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21 examples of successful loyalty programs — and what makes them work

Done right, loyalty programs are a uniquely effective way to improve customer retention. Research from Accenture found that loyalty program members drive between 12 and 18% revenue growth each year.

There are countless examples of brands that have seen big results. Although many of them make it look easy, their success is down to a keen understanding of what makes their customer tick, and, by extension, what kind of loyalty program will resonate.

It’s not a one-size-fits-all approach, and the options for structuring loyalty offerings are ever more varied. The humble loyalty card is still often effective, but online loyalty programs present innovative and intricate ways to encourage and track loyal customer behavior.

So let’s dig beneath the shiny numbers of some of the world’s most successful loyalty programs and see what makes them work.

Examples we’ve used:

1. Sephora’s “Beauty Insider Program” 2. “LEGO Insiders” 3. Barnes & Noble 4. TheCHIVE 5. Astrid & Miyu’s “Astrid & You” 6. Amazon Prime 7. Lively 8. Pulse Boutique’s “Pulse Perks” 9. Annmarie’s “Wild and Beautiful Collective” 10. Pacifica Beauty 11. Mirenesse 12. REI’s “Co-op membership” 13. The North Face’s “XPLR Pass” 14. Lucy and Yak 15. Waterdrop 16. Nicce Clothing 17. Eat Bobo’s 18. MoxieLash Insider 19. 100% Pure 20. Spoiled Mama 21. Dr. Axe

The four main types of loyalty program (and examples of each)

There are four main kinds of loyalty program:

– Points-based – Value-based – Tiered – Subscription-based

Each has been used to great effect. Here’s why the best have succeeded (and why others might fail).

Points-based (“earn and burn”)

Points-based loyalty programs reward customers with points for purchases, which can be redeemed for discounts, exclusive products or other rewards.

One of the most lauded points-based loyalty programs is Sephora’s Beauty Insider Program .

Using their points, members have the chance to test a range of “trial-sized” products and unique experiences – such as full-face makeovers. 

This works particularly well in the beauty industry , where creativity and experimentation are so fundamental.

Sephora also capitalizes on the community-driven nature of the beauty industry — Reddit’s r/makeupaddiction community alone has over 4 million members — with its “ Beauty Insider Community ”, a space that lets beauty lovers find their inspiration and seek advice from other members.

The French brand stays ahead of the curve by getting one vital thing right: it continues to transform and tweak the loyalty program to best meet the ever-changing needs of its customers. And that’s a great way to stop them from losing interest.

Another classic example of a points-based loyalty program is the loyalty card. You buy your items in a store, scan your card, and receive points based on the total value of your purchase. It’s a simple, clear reward that plays especially well in those industries where purchases are frequent and increasing average order value is a priority.

Value-based loyalty programs

Value-based loyalty programs are a bit like points-based ones, but points can be earned in other ways than just making purchases.

The LEGO Insiders program , for example, rewards customers not just for purchases, but also for registering LEGO sets and getting involved in the customer community.

It works because LEGO enjoys such a strong emotional connection with its customers. People love their LEGO, and the company maintains this sense of reciprocity through initiatives like LEGO Ideas, through which customers’ original designs can be turned into official products via a voting process.

Building this kind of loyalty is incredibly valuable for a brand that sells high-ticket items, and for which increasing purchase frequency is essential.

The MoxieLash Insider program is another excellent example of a value-based loyalty program. Like Sephora, they understand the value of building a community of advocates, especially on social media , where a highly visual product like theirs plays particularly well.

That’s why they offer points not just for purchases, but for social media engagement and app downloads. They know that, in their case, the downside of giving product discounts for non-transactional activities is more than offset by the benefits of social media engagement.

Tiered loyalty programs

Tiered loyalty programs involve levels of membership that offer increasing rewards and benefits based on customer spending or engagement.

They’re usually more complex to manage, but they can be more effective at creating customer loyalty.

Tiered loyalty programs are particularly well-suited to high-end, luxurious products, where the feeling of exclusivity can heighten the sense of luxury.

Astrid & Miyu’s loyalty program Astrid & You is a great example. At the silver and gold tiers, customers get early access to sales and promotions. At gold, they get £20 off on their birthday.

Hospitality companies tend to use tiered loyalty programs, too. Hilton Honors is a notable example.

Tiered loyalty programs are particularly effective in industries with fluctuating demand. Where purchases are frequent and consistent, and average order values low, exclusive tiered benefits can be less of an incentive to make repeat purchases. 

What makes these tiered loyalty programs so effective is that they understand their status as “luxury” purchases in the eyes of potential customers , and that therefore they might have to work harder to incentivize repeat custom. At the same time, they recognise that it’s exactly this luxury status that makes exclusivity an enticing benefit.

Subscription-based loyalty programs

With subscription-based loyalty programs, customers pay an ongoing fee to get access to perks, products or exclusive events.

Because customers have to pay up-front — rather than passively accruing points as they shop — it’s more difficult to enroll customers onto your loyalty program . The benefits have to be significant.

Subscription-based loyalty programs are best suited to frequent, less-considered purchases — such as books. Barnes & Noble Membership involves an annual fee for exclusive discounts, free shipping and special offers.

Similarly, Amazon Prime gives customers unlimited to extremely fast delivery for a set fee.

In commoditized markets like bookselling, where it’s difficult to compete without a race to the bottom on price, these bonuses tend to have a “lock-in” effect on customers. Once they’ve paid their membership fee, it’s a sunk cost, and they can choose between your next-day delivery or your competitor’s comparatively slow delivery.

Compare these industries to some of the luxury brands adopting tier-based loyalty programs. You’d have a hard time convincing someone to pay $10 a month for a subscription for a brand they purchase from a few times per year at most.

In Amazon’s case especially, subscription-based loyalty programs can also smooth the move into new markets. When Amazon launched Prime Video, they had a ready-made audience of Prime customers ready to adopt it, and they could strengthen the loyalty program by adding it as an additional feature.

The results can be huge. A 2015 report by the Consumer Intelligence Research Partners (CIPR) found that Amazon Prime members were spending an average of $1,500 per year on Amazon.com , compared to $625 per year spent by non-Prime Amazon customers.

