Loyalty Marketing Guide

Introduction to Loyalty Marketing

Loyalty marketing is a strategy aimed at encouraging repeat business by rewarding customers for their continued patronage. This guide will cover everything you need to know about loyalty marketing, including its benefits, types, strategies, and best practices.

What is Loyalty Marketing?

Loyalty marketing involves creating programs and initiatives to retain existing customers, encouraging them to continue doing business with your brand. These programs often include rewards, discounts, exclusive offers, and other incentives.

Why Loyalty Marketing Matters:

  • Customer Retention: Keeping existing customers is more cost-effective than acquiring new ones.

  • Increased Revenue: Loyal customers tend to spend more over time.

  • Brand Advocacy: Satisfied customers often become brand ambassadors, spreading positive word-of-mouth.

Types of Loyalty Programme Models

Different loyalty programmes cater to various business models and customer preferences. We are going to provide you with information on 8 loyalty models that we know work, you must ensure that your loyalty programme has been tailored to suit your audience and your brand. One size definitely doesn’t fit all when it comes to loyalty. In this section you can see real life examples of what these loyalty models have achieved for existing brands and understand how you could best use these in your environment. Here are some popular types:

Points Based Programmes

This is probably the most utilised loyalty programme. Your customers will quickly be able to understand how the programme works as long as you keep the metrics simple – with an emphasis on simple! 

Choose which behaviours to reward, whether that be increased spend, total spend, specific spend on products or categories, referrals or engagement. Choose whether to display points as points or as a monetary value depending on what your customers will value most. 

A simple points system works well when customers are engaging frequently with your brand. Rewards could take the shape of free products, discounts, extra service items or retail products or experiences. The type of rewards you offer will depend on who is purchasing and therefore who holds the reward account. In a B2B environment if it is not the Business Owner then free products or discounts may not be seen to be of value. 

Points systems must be simple to understand. Where most programmes fail is that the metrics for awarding points and/or redeeming points is too confusing or complex. 

The three biggest players in the UK loyalty landscape- Tesco Clubcard, Nectar and Boots Advantage Card - all remain strong advocates of points based programmes. However, all have introduced additional metrics to further motivate and reward customers.

Tiered Loyalty Programmes

With a tiered loyalty programme you are able to provide initial benefits to new customers, as well as providing enhanced benefits or rewards to remaining loyal customers or for those who change buying behaviours. 

A tiered programme can also be overlaid onto a simple points system, as seen in the previous example. A tiered programme can provide additional earning potential for your top customers or open up access to different rewards. 

This type of programme also emphasises to your customers that you appreciate their loyalty to your brand.

Paid For Programmes (VIP Loyalty)

Charging an upfront fee (subscription) for VIP benefits will only work for existing customers that already see the benefit in your service or product. 

People enjoy feeling part of something, but to pay for VIP benefits, customers must feel confident that the rewards they receive outweigh the initial cost. 

Charging for VIP benefits has become a popular trend in recent years, with UK programmes such as Tesco and Boots introducing their Clubcard Plus and Advantage Plus programmes.

Cash Back Loyalty Programmes

Cash back has been a big driver in building relationships in B2B for a long time but it is slowly being replaced by incentive programmes and loyalty mechanics that drive engagement. Whilst cash is often voted the preferred reward offering by members, it doesn't provide the same level of brand advocacy and value that an experience might. Cash back doesn't reward as many people in the business, however it can help to secure business relationships is money or procurement is the driver. 

If this is part of your business model it is a good idea to explore how you can split the reward buckets to still offer cash but also to offer other rewards ideas that can boost advocacy, engagement and in turn customer retention.

Coalition Loyalty Programmes

Partner with other companies to offer an all inclusive service or offering 

If your customers have to shop with more than one provider to complete their purchases, you could find that by partnering with other non-competitive companies in your sector to provide an all-inclusive service offering, you are able to provide more value to your customers. We have seen this work particularly well for manufacturers. 

