Do Customer Loyalty Programs Actually Add Value?

Loyalty programs have long been thought to retain to existing customers and help add value to their visits, but is there any truth behind that theory? With acquiring new customers costing 5 to 10 times more than selling to your existing base, this simple way to add value shouldn’t be ignored.

The Data

In the 2015 Colloquy Customer Loyalty Census, memberships were high among consumers. Most households held an average of 29 loyalty programs, with an average of 12 being actively used each year. Memberships are clearly popular, but companies aren’t utilizing them to the best of their ability.

It’s true that existing customers spend 67% more than new ones on average. In fact, just a 5% increase in customer retention can translate to a 25-100% increase in sales. Ensuring retention by rewarding loyalty, therefore, should yield higher sales.

The issue for most companies is often implementation and wording, despite this being a classic value marketing technique. If you’re looking to increase customer value, then here are a few ways to ensure your loyalty program is all it should be.

Simplify the Point System

Point systems are a common way to run loyalty programs. The more a customer buys, the more points they earn towards a reward. Discounts, freebies, and VIP treatment are popular options. While the concept is simple, companies often make the process complex or confusing.

Your goal here is to keep the communication to your customers as simple as possible. Make sure they fully understand how points are earned and make the rewards easily understood. Avoid specifying dates or months, too, as that often adds confusion.

The Tier System

Point systems are an excellent choice for small, frequent purchases. If that doesn’t fit your type of business, then a tier system can be the better option. This method encourages loyalty to the brand and making more purchases.

Start off with small rewards, like a 10% discount, then increase the benefits as customers reach new tiers. This encourages consumers to use their points while fostering a better commitment to higher priced items. Bronze, silver, and gold are popular tiers. Again, clearly explain how tiers are reached and what the benefits of each are for the consumer in simple, plain wording.

VIP Status

Amazon Prime is an excellent example of this loyalty program. Customers pay an upfront fee for membership status, entitling them to faster shipping as well as movies, TV, and more. Throw in a free trial, and you’ll have loyal customers spending more in no time.

It’s worthwhile if you have a lot of offerings as customers make more frequent purchases. For this option, consider it more of a sale than a program. Your consumers are buying this membership and getting XYZ in return, which should be highly alluring.


These are just a few of the loyalty programs raking in a combined billions across multiple industries. They work because it makes the customer feel valued for spending their money with you, in turn increasing their value for your business. From retention to your net promoter score, loyalty programs are worth it.