Gamification in loyalty programs

It’s not exactly a type of loyalty program, but lots of brands use gamification to boost engagement with their programs. One notable example is TheCHIVE .

Walker Information’s 2020 customer study predicted back in 2013 that “customer sentiment, or feelings that customers have about their interactions, will increase in value as companies look to differentiate based on the experience they deliver.”

To offer this superior experience, customer loyalty programs provide a great platform for brands. And photo entertainment website TheCHIVE is doing exactly this. By rewarding their customers for photo uploads and social sharing, community is being put at the heart of their gamified blog.

As a result, the brand has gained an active community of highly engaged customers. They now attribute 6% of their annual revenue to their loyalty strategy – generating 6,800 referred visits per month.

By giving customers a reason to return to the site, they are more likely to shop again and again.

TheCHIVE leaderboard

Examples by industry

Fashion and apparel ecommerce: crafting style-centric loyalty in online fashion.

The fashion and apparel ecommerce sector thrives on the allure of exclusivity and the joy of personal expression. Loyalty programs in this space are uniquely positioned to tap into these consumer sentiments. Here, loyalty isn’t just about transactions: it’s about becoming part of a fashion-forward community and enjoying the perks that come with it.

Fashion brand Lively is an example of a loyalty program that makes its most loyal customers feel special. It rewards members with points on their birthday, when they refer a friend and if they follow Lively on social media.

It’s easy for members to see the perks because benefits are clearly explained across their site.

Not only is it an effective loyalty strategy for a fashion brand, but customers also see the value of joining straight away. They’ll get 100 “Lively points” just for signing up. And that translates into $10 off their next purchase.

So, it’s a customer loyalty program that offers instant gratification. It also creates a strong and lasting emotional bond with the customer early on.

The results are impressive: the loyalty led to an increase in average customer lifetime value of 39%, and average spend increased by 36%.

Women’s fashion store Pulse Boutique offers customers a better chance to engage with their brand by inviting them to be part of a trusted fashion community.

This customer loyalty program is called Pulse Perks . It aims to encourage customer engagement on social media. At the same time though, it also helps increase user-generated content (UGC), customer reviews and photo submissions.

UGC and reviews are vital to brands because research has found that at least 9 2% of people trust word-of-mouth recommendations from friends or family. Meanwhile, people are four times more likely to buy a product if a friend or family member recommends it.

Since its launch, this example of a loyalty program generated a 39% uplift in returning shoppers. It also drove a 19% growth in average order value (AOV).

These programs work because fashion is a highly visual and shareable industry. Encouraging customers to share their fashion hauls, style tips, or outfit of the day (#OOTD) posts with brand-centric hashtags can amplify a brand’s presence on social media. Brands like Zara and H&M have effectively used user-generated content to engage their community, creating a ripple effect of brand visibility and customer engagement.

The key for fashion ecommerce brands is to tailor loyalty programs that not only reward purchases but also encourage brand interaction and social sharing. This approach resonates well with fashion consumers who value both the product and the experience surrounding it.

Beauty and cosmetics brands

In the beauty and cosmetics ecommerce industry, loyalty programs play a pivotal role in enhancing customer experience and brand loyalty. This sector, characterized by its emphasis on personal care, self-expression, and frequent product launches, finds unique value in loyalty programs that offer personalized rewards and exclusive experiences.

The aim of Annmarie Skin Care was to develop a loyalty program where members felt part of a community that shared similar beliefs and values. So, they created the “ Wild and Beautiful Collective ” to bring their members together.

It’s so important to create a sense of community – especially in the beauty industry. Beauty shoppers are more vocal on social media, for example. They’ll share tips, recommendations and look to learn and thrive from each other.

The “Wild and Beautiful Collective” is a membership program example that nurtures this sense of inclusion through its name and mission. And Annmarie Skin Care’s approach speaks volumes. Members spend (on average) 140% more than non-members. The brand generated more than 1000 reviews too. 

Meanwhile, they enjoy high levels of engagement with members, with 40% of points being redeemed within three months of being awarded.

Pacifica Beauty ’s customer loyalty offering seeks to engage customers through the whole buyer journey . It has a branded, easy-to-use loyalty page . And there’s a pop-up display that will show you how many points you can redeem in the cart. At each stage of the process, the brand aims to make it easy for the customer.

As you near the end of your buyer journey, Pacifica Beauty shows a checkout slider. This lets you claim the rewards you’ve earned towards your purchase.

Now, thanks to this example of a customer loyalty strategy, Pacifica Beauty’s members spend 130% more on average than non-members. 

Beauty brand Mirenesse elevated their loyalty program by introducing a special paid member tier. This is known as the “Gold” tier.

In exchange for a $10 monthly membership, customers of this VIP tier get extra perks on top of the basic rewards. This includes two points for every dollar spent, access to secret sales and the chance to trial new products as part of a tester panel.

Sports and outdoor ecommerce: elevating adventures with rewarding experiences

Outdoor brands have long done more than most to connect with their customers based on shared values. Patagonia set the standard with their “Don’t buy this jacket” PR campaign . The ad, which encouraged potential customers to buy a used Patagonia jacket rather than a new one, detailed the environmental impact in the creation of each new jacket.

A number of other big outdoor brands have incorporated this apparently-genuine, values-based customer connection into their loyalty programs.

The North Face’s XPLR Pass membership program, which offers rewards ranging from discounts to competitions and early product access, gives loyal customers 20% off their next order for completing a course on racial diversity.

REI’s Co-op Membership program , along with the more standard benefits of discounts and free delivery , builds on the connection between customer and brand by giving cashback on purchases based on business profits. They’re also invited to elect candidates to the board.

So why does it work? Because the products customers buy from these brands are used towards a hobby they care about. They’re not necessary purchases, they’re purchases that reflect these customers’ values . And brands share those values in an authentic way — through their transparency, ethical business structures and focus on sustainability.

It’s not something you can fake. And it’s harder — but not impossible — to build this kind of connection when you sell an everyday commodity.

Loyalty program branding: 4 brands that get it right

Loyalty programs succeed and fail by the attractiveness of their rewards — but how you design and brand your loyalty program can make a big difference too.