By partnering with another company your customers’ could purchase everything they need through one site making their buying process more efficient, easier and more rewarding. 

Another way of partnering with other companies is to provide the ability for customers to redeem their points with other companies rather than just with your brand. Mando-Connect and YouGov research found that on average, across key loyalty sectors in the UK, 58% of Britons want rewards from brand partners with 19% finding partner rewards more appealing than a brand’s own.

Community Loyalty Programmes

Depending on your industry and your audience, your customers may see more value in extra service than financial benefits. 

Airlines and hotels are doing this effectively with their tiered loyalty programmes in that the more loyalty a customer displays, the more services they are able to open up. This could be in the form of a personal concierge service or lounge access. 

A non-monetary programme could simply be one where customers always receive an upgraded room when they have stayed at a hotel for the required number of nights, or free porterage.

Gamification Loyalty Programmes

People enjoy healthy competition! 

We see that on fitness apps from the likes of Fitbit, Apple Activity and Strava etc...; in friends’ leaderboard and badge awards; internally with customer service software; on LinkedIn with the AllStar profile; in Dropbox with their offer of more space. 

Gamification does not have to be linked to traditional rewards in terms of customers receiving points or money. Gamification can create loyalty just by providing customers with motivating, personalised messaging and communications; with recognition when they have achieved success and pointers; and with motivation when they need that little extra push. 

People enjoy recognition and competition if it is executed in an engaging manner.

Surprise and Delight Loyalty Programmes

'Surprise and Delight’ loyalty is a strategy that gives customers unanticipated benefits and rewards to re-ignite interest in products or services whilst nurturing customer relations – it is far more than offering a discount code for the next purchase. According to CrowdTwist, 67% of customers say that surprise gifts are a very important part of a loyalty programme. 

A Surprise and Delight strategy is ideal where you are able to target behaviour for specific customer segments rather than a mass audience. With the key to Surprise and Delight being the anticipation of not knowing when or how they will happen, it makes them an ideal metric to be able to rapidly deploy and freeze based on market dynamics. 

With movements like #BeKind mobilising and empowering generations, empowering your staff to offer customers instant surprise and delight loyalty will not only make the customer feel good, it will also generate staff goodwill and positivity. Plus it gives the added bonus of being something your teams are now actively engaged with and therefore more likely to talk about to their peers. They are now supporting and referencing your brand in a positive way as brand advocates.

Benefits of Loyalty Marketing

Implementing a loyalty marketing strategy can offer several advantages:

Improved Customer Retention

Loyalty programmes encourage repeat purchases, increasing customer retention rates.

Enhanced Customer Engagement

Loyalty programmes provide a platform for regular interaction with customers.

Valuable Customer Insights

Collecting data from loyalty programmes helps understand customer preferences and behaviours.

Competitive Advantage

A well-executed loyalty programme can differentiate your brand from competitors.

Increased Sales

Loyal customers are more likely to make additional purchases and spend more per transaction.

Developing a Loyalty Marketing Strategy

Creating an effective loyalty marketing strategy involves several key steps:

- Define Your Goals

Determine what you want to achieve with your loyalty program (e.g., increase customer retention, boost sales, enhance customer engagement).

- Understand Your Audience

Identify your top performing customers based on the strategy you are aiming for as a business. Analyse your customer base to understand their preferences, spending habits, and what motivates them. Create a brand touchpoint wheel to see where customers are interacting with your brand. 

- Choose the Right Type of Programme

Select a loyalty programme that aligns with your business model and customer preferences. You can use one or more of the loyalty programme models we outlined above. In LoyaltyStream you can select campaigns based on your business goal, e.g. customer retention, acquisition or growth and then choose which segment of your audience you want to target with each campaign.

- Design Attractive Rewards

Offer rewards that are valuable and relevant to your customers. Research what value looks like to the customers already displaying your desired behaviours. This could be through questionnaires, telephone interviews, one-to-ones or focus groups.

