5+Types of Loyalty Programs To Keep Customers Coming Back in 2025

As a business owner, you know how important it is to keep customers coming back. Building strong relationships with them isn’t just a nice-to-have—it’s essential for success.

So how do you do it? There are lots of ways, but I’ve found that loyalty programs are one of the most effective tools. They not only reward repeat purchases but also help create a sense of community and appreciation for your customers.

In this article, I’ll break down the top 7 most popular types of loyalty programs. And I’ll show you how each one can help your business grow. Ready to find the right fit? Let’s dive in!

A Quick Comparison of Types of Loyalty Programs

Here’s a clear comparison of the most common types of customer loyalty programs to help you decide which works best for your business:

7 Types of Loyalty Programs

Points-Based Programs

Point-based programs are one of the most popular types of loyalty programs. Customers earn points for various actions, such as making a purchase, referring friends, or leaving a review on social media. These points can be redeemed for rewards like discounts, free products, exclusive offers, or unique experiences, thus boosting customer retention and loyalty.

How It Works

Points-based programs operate on a straightforward principle: Customers earn points for their actions and then redeem them for rewards. For example:

• Earning Points: Customers earn points for actions like purchases or engagement activities. For instance, spending $1 might earn 10 points. Some programs also award points for reviews, social media shares, or referrals.
• Accumulating Points: Points are accumulated over time, allowing customers to save up for bigger and better rewards.
• Redeeming Points: Points can be exchanged for rewards like discounts or free products. For example, 100 points could provide a $10 discount.

Strengths

• Heightened customer loyalty
• Actionable customer insights
• Viral word-of-mouth promotion
• Collecting valuable customer insights
• Straightforward earning and redemption system
• Frequent purchase incentives for customers to buy more
• Flexible reward options like discounts, free products, or exclusive experiences

Best For

• Businesses with frequent purchase cycles, such as coffee shops, grocery stores, or e-commerce platforms.
• Companies aiming to build long-term relationships with customers.
• Brands seeking to gather data to create personalized marketing strategies.

Successful Case Studies

Starbucks Rewards

Starbucks Rewards is a standout points-based program where customers earn stars for every dollar spent via the app or a registered Starbucks card. Stars can be redeemed for free drinks, food, or merchandise. This program boosts repeat purchases and fosters exclusivity and loyalty, significantly contributing to Starbucks’ revenue growth.

• Earn two stars per $1 spent.
• Rewards start at 25 stars (e.g., drink customization) and go up to 200 stars for a free handcrafted beverage or lunch.
• Gold members ($150+ annual spending) enjoy free birthday rewards and personalized offers.

Sephora Beauty Insider

Sephora’s Beauty Insider program uses tiers (Insider, VIB, Rouge) to reward members based on spending. It offers free shipping, exclusive product access, and early sale invitations. This program generates over 80% of Sephora’s annual sales, demonstrating its effectiveness in building loyalty.

• Earn 1 point per $1 spent.
• Redeem points for beauty products, samples, or experiences like makeup sessions.
• Rouge members ($1,000+ annual spending) receive unlimited free shipping and access to exclusive events.

From my personal viewpoint, points-based programs like Starbucks Rewards make every visit feel worthwhile. There’s a certain joy in watching points add up and finally redeeming them for a free treat – it feels like a small victory! These programs don’t just offer rewards; they create a sense of connection with the brand, making every purchase a little more exciting.

Tired Programs

One of the best types of customer loyalty programs, tiered programs take the basic points-based system a step further by introducing multiple membership levels. As customers spend more or engage consistently, they advance to higher tiers with greater rewards and perks. This creates a feeling of exclusivity and also motivates customers to aim for premium tiers.

To encourage participation, consider setting a low qualifier or easy requirement for the lowest tier, such as subscribing to email newsletters or creating an account. This makes the program accessible to a wider range of customers and increases awareness.