Lucy and Yak , a sustainable dungarees brand, is notable for its visually appealing integrated loyalty page. Using UGC photos of customers wearing their products and lifestyle imagery to showcase how customers can earn points, it is fun and on-brand.

Lucy and Yak describes its customer loyalty platform in their own tone of voice . You don’t just earn points, you earn “Yak points”. You don’t get “tier 1”, “tier 2” and “tier 3”, you get “Comfort Lover” “Yak Enthusiast” and “Dungaree Devotee”.

Lucy and Yak makes the most of its strong brand personality to boost its loyalty program. And that, in turn, strengthens the brand further.

Waterdrop – a “micro drinks” company – are paying careful attention to the look and feel of their loyalty program page. It means the Waterdrop Club is synonymous with the overall branding .

It uses fresh colors, light imagery and inclusive language. 

On the page itself, everything is signposted clearly – from actions that customers must take to earn points, to information on the free gifts they can acquire.

Waterdrop’s loyalty program helpedg the brand to generate more than €58,000 from referrals . It’s one of the most effective health and wellness loyalty programs out there .

But if you’re looking for good examples of loyalty programs, sometimes the clue is in the name.

Nicce Clothing paid special attention to the name of their program and how they named their points system. “N Coin” is a simple, yet memorable term. It’s a customer loyalty program that clearly has its own brand. But Nicce Clothing also ensures it works with their overall contemporary and minimalist identity.

A family-run oat bar company, Eat Bobo’s got creative in naming their loyalty program example. Bobo’s Love Mitts is the name, while the points are called “Love Mitts”. Like Lucy and Yak, Eat Bobo’s loyalty program leverages and strengthens their down-to-earth, crafted-by-hand image.

6 examples of effective loyalty program marketing

If you want people to sign up to your loyalty program, you need to tell them about it. Here are a few brands that are particularly good at marketing their loyalty program.

Email marketing

MoxieLash get their loyalty emails right. They’re visually appealing, to-the-point, and the value proposition is crystal clear.

Loyalty pages

Encourage your customers to enroll in your loyalty program by building it a standalone page.

100% PURE built a beautifully designed loyalty page to explain the benefits of the loyalty program and to encourage customers to enroll.

Time-limited promotions

“Short-time only” promotions encourage loyalty program sign-ups by creating a sense of scarcity. You could try “double points week”, or offering money off a product to loyalty program members for a month.

Dr. Axe has run promotions like triple point weeks, seasonal offers and higher rewards for referrals.

They also incorporate the loyalty program into all their email marketing and across their website.

Refer-a-friend

Word-of-mouth referrals are often the best way to acquire high-value customers at low cost. Building specific rewards for referrals into your loyalty program is a good way to increase its value.

Banners and popups

Like Pulse Boutique , you can use website banners to announce the launch of your loyalty program. It’s a solid, concise way to explain the benefits and include a strong call-to-action.

Contests and leaderboards

An often-effective way to scale up your loyalty program is to introduce a competitive element — for example, by creating a kind of “leaderboard” of referrals, and rewarding those customers who are most prolific.

And by having an effective loyalty program marketing plan for those newly referred customers, this can turn into a virtuous cycle.

Ready to use loyalty marketing to your advantage?

These examples show us just how powerful loyalty programs can be, how great brands are making the most out of theirs, and how you can use your understanding of your own audience to design your own successful loyalty program.

But for many smaller ecommerce businesses, the biggest challenge is implementation. How do you set up, optimize and analyze your loyalty program without significant investment of both time and money?

With this, LoyaltyLion can help. When you’re ready to get started, book a demo .

About the author

Mollie woolnough-rai.

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Starbucks Loyalty Program Case Study

Starbucks, renowned as one of the foremost coffee brands globally, owes its success not just to its exceptional range of products. A significant contributor to its widespread acclaim is its highly popular loyalty program , which has been an inspiration for many U.S. restaurant chains and retail stores. Launched on December 26th, 2009, the Starbucks rewards program has amassed over 30 million active members, contributing to nearly 60% of the brand's total revenue. The program effectiveness was strikingly evident in 2019, with Starbucks reporting a substantial 7% increase in sales primarily attributed to the efficacy of its rewards program.

Program type 

Points system.

• Points for rewards
• Coalition Loyalty

Starbucks Rewards leverages a points-based system ingeniously designed to enhance customer engagement and loyalty. Members accumulate 'Stars' with each purchase made via their registered Starbucks Card or through the Starbucks mobile app.  The program is structured to encourage varied forms of engagement, enhancing the overall customer experience and brand loyalty.

• Earn 1 Star per $1 spent when you pay in cash
• Earn 2 Stars per $1 spent when you preload your digital Starbucks Card
• Earn additional bonus Stars through special promotions
• Earn double Stars on Delta Airlines travel days
• Earn double Stars on promotional days
• Points expire after 6 months

Starbucks Rewards allows its members to redeem their accumulated Stars at various levels, each unlocking distinct rewards. This structure caters to diverse preferences, allowing customers to either redeem their Stars for immediate benefits or save them for more substantial rewards.

• 25 Stars: Redeem for a free drink customization, such as extra flavor, espresso shot, or alternative milk.
• 50 Stars: Get a complimentary hot coffee, tea, or bakery item like a bagel or croissant.
• 150 Stars: Choose a free handcrafted drink, hot breakfast, or a parfait.
• 200 Stars: Earn a complimentary lunch item, like a salad, sandwich, or protein box.
• 400 Stars: Exchange for packaged coffee beans or select Starbucks merchandise.

Coalition loyalty

Starbucks and Delta Airlines have embarked on a partnership, merging the world of coffee with the skies. Linking your Delta SkyMiles® and Starbucks® Rewards accounts opens up a new realm of earning opportunities and exclusive benefits.

• Travel-day perks: Double Stars on Delta travel days
• Everyday earn: 1 mile per $1* spent at Starbucks
• Exclusive offers: More opportunities to earn Stars and miles

Interesting takeaways

Multi-channel communication.

Starbucks leverages multiple channels to communicate about its rewards program, ensuring widespread awareness and engagement. The use of a dedicated landing page, mobile app, points balance reminder emails , company blogs, and social media platforms creates an ecosystem where information about the program is readily accessible and consistently updated. The clarity and frequency of updates, including press releases for significant changes, demonstrate Starbucks’ commitment to transparency. This approach not only keeps existing members informed but also attracts new participants by clearly outlining the program’s benefits. Good communication is likely a significant factor in the program's high membership numbers.

