Any business, no matter the size, grows and thrives by attracting new customers, but the real value is in taking care of those who have already made a purchase. In fact, the cost of acquiring a new customer can be five times that of retaining an existing one. Building brand loyalty, and creating positive associations in the consumer’s mind, is a sophisticated challenge. One solution is to build a loyalty program, a strategy that 90% of companies already employ. Another is to focus on the customer experience to delight and surprise customers repeatedly.

Take inspiration from these 10 loyalty program features to create your brand loyalty strategy.

1. Exclusivity: How Google and Hermès Created Desire

Few incentives are more compelling in generating brand loyalty than exclusivity. Consumers want to feel special. Two brands that have flourished by using limited-edition offers or invitation-only tactics to impressive effect are Google and Hermès. The former might come as a surprise, given that the ethos of the Google brand is accessibility and inclusivity, but let’s not overlook the fact that when Google launched Gmail in 2004, the service was an invite-only affair. That structure remained in place until 2007, by which time Gmail had distinguished itself sufficiently in the market to gain market share. Today, Gmail is the world’s most popular email platform, with 1.8 billion users.

Likewise, Hermès has turned the purchase of its Birkin bag into an event. Each bag is handcrafted and only a limited number are produced each year, reserved for the most loyal customers. That means you cannot simply buy a Birkin bag. The right to buy is conferred on an elite few by Hermès as a reward for their loyalty. Not surprisingly, the value of a bag has soared. In 2020, one bag sold for a record $388,738.

How Brands Can Leverage Exclusivity:

Entice your customers with a quest to unlock an exclusive level of loyalty that only a select few can reach. For the customer, it’s a reward for their dedication and resolve.

2. Purpose-Driven Loyalty: The Patagonia Story

Outdoor clothing retailer Patagonia built a dedicated following of climbers and hikers on the quality of its products alone, but it’s the brand’s approach to loyalty that has really set it apart. In short, Patagonia relentlessly pushes a sustainable, eco-friendly, environmentally conscious ethos that resonates strongly with customers, to the point of urging customers not to buy new gear but to recycle used items instead. Patagonia is an excellent example of a brand that stands for something and uses its position to offer more than products. Loyal customers look to the brand as a thought-leader on the sustainable lifestyle they aspire to. Has it affected profits? Hardly. Patagonia pulls in more than $800 million in revenue each year in the U.S., and the appeal to reused clothing saw sales increase 30%.

How to Find your Purpose:

Identify what matters to your customers beyond price, product, place and promotion. Today’s consumer wants purpose, too.

3. Customer Choice: The Sephora Model

Beauty retailer Sephora has an ongoing challenge to address in that its price point is typically higher than that of competitor brands in a saturated market. It resolves this challenge with one of the most successful tiered loyalty programs in the industry, counting 25 million customers. The Beauty Insider program is free to join and lets customers accumulate points and access a series of tiered loyalty levels. Then it allows customers to choose how to spend those points, without friction, conditions or restrictions. By putting the customer in control, Sephora manages to generate 80% of its sales through the Beauty Insider program.

How Brands Can Promote Choice:

Go beyond a one-size-fits-all program, identify your frequent or big ticket shoppers, and reward them.

4. Ease of Use: Starbucks

From location to lighting, Starbucks researches and refines every single step of the customer journey, bringing some serious behavioral science to the simple act of buying coffee. But it’s the Starbucks Rewards program that really drives business, with more than 19.4 million members generating 50% of store revenue. The secret to success is a personalized, seamless and gamified rewards experience delivered through an app — no punch cards in sight. Any reservations customers have about data capture are addressed when they see how that data is put to good use. The benefits keep on coming and for the customer, Starbucks’ presence as an essential part of their day is consolidated.

How Brands Can Drive Ease of Use:

Starbucks keeps the customer concentrated on the coffee and takes care of the rewards automatically. Brands that manage the rewards process through automation rather than manual input save time and efficiency.

5. Loyalty at a Price: The Amazon Prime Model

How did Amazon become the leading brand for customer loyalty? By asking customers to pay for the privilege. Surprisingly, it worked. Amazon Prime has more than 200 million subscribers worldwide, who pay an annual fee and receive free shipping, exclusive offers and access to free streaming, books and magazines in return. Because each customer has sunk cost into their subscription, they are more likely to take advantage of the perks. In fact, Amazon Prime shoppers spend an average of $1,400 a year compared to $600 for non-subscribers. Of course, if paid subscription alone were a guarantee of success, then every gym would be packed to capacity, so we should be careful of overlooking the technical and logistical advantages that come with being the world’s biggest retailer. Nevertheless, creating a membership club is a tried and tested way to secure loyalty.