How It Works

These programs are easy to follow:

• Entry-Level Perks: Members start with basic rewards like discounts or free shipping.
• Progression: Spending more or engaging frequently unlocks higher tiers with exclusive benefits like early access, personalized services, or VIP experiences.
• Top-Tier Rewards: At the highest levels, luxury perks like priority support, flexible check-ins, and special events await.

Strengths

• Encourages higher spending and engagement
• Creates a sense of exclusivity and status
• Provides opportunities for personalized rewards and experiences

Best For

• Businesses with high-value or premium products
• Brands aiming to foster a sense of exclusivity
• Companies seeking to reward escalating spending
• Long-term customer relationships where status matters
• Loyalty strategies that leverage status or prestige

Successful Case Studies

Marriott Bonvoy

Marriott Bonvoy offers six tiers, from Member (free) to Ambassador Elite. Starting perks like free Wi-Fi and member-only rates evolve into luxurious benefits, including personalized services and flexible check-ins for Ambassador Elite members.

Members in higher tiers contribute over 50% of total bookings, highlighting the program’s impact on customer retention.

NikePlus Membership

Nike upgraded its loyalty program after discovering that app users aren’t just brand fans—they’re higher spenders, too. In fact, NikePlus members spend 40% more than other customers.

Nike’s data analysis also revealed that over 50% of transactions at its large New York and Shanghai flagship stores come from app-using customers. To maintain this momentum, Nike introduced exclusive perks for those using the Nike Training Club app, providing personalized access to limited-edition collections that match their favorite workout routines. Additional member-only benefits, such as “Clean Kicks on Us” and “Nike Master Trainer Fitness Class,” reinforce a curated experience and keep loyal customers feeling valued.

Paid Loyalty Programs

Paid membership programs, also known as premium loyalty programs, require customers to pay a fee to join in exchange for exclusive perks, such as discounts, free shipping, or premium services. These programs attract highly engaged customers, thus building strong customer relationships and increasing customer lifetime value.

Research by McKinsey shows that members of paid loyalty programs are 60% more likely to spend more on the brand after subscribing than 30% for free programs.

How It Works

Paid loyalty programs operate on a subscription model. Customers pay a recurring or one-time fee to access exclusive benefits.

• Onboarding Members: Customers join through paid sign-ups, often incentivized by free trials or discounts.
• Exclusive Access: Members enjoy premium perks like faster delivery, better discounts, or personalized services unavailable to non-members.
• Retention Strategies: Programs stay relevant by offering new features, personalized offers, or curated updates to justify the membership fee.

Strengths

• Generates immediate revenue through membership fees
• Attracts highly engaged and valued customers
• Allows for more premium and exclusive rewards

Best For

• E-commerce, subscription services, and streaming platforms.
• Brands targeting customers willing to pay for premium perks.
• Companies focused on recurring revenue models.

Successful Case Studies – Amazon Prime

Amazon Prime is a benchmark for paid loyalty programs, with over 200 million subscribers globally. Members pay for various benefits, including convenience, entertainment, and exclusive access.

• Fast, Free Shipping: Members receive one—or two-day delivery, making logistics a significant selling point.
• Digital Services: Access to Prime Video, Amazon Music, and more creates an integrated ecosystem.
• Exclusive Deals: Members gain early access to sales like Prime Day, which generated over $12.7 billion in 2022.

Coalition Programs

This type of loyalty program encourages customers to engage with the organization and grants them access to exclusive discounts and promotions as members. This approach provides broader earning and redemption opportunities for customers and can expand each brand’s reach by tapping into a shared customer base.

How It Works

Here’s how it works: Businesses form partnerships, expanding their customer base through collaboration. Customers earn points when they shop with any participating brand, and these points can be redeemed across the coalition, providing flexibility and added value.

Strengths

• Access to a wider audience through partner networks.
• A diverse range of redemption options increases appeal.
• Shared program expenses make it more affordable for each business.
• Collective data aids in crafting targeted marketing strategies.

