Believe it or not, loyalty program ideas don’t need to involve points systems or promotions. These four brands are proof.
Now that customer acquisition costs are on the rise, retention and loyalty are on everyone’s minds. An unfortunate truth: most loyalty program ideas in eCommerce are some variation of the same old points system. Sephora is held up as the gold standard here.
But just because you hear about it often, doesn’t mean that it’s right for you. Here are four original loyalty program ideas from real brands that you can use for inspiration.
Loyalty Program Idea #1: Fantasy Football / The NFL
To some of you, calling Fantasy Football a loyalty program might be a stretch. Even though most Fantasy leagues are not officially run through the NFL, they do achieve many of the stated goals of a traditional loyalty program.
Fantasy Football keeps fans engaged with the brand (the NFL). It encourages fans to sample different categories (learn about different teams). And it increases purchase frequency (number of games watched per season).
Fantasy Football also achieves one goal that traditional loyalty programs aim for but rarely accomplish: increasing participation from casual customers (fans). A typical Fantasy league is sourced from a network of coworkers or friends. The instigator(s) will be the die-hard football fanatics who know all of the stats and players. But the group will inevitably include casual fans or people in the network who don’t even consider themselves football fans.
How does Fantasy Football achieve this feat? A mix of entertainment, gambling and peer pressure.
Something interesting to note: the NFL provides raw data that powers fantasy football platforms, but the league does not operate its own platform. This is a wise move–the Fantasy tradition is a grassroots one. The league lets other entities that specialize in audience development and technology do the heavy lifting.
Loyalty Program Idea #2: Physical & Digital Loyalty & Referral Program / Larroudé
90s kids may remember the viral Youtube sensation “Let Me Borrow That Top”. If you don’t know what I’m talking about, click that link right now. The song highlights common behavior among the fashion-obsessed: if you see someone wearing something cute, you want to know where they got it.
Women’s footwear brand Larroudé found a way to capitalize off this behavior. Each pair of shoes they sell has a QR code sticker on the sole. You receive a $20 credit for activating your QR code (aka enrolling in the program). If you’re wearing a pair of their shoes and a friend takes notice, she can scan the QR code and buy them on the spot. You’ll both receive an additional $20.
This program bridges the divide between loyalty and referral programs by providing tools that enable anyone to become an IRL “influencer”. If a customer likes the brand and sees some initial success with the referral program, they become more likely to check in on Larroudé’s new arrivals in the future. Why not return to the brand where your purchase provides some tangible benefit?
Loyalty Program Idea #3: The Annual Ornament / Lenox
The “Annual Ornament” was a holiday tradition in my childhood home. These were crystal ornaments in holiday shapes (a sleigh, a bell, etc) with the year etched into them. My mother would hang them around the dining room. And this tradition ensured that she would buy from the manufacturer–Lenox–at least once per year.
If you think my mom is an outlier, check out the reviews page for the 2021 ornament. Many reviewers have been participating in this tradition since the 1980s or 90s. In my mom’s case, participation in the ornament tradition resulted in other Lenox purchases. It was the “fancy” dinnerware we used during family parties, although we typically bought it from an outlet store.
A loyalty program doesn’t need expensive software or complicated rules to be successful. Creating a tradition for your customers achieves the same goal–increasing the probability of repeat purchases. As a bonus, this strategy is a money-maker instead of a marketing cost.
Loyalty Program Idea #4: Annual Membership / Restoration Hardware
To be fair, Restoration Hardware isn’t the first retailer to charge an annual membership fee. That honor probably belongs to Costco, depending on how you want to define things. But RH is a rare example of a mono-brand retailer adapting this model in a way that is value-additive and compelling.
How it works: if you want to join the program, you pay a $150 annual fee up front. In return, you receive 20% off every full price purchase and an additional 25% off sale purchases. This is compelling because Restoration sells high ticket items–furniture–so membership has the potential to pay for itself after a single purchase. If you’re buying a new couch for $2k, this is a no-brainer.
People usually buy furniture in a clustered fashion. They either save up to furnish a new home or room in one shot, or replace pieces in the room over a number of months. If you’re an RH member, you will be more likely to do most or all of that shopping using the 20% discount. The program increases LTV by capturing more of the buyer’s share of wallet.
A membership program won’t work this well for every retailer. What Restoration did right: they studied how consumers interacted with the furniture category, then built out a loyalty strategy based on those insights. You should do the same: think customer-first, not tactics-first.
Why Points-Based Loyalty Programs Are Played Out
One thing in common across all four of these examples is that the loyalty program drafts off of consumers’ natural behavior within the category. Points-based loyalty programs take the opposite approach. These programs apply a standard tactic to every business, regardless of its product category or growth goals.
I already covered the common misconceptions about loyalty programs, but here is a quick refresher:
- A loyalty program won’t overcome consumer behavior. Some products have a naturally higher purchase frequency than others, and rewarding points for each purchase won’t change that.
- A loyalty program can’t turn every customer into your best customer. Different customers have different levels of disposable income, which constrain their potential LTV.
- Points-based loyalty programs often incentivize the wrong types of customers. If you aren’t careful, you’ll wind up paying more to retain margin-draining customers.
Loyalty program software is often marketed as the solution to a business problem. But applying blanket “best practices” without considering the nuances of your business is always a recipe for disaster. Better to follow the lead of the loyalty program ideas outlined here and develop concepts based on the way your customer actually behaves.