How Brands Can Offer Paid Membership:

The only caveat here is that the value exchange has to be fair. Amazon is able to absorb a lot of the cost of offering Prime. If you’re asking customers to pay for membership, the benefits have to be compelling.

6. Turn Fans into Fanatics: The Apple Way

Visit the Apple website and you might notice something surprising, mainly because it’s missing. There is no loyalty program. Instead, with its customary focus on proprietary tech, Apple invites customers to sign up for an Apple Card to spread out the cost of their purchases. So why is Apple second only to Amazon when it comes to customer loyalty? The answer is in the relentless obsession with customer experience, from the design and location of the brick and mortar stores to the sound a box makes when it is opened. Ultimately, Apple’s approach comes down to an obsessive level of attention to detail and focus on customer satisfaction. With that secured, there’s almost no need to suggest a loyalty program.

How Brands Can Be Apple:

Look at the brick and mortar competition and do things differently, on your terms, based solely on what you know about your customers.

7. Educating Your Customers: Ikea 101

As with some of the other big retail giants, it’s easy to look at Ikea and assume that their customer loyalty is a natural extension of their market share. But that assumes that customers are naturally passionate about furniture. Instead, Ikea deserves enormous credit for taking the frustration and friction out of shopping, and for making the experience fun — with free meatballs and coffee to start with! Crucially, the retailer takes a proactive approach to bridging the knowledge gap. As part of the Ikea loyalty program, customers can attend free workshops for the whole family on DIY and design.

How Brands Can Educate Their Customers:

Knowledge and skills represent value just as much as discounts. Help your customers learn and grow, and their loyalty will follow.

8. Transferrable Rewards: Marriott Bonvoy

With more than 141 million members of its Bonvoy Rewards program, Marriott operates one of the world’s largest loyalty programs. The value for the business or leisure traveler is in the sheer number of affiliated brands within the program, giving customers a huge choice of where to redeem their points at a full range of price points. Admittedly, this is a tough challenge for the small business to recreate, but then again, Marriott started with a single root beer stand in 1927.

How Brands Can Build Their Community:

Collaborate with other retailers in the same location to create a rewards program that grows the market as a whole. That increased footfall will translate to revenue.

9. Lifetime Membership: Yours for $20 at REI

The outdoor clothing and accessories retailer REI takes an ambitious approach to customer lifetime value. Customers can lock in lifetime membership for just $20. Like Amazon Prime, the upfront request for a membership fee encourages the customer to shop more, particularly since a 20% discount is applied automatically to purchases, as well as access to exclusive events and special offers. Crucially, the rewards program matches the spirit of REI’s history as a co-op. At the end of each year, members receive a 10% dividend of profits.

The Benefits of Lifetime Membership:

REI offers a great example of why you should save your best discounts for members, as opposed to heavily discounting items across the store on events such as Black Friday.

10. Join the VIP Club: Nordstrom and North Face

The top 1% of your customers typically spend five times more than the other 99%. Conclusion: Pander to the needs of your VIPs. Two brands that have created exclusive, bespoke loyalty programs for their VIP customers are Nordstrom and North Face, giving members exclusive access to new releases and the chance to redeem points for new adventures. Neither of these programs is about being elite or high-profile. Rather, the program is steeped in the brands’ missions and passion for adventure.

How to Take Care of Your VIPs:

Empower your VIPs to promote your brand, encourage them to build their dream experience, and treat them almost as an extension of your own team.

The Loyalty Movement

There’s no denying that the businesses discussed in this article have wrung the most out of their respective loyalty programs. But at Twism, we believe that customer loyalty as it stands today is still incredibly undervalued and under-resourced. The irony of most of today’s customer loyalty programs is that they aren’t about loyalty at all. They have more to do with an economic transaction than a true relationship with a brand. True loyalty is emotional, and at times even irrational, and leads to customers feeling like they’re part of something — a community — a deeper connection. That’s why we’re redefining loyalty.

To do so, we’ve developed a whole new approach to loyalty programs that caters to each unique business, as well as their customers’ needs and habits, so that we can all feel more connected than ever.

With Twism, ecommerce and brick-and-mortar companies of all sizes can put their business in their customers’ wallets with seamless onboarding through the card they already use. No cost, no log in, no cards. Just a succession of rewards and surprises that turn your customers into brand evangelists.
Ready to learn how? Get started with Twism for free today.