Best For

• Collaborate with complementary brands.
• Offer customers a more extensive rewards network.
• Share the costs and benefits of a loyalty program.

Successful Case Studies – Vinamilk

Vinamilk, one of the world’s top 36 largest dairy companies, recognized the need to unify its fragmented loyalty schemes across various sales channels. To address this, Vinamilk partnered with the Joy Rewards & Loyalty Program platform to develop a coalition loyalty program.

By implementing the Joy platform, Vinamilk aimed to:

• Consolidate Customer Data: Integrate information from online and offline channels to comprehensively understand customer behavior.
• Enhance Customer Engagement: Offer a stable and smooth rewards experience, encouraging customers to interact more frequently with the brand.
• Expand Reward Options: Collaborate with other businesses to provide diverse rewards, increasing the program’s attractiveness.

The Joy platform’s robust engine can handle over 30 million actions monthly, ensuring a smooth and scalable loyalty experience for Vinamilk’s extensive customer base. This collaboration not only streamlined Vinamilk’s loyalty initiatives but also set the stage for future partnerships with other brands, enhancing the overall value proposition for customers.

For businesses looking to implement a similar coalition loyalty program, the Joy Rewards & Loyalty Program app is available on the Shopify App Store. It’s a user-friendly solution designed to help businesses build and manage effective loyalty programs. Notably, Joy features a robust rewards structure—enabling points, discounts, gift cards, or custom benefits—and a dedicated landing page you can tailor to showcase reward tiers, redemption guidelines, and special offers. This ensures customers can easily understand and access their loyalty perks, encouraging them to keep coming back for more.

Referral Programs

Referral programs, also called word-of-mouth promotions, reward existing customers for introducing your products or services to their friends and family. These programs are highly effective because they build on trust – 77% of consumers are more likely to purchase a product when recommended by someone they know.

Referral programs are becoming essential for industries like retail, tech, and services due to their ability to drive high-value and long-term growth.

How It Works

Here’s how a referral program typically functions:

• Customer Invitation: Existing customers (referrers) share unique links or codes within their network.
• Friend Action: Referred friends (referees) make a purchase or sign up using those links or codes.
• Dual Rewards: Referrers and referees earn incentives, such as discounts, free credits, or exclusive access.

Strengths

• Higher customer lifetime value.
• Increased brand awareness through word-of-mouth marketing.
• Improved customer trust from friends and family more than traditional advertising.
• Saving costs because referrals are 5 times cheaper than traditional advertising methods.

Best For

• Businesses looking to leverage happy customers to expand their reach.
• Startups aiming for rapid, cost-efficient growth.
• E-commerce and service-based industries.

Successful Case Studies

Dropbox

Dropbox’s referral program is a textbook example of success. The company offered 500MB of extra cloud storage for the referrer and referee. This simple yet powerful reward motivated users to invite friends, resulting in a 3900% growth in 15 months.

By the end of the campaign, Dropbox’s user base grew from 100,000 to 4 million. This program showed that valuable incentives like extra storage could turn customers into effective brand advocates.

Airbnb

Airbnb took referrals to the next level by offering $25 travel credits to referrers and referees. The program encouraged users to share their love for Airbnb while earning credits to explore more destinations. This strategy contributed to 900% annual growth in bookings and helped Airbnb penetrate new markets globally.

Gamified Loyalty Programs

In different types of loyalty programs, gamified loyalty programs add gaming elements—like challenges, badges, and rewards—to customer interactions to make engagement enjoyable. These programs motivate and retain customers by rewarding them for earning points, completing tasks, or achieving milestones.

Gamification also creates a sense of competition and achievement through leaderboards or progress tracking, keeping customers coming back for more. According to recent studies, 81% of consumers said gamification increased their engagement with brands.

