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27 Jun 2020

5 Types of Customer Loyalty Programs

Now that we’ve established the importance of a customer loyalty program, we know that the best customers are the loyal ones. However, you also need to know that deciding the best type of customer loyalty program for your business is just as important to help you maximize limited capital.

With the right customer loyalty program to compliment your products and services, your business will be able to identify your segment of customers and distinguish profitable and unprofitable customers. 

This helps you decide on a suitable strategy to either re-engage or remove them. This is because customer loyalty programs can cost more money than they generate if you don’t use them right. In that sense, choosing the right program will definitely help you strategize and focus on profiting customers for your business. 

Without further adieu, let’s go into the different types of customer loyalty programs available and how they work. 

1. Point Program

Ranging from retail to even gas stations, points program is the most common type of customer loyalty form in most industries. It works on the idea that to earn more points, customers will be more motivated to spend more to collect more points. 

Every time customers spend or make a purchase at your outlet, your customers will earn points and they can then use these points to redeem rewards such as discounts, cash vouchers, upgrade services, gift goods, and many more. 

A few popular examples are the Caltex JOURNEY card that rewards customers every time they purchase petrol or makes any purchases at any participating merchants.

Caltex points-based customer loyalty program

Image Source: Caltex

Similarly, the Shell Bonuslink Card also rewards customers with points that will enable them to redeem a wide range of Shell products. 


Image Source: Shell

The advantage of the points program goes beyond just accumulating points for your customer, it also helps you motivate customers to stay invested in your company in the long run and serves as offline marketing for your brand. 


As most point programs are customized based on the company, be sure to set up a very clear points-earning process so that it’s easier for you to market and explain to your customers. The easier it is for them to understand, the more likely it is for them to join and stay invested. 


2. Cashback Program

While in the past, we often hear cashback as a reward program for credit cards, now cashback has expanded as a customer loyalty program. Although most companies may have their own mechanism of a cashback reward, cashback as a loyalty program mainly encourages repeat customers by giving back a certain percentage of the amount spent and helping them save money on their next purchase. This helps businesses like you to retain your customers while enhancing the customer’s experience. 

An example of cashback as a customer loyalty program would be the Fave Cashback program where customers get to earn Partner Cashback every time they pay using Favepay. 


The more they spend, the higher the cashback rate they earn. Unlike other cashback programs, the cashback earned by customers can only be used at the merchant that issues the cashback. This not only encourages higher purchase values but also ensures that your customers continue to come back to utilize the cashback earned. 


Using cashback as a customer loyalty program can be complicated for micro to medium businesses. In this case, choosing an existing cashback program may help you avoid spending more than you profit from this program, and with the right platform, you can even track and manage your cashback issuance. Enhancing your overall day-to-day operation and guaranteeing the effectiveness. 


3. Referral Program

The referral customer loyalty program relies heavily on the marketing strategy of word of mouth. This program attempts to connect you with new customers through existing ones. How? With every new customer obtained from recommendation, the recommending customer will be rewarded with either discount, cashback, freebies, or even store credits.

Additionally, the referral program often has the ability to help you not only retain existing customers but also acquire new customers. Existing customers are motivated to come back to utilize their rewards while new customers will be more likely to come and spend if your business is recommended by someone they trust. 

One of the best examples of this loyalty program is Referral Candy. - A customer loyalty platform that helps merchants to reward and manage customers under the referral program automatically. It aims to reduce distraction in the recommendation process and improves customer experience. 

Referral Candy referral-based customer loyalty program

Image Source: Referral Candy


To get the best out of the referral program, be sure that you actively remind your customers to recommend your business. This, however, will require a lot of time and effort. To improve this process, we recommend you to go for an existing referral program that can help you enhance and also manage your customer loyalty and recommendation journey. 


4. Paid Program

Aside from using rewards to retain your customers, you can also have them pay you to access your exclusive services, and that’s exactly how the paid customer loyalty program works. 

Paid program or usually more known as VIP memberships works in a way that customers will have to pay a monthly or annual fee to enroll as an exclusive member to gain access to special services, discounts, packages, and other exclusive products.

You can often see this type of customer loyalty program in the service industry. Some good examples of this are: 

ServisHero VIP membership for home cleaning service

Image Source: ServisHero

Show streaming subscriptions such as Viu Premium Subscription.


Image Source: Fave


What’s important to remember here is that your VIP program needs to include benefits that a regular member cannot access. It needs to resonate with the idea of providing premium and exclusive services to your customers or otherwise, it will lose its value. 


5. Gift-Card Program

With the gift cards program, customers are given the flexibility to choose and purchase the value they want. What’s great about this is that you will receive an up-front payment upon every purchase.  You can consider this as an advance investment to your business where you can use the investment to plan ahead. 

The best thing about the gift-card program is that it often prompts your customers to spend more than they would usually spend as they find it more satisfying to fully redeem the full amount under one receipt. 

A fine example of a gift-card loyalty program is the Fave eCard. With every purchase, Fave eCard grants merchants with up-front payments while rewarding customers with attractive cashback rates. 


One important tip to remember when it comes to using a gift card as a customer loyalty program is to ensure that the gift card provides more value than the amount that your customers paid. 

Although there are other types of customer loyalty programs that were not mentioned here, we hope this can help you better understand some of the available customer loyalty programs. So do you now know the best customer loyalty program yet for your business? 


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