Program simplicity and incentive structure

The simplicity of the points system (earn points and redeem for rewards) is user-friendly and easy for customers to grasp. This clarity enhances the appeal of the program and encourages participation. The structured nature of rewards incentivizes customers to accumulate more points to access greater rewards. This gamification element adds an extra layer of engagement, as customers are motivated to reach the next level. As customers get closer to a significant reward, their motivation to attain it increases. This psychological aspect of goal setting and achievement is a powerful tool in enhancing customer loyalty and encouraging more frequent purchases.

Incentivizing preloaded payments

Starbucks ingeniously incentivizes customers to preload their Starbucks account by offering double points for purchases made using a preloaded Starbucks Card. By preloading their accounts, customers commit themselves financially to future purchases at Starbucks, which effectively guarantees a degree of customer loyalty and repeat business. This strategy turns occasional visitors into regular customers, as the preloaded funds will likely be used exclusively at Starbucks locations. From a financial perspective, this strategy is beneficial for Starbucks. When customers preload their accounts, the brand receives cash in advance, improving its cash flow. This tactic also promotes increased engagement with the Starbucks mobile app, where preloading and tracking of rewards can be easily managed. 

Coalition program with Delta Airlines

The partnership with Delta SkyMiles is a strategic move that broadens the program’s appeal. By collaborating with an airline, Starbucks extends its reach beyond the typical coffee shop customer. This alliance allows both companies to tap into each other’s customer bases, potentially attracting new customers who are loyal to one brand to become interested in the other. It’s a creative way to expand market reach without direct competition. For customers who already patronize both brands, this coalition loyalty program reinforces their loyalty and increases their engagement with both Starbucks and Delta. It creates a more integrated customer experience and can deepen the sense of brand loyalty.

Areas of improvement

The removal of the tiers system.

The previous iteration of the program had a 'Gold' tier, which was a smart way to acknowledge and reward the most loyal customers. By offering them the ability to earn points faster and providing exclusive benefits, Starbucks recognized and cherished its most valuable customers. This tier system not only incentivized increased spending but also gave a sense of exclusivity and status. While simplifying the program might make it more accessible for new customers, it risks diminishing the perceived value for power shoppers. The elimination of the tier system could lead to a decrease of engagement from these highly valuable customers.

Lack of personalized engagement or rewards

In the current market, personalization is key to customer engagement. Starbucks’ generic approach to rewards and communication, without considering individual customer preferences and behaviors, is a missed opportunity. Personalizing rewards and communications could significantly enhance customer loyalty and encourage repeat business. Leveraging customer data to offer personalized rewards and product recommendations could not only improve customer satisfaction but also drive product discovery and sales.

Limited post-purchase engagement

Post-purchase engagement is crucial in maintaining a connection with the customer even after they leave the store. This ongoing engagement is essential for converting first-time buyers into regular customers. While Starbucks has started initiatives like Starbucks Odyssey , which offers additional ways to earn rewards through digital journeys, its integration with the main rewards program appears to be lacking. A more seamless integration could enhance the overall experience and effectiveness of the loyalty program. Recognizing that some of these initiatives are in their early stages, there is potential for growth and improvement.

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How to Make Your Loyalty Program Pay Off

• Brett Hollenbeck
• Wayne Taylor

A study of 2 million transactions at one retailer shows how companies often chase the wrong customers.

Do loyalty programs actually create more-loyal customers? In a recent study, researchers analyzed two years of purchase data from more than 10,000 customers at a top U.S. retailer to explore how spending did (or didn’t) change after customers became loyalty members. They found that loyalty programs do increase profitability — but only for some customers, and not the ones you might think. Specifically, while the retailer had been targeting loyalty program promotions at customers with high levels of past spending, the researchers found that joining the program actually had no impact on those customers’ spending. On the other hand, joining the loyalty program increased spending by close to 50% for customers who were highly vulnerable to competitors. The researchers used a machine learning model to gain insight into who exactly these customers were, and found that the best predictor of changes in spending was actually customers’ locations relative to both the retailer’s stores and competing stores. Based on this surprising finding, the authors argue that marketers should target their promotions based not on historical spending, but on location, and that they should further consider investing in simple machine learning tools that can help them to identify the non-obvious traits that may correlate with profitability in their unique industry and market.

Ninety percent of leisure and hospitality companies (and more than 60% of all companies) offer some type of loyalty program — and yet, it’s not at all clear that these programs actually work. One report found that the average consumer belongs to more than 14 loyalty programs, often with multiple competing brands , suggesting that these programs hardly create loyal customers.

• BH Brett Hollenbeck is an assistant professor of marketing at the UCLA Anderson School of Management.
• WT Wayne Taylor is an assistant professor of marketing at the Cox School of Business at Southern Methodist University.

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Ecommerce Personalization Blog

Ecommerce tips, strategies, and news – all without ever having, [case study] build customer loyalty like starbucks + costco.

Building customer loyalty is a primary way to increase conversions and multiply profits. Below we explore two case studies in how to build customer loyalty, featuring Costco and Starbucks.  But first, we cover customer loyalty program basics, including how to define customer loyalty, why it is important, and ultimately, the types of loyalty you can build. If you would like to skip the theory and head straight to the case studies , click here .

What is customer loyalty program marketing?

A customer loyalty program, often called a rewards program, is a customer retention strategy that focuses on repeat purchases. Customer loyalty programs are designed to incentivize customer actions. Programs can offer many types of benefits such as rewards, points, cash back, gifts, free shipping and more.

Next we will see the benefits of customer loyalty, including improved add to cart rates, conversions, and AOV.

Why is customer loyalty important in eCommerce?

Returning visitors dramatically increase profitability. In our study on New vs Returning customers , we found that retained visitors

• Added items to carts 65.16% more than first time visitors
• Converted 73.72% more than first time visitors
• Spent 16.15% more per transaction

Further studies confirmed these benefits of customer loyalty. One study by Harvard Business School found that "Loyalty leaders - companies at the top of their industries in NEt Promoter Scores or satisfaction rankings for three or more years - grow revenues roughly 2.5 times as fast as their industry peers and deliver two to five times the shareholder returns over the next 10 years." And another study by  ZenDesk found that 75% of customers are willing to spend more from companies that give them a good customer experience, while 50% will switch to a competitor after one bad experience.