How It Works

These programs encourage customers to participate in interactive tasks such as purchasing, reviewing, or completing challenges. As users complete these tasks, they earn points or unlock rewards like discounts or exclusive perks.

Benefits

• Gamification increases user engagement by 100% to 150% compared to traditional approaches.
• Companies with gamified loyalty programs experience a 22% increase in customer retention.
• Gamified elements can lead to a 3.5x increase in sales performance levels.
• Incorporating gamification into loyalty strategies results in a 22% rise in brand loyalty.

Best For

• Brands aiming to create interactive and engaging customer experiences.
• Companies seeking to differentiate themselves in competitive markets.
• Businesses targeting tech-savvy and younger demographics who appreciate gamified interactions.

Successful Case Studies – Nike

Nike+ is a fantastic example of gamification in action. Through the Nike Run Club app, users can track their runs, earn badges, and compete on leaderboards. These features motivate customers to stay active and engaged with the app.

In 2020, Nike Run Club’s downloads grew by 45%, far surpassing the global app growth rate of 10%. Users also spend three times more with Nike than non-users. By leveraging gamified elements, Nike successfully retains customers while promoting a healthy lifestyle.

I’ve used Nike Run Club, and the milestones genuinely motivated me to push further in my fitness journey. Seeing my progress on a leaderboard was exciting and made me feel connected to a global community of runners.

Punch Card Programs

A loyalty punch card is a simple rewards system where customers receive a physical or digital “punch” each time they make a qualifying purchase. After a set number of punches, they can redeem the card for a reward, such as a free item or discount. This straightforward approach motivates repeat visits and encourages customers to keep coming back.

How It Works

• Issuance: Customers are given a punch card, either physical or digital, upon their first qualifying purchase.
• Tracking: Each time a customer makes a purchase, the card is marked. For example, a coffee shop might punch the card for each coffee bought.
• Reward Redemption: Once the card has the required number of punches, the customer can redeem it for a predetermined reward, like a free beverage or a discount on the next purchase.

Benefits

• Easy for customers and staff to understand and manage.
• Inexpensive to implement, especially for small businesses.
• Visible progress toward a reward motivates customers to return.
• Provides a sense of achievement and appreciation.

Best For

• Ideal for small businesses, such as local cafes, bakeries, and eateries, aiming to build a loyal customer base.
• Quick-service establishments where customers make frequent, small purchases.
• Companies looking for straightforward, budget-friendly loyalty programs.

Successful Case Studies

Starbucks Punch Card

In its early days, Starbucks used a traditional punch card system. Customers received a stamp for each beverage purchased, and after a certain number of stamps, they received a free drink. This approach effectively encouraged repeat visits and fostered customer loyalty.

Over time, Starbucks evolved its program into the digital Starbucks Rewards system, offering more personalized rewards and tracking through its mobile app.

Local Bakery Loyalty Cards

Many local bakeries use punch card programs to foster customer loyalty and incentivize repeat business. These programs are often straightforward, like offering a free loaf of bread after a customer purchases a certain number, such as nine loaves. This approach encourages repeat visits and also cultivates a sense of community among patrons.

How to Choose the Right Loyalty Program for Your Business

Choosing the right loyalty program requires aligning it with your business goals, understanding your customers, and carefully planning its execution. Here’s a clear, step-by-step guide to help you decide.

1. Understand Your Business Needs

Start by identifying your core objectives. Are you trying to increase repeat purchases, enhance customer engagement, or boost average order values?

For example:

• Increase sales: Choose a point or tier-based system
• Enhance brand loyalty: If you want to build long-term relationships, consider tier-based or experiential rewards that keep customers engaged over time
• Improve customer retention: Programs like subscription-based or punch card systems encourage repeat purchases and ongoing interactions.

2. Know Your Customers

Understanding your customers is crucial to designing a program they’ll love. Analyze their buying habits, preferences, and feedback. Look at data to identify trends, such as how often they shop or what motivates them to make repeat purchases.

