Loyalty program
A way for a business to reward repeat customers, usually with points, stamps or perks earned on purchases and traded for discounts or free items.
In short
- Every loyalty program has three parts: enrollment, earning and redemption.
- Points can be earned on visits, on dollars spent or on specific items and categories.
- Quick enrollment and a reward within reach matter more than the size of the reward.
A loyalty program rewards customers for coming back. The business recognizes a returning customer, counts what they do, and gives something back once they reach a threshold: a free coffee after nine, a $5 reward after 100 points, a higher tier after a year of visits.
How it works
Every program has the same three parts. Enrollment ties a customer to an account, by a card, a phone number, an email, an app or the receipt. Earning adds points or stamps, based on visits, dollars spent, or the specific items and categories bought. Redemption trades them for a reward, usually at the point of sale.
Common types
- Punch or stamp cards: one mark per visit, a reward when the card is full.
- Points programs: points per dollar or per item, redeemed for discounts or free products.
- Tiered programs: customers move up levels that earn faster or unlock perks.
- Paid memberships: customers pay a fee for ongoing benefits.
What makes one work
Joining has to be quick, or people skip it when there's a line. The reward has to be close enough to matter. And the program has to see what was bought, not only the total, if the business wants to reward particular products. Programs built into the point of sale see every sale on that system. Programs that run on the itemized digital receipt can do the same without an app.
Worked example
A café's points program
A café gives one point per dollar and a free drink at 50 points. A regular who spends $5 a day on weekdays reaches the reward in two weeks. If the café wants to sell more pastries, an item rule can give 5 bonus points with any pastry, which a points-per-dollar rule alone can't do.