Image Credit: Zendesk's 2021 Customer Experience Trends Report

How to build customer loyalty?

There are two major types of customer loyalty. The first is transactional loyalty, and the second is emotional loyalty.

How to build transactional customer loyalty

The first is transactional loyalty. This type of loyalty is rational in nature. Customers perceive it is in their best interest to stay with this company based on repeated past experiences. For example, they may believe that the brand is the least expensive, most convenient, or least risky option. Famous brands who have built their business through transactional loyalty include Walgreens and CVS. In fact, certain industries compete primarily on transactional loyalty, including pharmacies, gas stations, and grocery stores. There are many ways to generate transactional loyalty. Below are few principles.

• Loss aversion: Customers value losing more than gaining. By incorporating rewards, points, and bonuses you can influence customers to continue shopping with you else they lose the points they have earned
• Recency Bias: Customers overweigh what has happened most recently. Brands can take advantage of this by introducing daily deals or other tactics to boost
• Reciprocity: Finally reciprocity is a well documented social norm where people respond to a positive action with another positive action. (link to Wiki). Brand can create transactional loyalty by leading with value, such as a gift or credit, which can spur customers to want to respond.

How to build emotional customer loyalty

The second type of loyalty is emotional loyalty. As the name implies, this type of loyalty is not based on a "rational" calculation that being loyal is better for the customer, but instead is based on an emotional connection. Typically, this connection takes the form of status, the brand becoming part of the customer's identity, or the brand being used to express their identity. Because of this, they are much less likely to be influenced by competing offers and brands may enjoy higher price elasticity when they set their pricing strategy . Again, there are a few principles at work that eCommerce stores may take advantage of to maximize customer emotional loyalty. There are many famous examples of brands that have created emotional loyalty with customers, including Apple, Disney, Starbucks, Coke, and Pepsi.

We've covered how Starbucks creates loyalty through their omnichannel-retail strategy here .

Customer loyalty examples: tactics and strategies from top companies

Below we break down examples of customer loyalty programs, and call out specific tactics these companies make in a running list.

How Costco creates customer loyalty

Costco is a multinational company that operates membership big-box retail stores. The company has grown to 152.7 billion dollars annually, and makes for a fantastic case study on customer loyalty. As their management states in their latest 10-Q filing , "We believe the most important driver of our profitability is sales growth, particularly comparable warehouse sales growth.... Comparable sales growth is achieved through increasing shopping frequency from new and existing members and the amount they spend on each visit (average ticket)."

“We believe the most important driver of our profitability is sales growth, particularly comparable warehouse sales growth.... Comparable sales growth is achieved through increasing shopping frequency from new and existing members and the amount they spend on each visit (average ticket) ” - Costco 10-Q, 2021

1. Cross subsidizing with a membership model

Costco's loyalty program begins with their membership business model.  Members pay an upfront cost to be able to enter the store and purchase goods. In return, Costco provides low, competitive prices, private label items, and other exclusive perks.

“Our membership format is an integral part of our business model and has a significant effect on our profitability. This format is designed to reinforce member loyalty and provide continuing fee revenue. ” - Costco 10-Q, 2021

2. Using loss leaders to promote transactional loyalty

Part of Costco's loyalty strategy is to "provide members with quality goods and services at the most competitive prices." Instead of maximizing profits per transaction, they focus on maximizing each customer's lifetime value to the company. This is exemplified most clearly in their gasoline service.  "We believe that our gasoline business draws members, but it generally has a significantly lower gross margin percentage relative to our non-gasoline business." Costco takes measures to ensure members will always save on their gas bill. They are able to do this because of their membership business model, which doesn't rely on profits in gasoline to fuel the business.

3. Using unique, private label products to increase loyalty

Private label products increase customer loyalty in a number of ways.  First, it distinguishes Costco. Instead of competing in purely commoditized products, Costco can offer exclusive options for their members.  Further, as customers become habitualized to these products, it improves their membership retention rate . If customers want to enjoy these products, they must continue shopping at Costco.

Because of the exclusivity and collapsing the supply chain, these product are often more profitable on a unit basis as well. 

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4. Maxime loss leaders with creative financing options

Finally, Costco compliments their product offering with a branded credit card. They have tailored the rewards card to maximize customer loyalty, highlighting some of the biggest reasons to be a member.

• 4% cash back on Costco gas
• 2% cash back on Costco purchases
• Costco membership is bundled with the price of the card

How Starbucks improves customer loyalty

Starbucks is another premier case study of how to improve customer loyalty.

5. Cross channel marketing

Starbucks does an incredible job driving customers into their loyalty program. We've covered before in our case study of Starbucks' omnichannel strategy how they tie in different channels, all leading to subscribing to their renowned loyalty program. Below we see a clear example. Once subscribed to their email list, customers receive member exclusive offers. If they would like to partake, they must enroll in the loyalty program.

Starbucks extends their Rewards program to lower margin grocery items as well. The rewards themselves help drive traffic to their in-store locations, increasing frequency, lifetime value,  and accessing a whole new group of customers.

6. New product development

Starbucks also drives repeat purchases through new product development.  With a steady stream of new options, customers are nudged to come back and try their latest creations. These new products often embody other aspects of the business, in this case Starbuck's new relationship with OATLY.

“We recognize that we are a beverage-forward concept. Beverage is our key point of differentiation.” - Pat Grismer

7. Create urgency with limited time products

Additionally, seasonal holiday beverages create excitement in their customer base and provides a sense of urgency to come into the store. In fact, there are now many seasonal beverages that customers pine for, including Pumpkin Spice Latte, Peppermint Mocha, and Irish Cream Cold Brews.

Further, Starbucks constantly rotates in limited run premium products.  Combined, holiday and limited time products give a reason to return.

