag of beans, slice of cake or another product; customers simply open the app and scan a unique QR code at point of sale, which awards them their loyalty points and allocates rewards once they reach milestones.

Since rolling out this new and improved loyalty program, Quest Coffee Roasters has seen a huge surge in registrations and engagement, from customers new and old.

Want to launch your loyalty program but need a bit of help? Check out our free Digital Loyalty Program Launch Checklist!

What makes a good loyalty program?

what makes a good loyalty program
What makes a good loyalty program?

From value and excitement to convenience, simplicity and social currency – a digital loyalty app is a remarkably straightforward solution that achieves all of the above.

The Stamp Me app is a cost-effective turnkey solution for providing your customers with a highly engaging loyalty program that works tirelessly to boost your company’s retention rates and build loyalty.

Now that you know what makes a good loyalty program, you can get the most out of the Stamp Me app by incorporating your own unique campaigns and promotions into the rewards structure for a more exclusive loyalty experience.

Email Course: 7 Days of Customer Loyalty

Sign up for our free, 7-day email course and become a customer loyalty expert!

We’ll also send you loyalty tips, trends and resources from time to time (which you can opt out of whenever you like).

Thanks! We've sent the course straight to your email!
Oops! Something went wrong while submitting the form.