- Promote Your Programme

Use various marketing channels to promote your loyalty programme and encourage sign-ups. Align your business against the goals and objectives of your programme. Make sure that everyone within the business is delivering the same message. Check back on your brand touchpoint wheel to ensure that every touchpoint has been covered.

- Monitor and Optimise

Regularly analyse the performance of your loyalty programme and make adjustments as needed. There are a wide range of measurement tools that you could use to monitor the performance of your loyalty programme. 

Best Practices for Loyalty Marketing

With the average consumer being a member of at least 14 loyalty programmes, 7 of which are considered active, you need to make sure yours stands out from the competition. Here are some best practices you should make sure you follow:


Tailor rewards and communications to individual customer preferences.


Make the programme easy to understand and participate in.


Clearly communicate the terms and conditions of your loyalty programme.

Mobile Optimisation

Ensure your loyalty programme is accessible and user-friendly on mobile devices.

Omnichannel Experience

Allow customers to earn and redeem rewards across multiple channels (e.g., in-store, online, mobile app).

Continuous Improvement

Regularly update and enhance your loyalty programme based on customer feedback and performance data.

Case Studies and Success Stories

Loyalty programmes are succeeding across all sizes of business, in every sector and solving numerous challenges for business. Here are some examples of companies who are doing it well.

Pret a Manger

Pret a Manger’s strategy for customer loyalty is widely supported with ‘Surprise and Delight’. Staff are actively encouraged to give away free coffees or free food each week through random acts of kindness. 

In 2015, Pret gave away over one million free coffees – making them a talking point and increasing their brand profile. The chance to get a free coffee encouraged customers to repeat visits and allowed for relationships with staff to be built, giving local level insights into the customer base.

Next Retail

In the mid 2000’s, following an aggressive store opening strategy, Next realised that the demand for the brand would inevitably reach a maturity and a saturation point. Next decided to stock external brands which achieved three thing: it extended customer choice; it allowed Next to utilise and exploit capacity in its supply chain, by handling the distribution of additional brands; it provided Next with an additional revenue stream. 

By adopting this strategy Next was able to gain several major advantages: 

  1. The business was better able to attract new customer segments. 
  2. The new business provided Next with access to market intelligence and insight about the buying preferences and behaviours of these new customers. 

During more recent years, Next have succeeded in developing their online offering and become a ‘go to’ virtual department store whilst high street alternatives like Debenhams have crumbled. Their stockist expansion of partner brands (such as Dorothy Perkins and Wallis) has enabled brands to remain accessible to customers when their high street presence has otherwise disappeared.


In 2020, Boots boosted their loyalty offering by introducing Boots X, where beauty fans become part of the ‘Boots X Tribe’ – giving them the opportunity to experiment, discuss and explore beauty in new ways. As part of a digital community supported through Instagram, the hashtag #BootsX and email communications, Tribe members receive Boots ‘beauty freebies’ with latest launches, brand competitions, free products, exclusive offers, beauty tips and more sent directly to them. 

Boots use Influencers and beauty experts to advocate product tests via social channels to support the Boots X experience and create a buzz around the latest products available in store and online.

Amazon Prime

Amazon Prime members have been proven to spend up to 2 times more than non members. The number of Amazon Prime members also allows Amazon to predict the level of future sales for the business.

Amazon provides an online retail service to millions of users across the globe. They constantly innovate with extra value options for customers willing to pay for those services such as Prime membership, 1 hour delivery times and video and TV streaming services. 

In today’s busy world Amazon’s innovation, personalisation and added value services instil a level of trust and peace of mind to their customers that is hard to match. 

Amazon Prime is offered to customers for approximately £79 a year. They have up to 150 million members across the world and benefits include access to their streaming service, free delivery and quicker delivery times. In 2020, Amazon Prime declared sales amounted to an estimated $10.4 billion worldwide.

Trip Advisor

To improve their reach, relevance and personalisation, TripAdvisor introduced TripCollective badges. These badges recognise users for their unique contributions which make the TripAdvisor travel community stronger, smarter and better.