8. Unique experiences for Rewards Members

Finally, Starbucks routinely creates rewards member engagement campaigns. These often take the form of exclusive games and rewards Starbucks Rewards Members can participate in. Below is just one example. In Starbucks For Life, Rewards Members collect game pieces that can earn them rewards ranging from a $500 gift card, Bose  Earbuds, and of course, the namesake grand price, free Starbucks for Life.

Next Steps...

Starbucks and Costco are great case studies in how to build customer loyalty.

At it's core, customer loyalty is about providing a better experience. While there are many ways to improve customer's experience in an eCommerce context, the primary ways revolve around creating personalized, relevant experiences and offers across all channels. Below are a few resources we have put together to help.

• Advanced eCommerce personalization examples  - In this guide, we showcase numerous personalization examples, including digital first brands such as Thrive Market and Third Love. 
• Triggered email examples and best practices  - Email remains the best channel for driving profit. In this guide, we showcase how top brands like Nike, Amazon, and Google use triggered emails to increase AOV.
• Database marketing examples  -  Finally, leveraging first party data on your customers is the best way to create better offers. We've found RFM analysis to be especially useful here.

Lastly, we help hundreds of premier eCommerce stores generate customer loyalty and repeat purchases. If you would like to see if we can help your store, schedule a personal demo here .

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Preparing for loyalty’s next frontier: Ecosystems

Today’s consumers are the ultimate surfers, hopping between channels, devices, and sites as they shop. Loyalty programs are static by comparison, relying on increasingly outdated rewards and the redemption strategies of the past.

To create loyalty programs as dynamic as their consumers, companies need to develop an underlying consumer-loyalty strategy built around a fluid partnership of products, services, and experiences. We expect some brands to go even further, pursuing partnerships as a new way to compete. That means multiple companies from different sectors will develop a joint loyalty program around a unifying customer value proposition.

We see early signs of this happening already. Of the Financial Times’ top 25 brands of 2019, more than 40 percent have partnered with at least one other consumer brand to improve the customer experience and drive increased engagement. Indeed, as industry boundaries continue to blur, consumer and loyalty strategy will require a broader frame of reference.

Benefits of this approach include a deeper understanding of customer behavior through richer data. Ecosystem-centric loyalty programs are still in their nascent stages, but they will become increasingly prominent as consumer brands realize the need to compete at scale. And the value at stake is significant. Top-performing loyalty programs show a significantly higher success rate at changing customer behavior to drive value, and they have brands that are more likely to be preferred by customers (Exhibit 1).

Despite the opportunities, many loyalty programs have plenty of room to grow. We looked at a basket of 50 loyalty programs from top brands and found that just 18 percent have experience-led programs, 6 percent have connected offerings, and 2 percent have ecosystem offerings (Exhibit 2).

We see three important phases as companies evolve to next-generation loyalty programs:

Phase 1: From rewards and redemption to experience and content

“Earn and burn,” or pure discount-based programs, are no longer enough. Consumers are looking for something more. When it comes to loyalty rewards, it’s no longer just about the transaction at point of purchase; it’s about additional experiences and services that create new touchpoints. Companies are pursuing content and experiences to drive up engagement and get consumers more connected with the brand on a daily or weekly basis. Programs that balance monetary rewards with experiential offerings  (exclusive events, early access, unique discoveries or adventures) can provide value beyond the transaction by appealing to the consumer’s head and heart (Exhibit 3).

Phase 2: From siloed programs to connected offerings

Given the shift toward experience and content, brands are tapping into their complementary product and service offerings to create their own brand ecosystem. These brands are looking across all they can offer to their customers to tie together both commerce and noncommerce moments.

As consumer brands increase their ability to leverage scale, data, and technology to create this connected offering, brands will continue to migrate toward smarter programs where personalized, “underwater” tactics are at the center of value creation, in which case published loyalty benefits will represent only a fraction of the total consumer value. The consumer engagement model will look to increase touch frequency and move into other areas of the ecosystem, such as credit cards or subscriptions.

There is at least one model of a connected loyalty offering on the market today: Amazon Prime. Prime serves as a loyalty ecosystem, serving the currency of on-demand convenience across sub-brands that include Amazon’s dot-com business, Prime Video, Prime Now, Whole Foods, and others.

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Phase 3: from company focused to ecosystem enabled.

Even as companies move toward connected offerings, it will be hard for any one player to replicate the size and scale of an ecosystem like Prime’s in any one sector, let alone across sectors. As a result, companies will need to think creatively and strategically about partnerships across categories, including with would-be competitors.

Brands should look to strategic partnerships to provide consumers with more holistic experiences tailored to individual consumer lifestyles and ecosystems. Loyalty is a fitting platform for these sorts of partnerships, enabling a disparate set of brands to craft a coherent set of benefits that feel personally relevant to the consumer. Likewise, it offers a host of benefits for member brands: broader access to consumer data, cross-marketing opportunities for customer acquisition and engagement, and economies of scale stemming from shared IT infrastructure.

Coalition loyalty programs are challenging

At the same time, brands must be open to the trade-offs inherent in an ecosystem-based loyalty partnership. Ecosystem-centric loyalty may require companies to partner with previous indirect competitors, giving rise to “frenemy” relationships across regions and channels. In contrast to loyalty coalitions, which were largely operated by third-party organizations, ecosystems are more likely to arise organically as companies forge strategic partnerships, placing the onus on the brands to govern their partnership’s strategy and architecture. (See sidebar, “Coalition loyalty programs are challenging.”) Nevertheless, if executed properly, brands stand to gain more from ecosystem-centric loyalty than they lose.

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What this means.

As brands begin to partner around ecosystems, what changes will these partnerships herald for the brands’ pre-established, stand-alone loyalty programs? In the near term, we expect standalone programs will continue to operate beside or within the ecosystem, much as individual airline loyalty programs can function independently while also yielding benefits across an alliance with other airlines. However, as ecosystems grow more conventional and their value becomes more apparent to brands, we envision that stand-alone programs may begin to consolidate under single-flagship ecosystem loyalty programs, or that stand-alone programs may evolve into ecosystems as they incorporate partnerships as part of the core program value proposition.