Keep in mind that the rewards are relevant and achievable. Customers are more likely to participate if they feel the program benefits them directly.

3. Choose the Right Program Type

Loyalty programs have different choices, catering to various business goals, such as:

• Points-Based Programs: Customers earn points per purchase and redeem them for rewards.
• Tier-Based Programs: Shoppers unlock higher reward levels by spending more, encouraging them to move up tiers.
• Cash-Back or Discount Programs: Customers receive a percentage of their purchase back as a store credit or a discounted price.
• Subscription/Membership Programs: Customers pay a regular fee for exclusive benefits or perks, like free shipping or access to special products.
• Punch Card Systems: Simple, cost-effective solution for businesses with frequent, smaller purchases (e.g., “Buy 9 coffees, get the 10th free”).
• Partner/Coalition Programs: Collaborate with other businesses to offer joint rewards, expanding your customer reach.

4. Plan for Implementation

Proper planning ensures a smooth rollout. Begin by setting aside a budget for setup expenses, including software, team training, and marketing. Also, plan enough time to integrate the new system with your existing POS, as this process can take several weeks. Moreover, invest in proper staff training to ensure everyone understands the program and can offer consistent customer service.

5. Monitor and Refine the Program

Once your loyalty program is live, track its performance regularly. Key metrics to monitor include:

• Customer Retention Rate: Aim for a 20% increase over time.
• Average Transaction Value: Target a boost of 15–25%.
• Redemption Rate: Keep this within the 25–35% range to ensure the program remains engaging.
• Customer Satisfaction: Strive for a 15% improvement in satisfaction scores.

Use customer feedback and data insights to refine the program as needed. Regular updates will keep it relevant and ensure long-term success.

Consumer Tips For Maximizing Loyalty Programs

Loyalty programs are a great way to save money and earn perks, but you need to use them wisely. These quick tips will help you get the most out of every program you join.

• Sign Up for Relevant Programs Only: Focus on programs from brands you shop with often. This way, you’ll consistently earn rewards that matter.
• Prioritize High-Value Rewards: Redeem points for items or perks that offer the best value, such as significant discounts or exclusive offers.
• Combine Loyalty with Promotions: Use your loyalty perks alongside sales or coupons to double your savings.
• Enable Auto-Tracking: Link your account or payment methods to apply points automatically.
• Consider Upgrading Tiers: If higher tiers offer valuable perks, consider upgrading to the next level if it’s worth the effort.
• Engage With the Brand: Earn extra rewards by participating in surveys, reviews, or social media activities.

Ending Words

Loyalty programs come in various forms, each tailored to meet specific business goals and customer needs. I hope you find this post helpful in understanding the different types of loyalty programs available and inspire you to explore new ideas for strengthening customer loyalty in your business.

Types of Loyalty Programs: FAQs

What are the 4 types of loyalty programs?

The four main types are:

• Points-Based Programs: Customers earn points for purchases, redeemable for rewards.
• Tiered Programs: Offer escalating benefits based on customer spending levels.
• Paid Membership Programs: Customers pay a fee for exclusive perks.
• Value-Based Programs: Align rewards with customers’ values, such as charitable donations.

What are the 4 levels of loyalty?

The four levels are:

• No Loyalty: Low attitude and low repeat patronage.
• Spurious Loyalty: High repeat patronage but low relative attitude.
• Latent Loyalty: High relative attitude but low repeat patronage.
• True Loyalty: High relative attitude and high repeat patronage.

What is an example of a loyalty program?

A common example is a supermarket’s points-based program, where customers earn points per purchase that can be redeemed for discounts or products.

What are the two types of loyalty?

The two types are:

• Behavioral Loyalty: Repeat purchasing behavior without emotional attachment.
• Attitudinal Loyalty: Emotional commitment to a brand, leading to advocacy and repeat purchases.