A quote from TripAdvisor states that “the benefits to community engagement of awarding our regular contributors with status designations and levels cannot be over emphasised”. It is an incredibly successful and powerful programme put in place to fuel and recognise customers’ desire to come back onto TripAdvisor, keep up their status and be seen to be contributing. 

In our experience, when organising overseas sales incentives, we always check TripAdvisor reviews. We know that is what our audience are doing and we need to make sure that we have the same information available to us. 

TripAdvisor has also given a platform to venue managers to be able to respond to feedback and it is their responses, seen by the whole community, which help them build their own loyal customers.

Measuring the Effectiveness of Your Loyalty Programme

Once you have agreed on the best programme to suit your brand and audience, the next step is to ensure that you are measuring its effectiveness and refining it over time. There are four key ways of measuring effectiveness, all of which should be looked at together and not in isolation to truly measure the success of any programme.

Customer Retention Rate 

This is the measure of how long a customer remains with your company. The number should increase over time as the number of loyalty programme members grows. A customer retention strategy begins with the first engagement a customer has with your brand and continues through their lifetime. 

According to studies done by Bain & Company, increasing customer retention by 5% can lead to an increase in profits of between 25% to 95%, and the likelihood of converting an existing customer into a repeat customer is 60% to 70%, while the probability of converting a new lead is 5% to 20%, at best. 

Net Promoter Score (NPS) 

This is a customer satisfaction metric that measures the degree to which people would recommend your company to others. 

A successfully loyalty programme will help drive customer acquisition by getting your loyal customer base to introduce their network to you. This type of activity can be rewarded using one of the programmes mentioned above.

Negative Churn 

There is always going to be natural churn in any business. By measuring negative churn you are assessing how many members have started increasing their spend or purchasing additional services. 

A successful programme should discourage customers from leaving you because they can see more value in their relationship with you than they do with your competitors. 

Customer Effort Score 

This is a preferred measurement because it measures actual experience rather than emotional delight. It is the measure of how much effort a customer has to undertake to solve a problem with your company. 

In today’s frantic world customers will often pay more if they feel that they are getting a quicker and better service from you. How you respond to and solve a customer’s problem is the key to retaining them as a loyal customer despite their poor initial experience.

Challenges and Solutions in Loyalty Marketing

Implementing a loyalty programme can present challenges, but these can be addressed with the right strategies:

Challenge: Low Engagement

 Solution: Offer compelling rewards and regularly communicate with customers about the benefits of the programme.

 Challenge: High Costs

 Solution: Focus on high-margin products for rewards and leverage technology to reduce administrative costs.

 Challenge: Fraudulent Activity

 Solution: Implement robust tracking and verification systems to prevent fraud.

 Challenge: Keeping the Programme Fresh

 Solution: Regularly update the rewards and introduce new features to keep the program exciting.

Future Trends in Loyalty Marketing

Stay ahead of the curve by understanding emerging trends in loyalty marketing:

Increased Personalisation

Leveraging data and AI to offer highly personalised rewards and experiences.

Integration with Blockchain

Using blockchain technology for secure and transparent loyalty programs.

Sustainability and Ethical Loyalty Programs

Offering rewards that align with sustainable and ethical practices.

Omnichannel Loyalty Programs

Providing a seamless loyalty experience across all customer touchpoints.


Loyalty marketing is a powerful tool for building long-term relationships with customers and driving business growth. By understanding the fundamentals, choosing the right program, and following best practices, you can create a loyalty programme that delivers significant value to both your business and your customers.

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LoyaltyStream Key Features

  • 21 loyalty campaign types to suit every business
  • Options to deploy gamification campaigns such as Spin-To-Win and Prize Draws as well as Badges
  • Ability to track and reward all behaviours from transactions to actions
  • In-depth visual analytics and insights on Campaigns, Members, actions and transactions
  • Customisable CRM and segmentation options to suit your Member profile
  • Scalable modular SaaS platform that can grow with your business


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