As we shift into the era of ecosystem-driven loyalty, brands must learn from the failures of the coalitions of old. To succeed, a loyalty ecosystem should be centered around the following seven design principles:

• Shared consumer in mind: The program must be highly personalized to the individual consumer, leveraging the full stack of consumer data across brands to offer personalized messages, offers, and experiences. Furthermore, brands should mutually understand the value of the consumer.
• Brand synergy: The program must be structured to elevate brand equity. Every brand must have an important role in the given ecosystem and provide value to that ecosystem through its products and/or services.
• Diversity of products and services: The program must provide consumers with value through tangible goods, services, or experiences in order to reinforce the program’s underlying appeal. Brands should develop common features and benefits together.
• Seamless consumer experience: Sign-ups, use, and redemption must be intuitive and responsive, keeping the program simple for consumers.
• All-in brand commitment: Companies must be willing to commit to the partnership, allocating adequate marketing spend and having clear agreements about sharing consumer data in a way that adheres to all relevant regulations.
• Alignment on governance process: Brands should enter the partnership with aligned strategies and goals, defined roles and responsibilities, and a process for managing risk effectively.
• Data and tech focused on connectivity: Brands will need to ensure, within the confines of the shifting regulatory landscape, that their data can be exported or used as needed—for example, through the use of application programming interfaces (APIs). Brands within the ecosystem need to commit to standards and processes for tracking key performance indicators, adhering to regulations, and establishing protocols for connecting technologies and sharing data.

As we shift into the era of ecosystem-driven loyalty, brands must learn from the failures of the coalitions of old.

As ecosystem-centric loyalty flourishes, all parties stand to gain. Consumers will receive heightened experiential benefits in addition to faster loyalty rewards growth, more-flexible redemptions, and an unmatched simplicity and daily relevance. Brands will see a rise in reach and frequency of usage. In addition, they will gain access to richer, more privileged consumer data, shared infrastructure, and cross-marketing opportunities. Finally, ecosystem-centric loyalty will provide hitherto unseen competition to today’s retail goliaths, a benefit that will trickle down to the consumer brands and, ultimately, back to the consumer.

Ecosystems are here to stay. It’s time for all consumer brands to start thinking about how they can participate in one. Ecosystem-centric loyalty is a start.

Julien Boudet is a partner in McKinsey’s Southern California office, Jess Huang is a partner in the Silicon Valley office, Phyllis Rothschild is a partner in the Boston office, and Ryter von Difloe is a consultant in the Seattle office. The authors wish to thank Michael Tappel for his contributions to this article.

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10 best customer loyalty programs and their case studies

• 6X more expensive to win a new customer than retain as existing one ( Parature )
• 5% increase in customer retention can lead to a 25-100% increase in profit for your company.  ( Harvard Business Review )
• 68% of millennials wou l dn’t be loyal to a brand that doesn’t have a good loyalty program. ( Loyalty Report )

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Get inspired with 8 examples of restaurant loyalty programs

The popularity of loyalty rewards programs is easy to explain: Great loyalty rewards programs drive revenue by helping restaurants turn new guests into regulars.

Offering rewards when guests spend more, make repeat visits, or post about you on social media gives them a reason to choose your restaurant over another and can give a big boost to sales when done right, according to Harvard Business Review .

With so many options out there, from “stealth” loyalty programs to app-based options with AI-powered personalization, it can be tough to know where to start.

Looking at other programs for inspiration is a great way to start. You can model a program after the one you like best or develop a mix-and-match approach to create a loyalty program that fits your business. As you review and brainstorm, you might even dream up benefits unique to your restaurant.

Check out these eight examples of creative loyalty rewards programs that can attract new guests and encourage customers to keep coming back.

Quick Links: Flour Bakery Juana Tamale Tin Shop Anchor Bar Sabrina’s Cafe BJ’s Restaurant & Brewhouse Landry’s Select Club El Lopo

Restaurant loyalty program case studies

You’ve probably noticed different types of customer loyalty programs at some of your favorite stores, restaurants, and cafes. Many chain restaurants offer their own customer loyalty programs— here’s a rundown of some of the most popular.

But what works for a national brand doesn’t always make sense for an independent operator or restaurant group, and vice versa. As you consider examples of loyalty rewards programs, think about which formats, perks, and tracking systems would work best for your restaurant.

Flour Bakery, Boston

Running a cafe and bakery in Boston means competing with Dunkin’, which has its own fiercely loyal customer base. Flour Bakery launched a bespoke app-based loyalty rewards program to compete with Dunkin’ Rewards.

In addition to rewarding purchases, customers can use the mobile app to skip lines during order pickups and gift goodies to friends and family.

Juana Tamale, Philadelphia

This award-winning Mexican spot puts its own fun spin on everything from birria tacos to Caesar salad, so it’s no surprise that its recently relaunched rewards program gamifies the experience for guests.

Rather than tying points to dollar amounts, Juana Tamale’s loyalty program offers 100 points per visit with a minimum spend of $15. Prizes increase in value from free churros (200 points) to a 30% discount (500 points) to a free T-shirt (1000 points).

Tin Shop Restaurant Group, Washington, D.C.

Loyal customers can join the Tin Shop Social Club for a monthly fee of $39.99. Membership includes invites to special members-only events. Exclusive, experiential rewards like this are quickly becoming the preferred type of reward offered by loyalty programs. In fact, 84% of millennials prefer them to transaction-based rewards.

Membership also grants people perks including daily free drinks and twice-monthly free happy hours at any of the hospitality group’s bars and beer halls.

Anchor Bar, Buffalo

The bar that claims to have created the Buffalo wing offers not one but two loyalty rewards programs . Its free App Perks program lets guests rack up and redeem points for future purchases at more than a dozen franchise locations. The bar’s higher-tier loyalty program gives guests free food for every $20 spent, with a one-time membership fee of $15.

Sabrina’s Cafe, Philadelphia

At this popular brunch spot, guests in the loyalty program earn a point for every dollar they spend. When they reach 100 points, they get $10 taken off their next bill.

Sanrina also employs a classic loyalty program benefit that people love: Members who dine in on their birthday also receive a special freebie.

El Lopo, San Francisco

At Spanish-inspired wine bar El Lopo, customers pay monthly into the Take-Care-of-Me Club in exchange for added value and VIP treatment. The staff serves up fare curated to the member’s preferences until a set spending limit is reached—no menus or bills needed.

BJ’s Restaurant & Brewhouse, national

This national chain drives repeat visits with its BJ’s Premier Rewards Plus program. Diners earn one point for every dollar they spend and can redeem loyalty points for discounts on future purchases, excluding alcohol.

BJ’s uses an irresistible strategy to get people to join their loyalty program. Newcomers are given a free “Pizookie” the day they sign up. For the uninitiated, that’s a sweet mashup between a pizza and a cookie.

Landry’s Select Club, national

Members of this rewards program can earn and redeem points at 600-plus participating concepts across the company’s portfolio. That includes casual and upscale brands like Joe’s Crab Shack and Del Frisco’s Double Eagle Steakhouse.

Along with earning points for every dollar spent, Landry’s Select Club members get a $25 welcome reward, a $25 annual birthday reward, priority seating, and perks like hotel discounts.

Restaurant loyalty rewards programs are a proven way to get butts in seats, strengthen your relationship with customers, and boost revenue.

Whether you go with a points-based system, set up a membership-based reward program, or use data to reward customers for supporting your business, the return makes setting up a loyalty program well worth the investment.

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For Businesses

For students & teachers, 4 examples of great bank loyalty programs.

EVERFI Content Team

Bank loyalty programs are a tried and true marketing tactic, offering the ability to both reward and incentivize customers. While customer loyalty programs in the banking industry are far from new, many of the tactics used in modern programs are drastically different today than those even 10 years ago. Today’s audiences are digital savvy, able to compare products and programs quickly and easily, and often incentivized by cost savings. In fact, 81% of modern bankers expect incentives in the form of loyalty programs or signup bonuses, according to a study by CGI. As a result, bank rewards programs are an important marketing tactic for banks and you should be using them.

Where do you start? These 4 examples of great bank loyalty programs will give you some inspiration on how to set up your own.

4 Great Bank Loyalty Programs

Capital one purchase erasure.

Banks often integrate loyalty programs designed to help customers accrue points towards travel (Air Miles) but Capital One took this a step further. With Purchase Erasure , customers are able to accrue points towards “erasing” already purchased travel. Here, customers simply make the purchase with their credit card or mobile phone, and then submit the purchase for erasure within 90 days of purchase and are refunded.

Capital One has many other bank loyalty programs, including a developer-focused DevExchange, allowing third-party organizations to add to and customize customer loyalty options with their own additions. Why is it great? Simply adding more flexibility to an existing loyalty program idea gives CitiBank customers a lot of advantages because they don’t have to worry if they forget to use points during a purchase.

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CitiBank thankyou

CitiBank actively works to promote customer activity and engagement with “ thankyou ”, a bank loyalty program designed to reward customers for using the bank’s network and partners. Points are accrued through using mobile apps, ATMs, checking accounts, and other services and can be redeemed towards products, travel, and even previously purchased products.

This program not only incentivizes customers to use CitiBank’s cards, but it also promotes them to use other services, while rewarding individuals for actively doing business with the bank.

Wells Fargo Customer Relationship Discount

While many bank loyalty programs revolve around credit and debit cards, many don’t. Wells Fargo offers reduced rates on car and student loans as well as other perks such as no ATM fees and discounts on safety deposit boxes through their Relationship Discount program .

Relationship discounts apply to consumer checking accounts with automatic payments enabled, and essentially reward active customers for using services like auto-payment. The same program offers discounts on a range of Wells Fargo services and even cash-back refunds on things like ATM charges from other ATMs. While this program certainly costs Wells Fargo a lot, it also greatly incentivizes customers because being more active with the bank saves them a great deal in fees and service charges. When combined with increased interest rates on accounts, plus bonuses for having more than $25,000 or more than $250,000, Wells Fargo actively rewards customers for using their services.

What can you learn from it? Bank loyalty reward programs don’t have to be based around spending money, you can just as easily reward using services, especially when those services save you money or earn you money.

Zion’s Bank Pays for A’s

Zion’s Bank actively targets Gen Z bankers with their Pays for A’s loyalty program, rewarding students aged 12-18 for good grades. While the loyalty program is only available in very select areas (Utah and Idaho) it’s a great example of how some banks are using creative and inventive ways to connect with consumers.

Pays for A’s basically offers students $1 per A or A+ grade for students with a Zion’s Bank account and 50 cents per A or A+ grade for students without a Zion’s Bank account. Students with eligible accounts are also entered into drawings to win savings accounts with college money.

Why is this bank loyalty program a great example? It actively targets an up-and-coming generation of customers and encourages them to open accounts with Zion’s. At the same time, it actively promotes the bank to parents, who will become more aware of the bank and its programs as a result of something that actively benefits their children.

Tips for Setting up a Bank Loyalty Program

Bank loyalty programs have existed for decades, but traditional programs often don’t work. You have to be creative, take an extra step, and specifically market your bank’s loyalty program to your customers. These tips will help you to set up a bank loyalty program that works for your customer.

Use Big Data and Automation – Many banks use customer loyalty programs to offer free perks and rewards such as concert tickets, but most customers won’t be impressed unless they specifically need those things. Using big-data and automation, you can choose and select rewards based on how customers spend their money, so perks are always relevant. For example, if someone frequently spends money with airlines, they’d likely appreciate perks in the form of free flights where someone who frequently spends money with music venues will be much more likely to appreciate concert tickets.

Go Mobile – Many people no longer use credit cards but instead purchase directly from their phone and debit using apps like Apple or Google Wallet. Making your bank’s loyalty program mobile-friendly is essential for capturing this audience as well as creating something that’s appealing to younger generations.

Set Goals – You want your bank’s loyalty program to have an end goal, such as customer retention, incentivizing signup, incentivizing credit-card use, or so on. Many financial organizations create multiple customer loyalty programs with different goals, working to incentivize customers into different actions. You should likely do the same.

Bank loyalty programs are an important part of marketing banking organizations and some customers will review them when choosing a bank. Good bank loyalty programs will also help you to promote customer satisfaction, brand awareness, and to reduce customer churn because individuals who are happy with perks they get from their bank are less likely to go elsewhere. However, you don’t have to offer free products and services, some of the most successful bank loyalty programs today are simple discounts on loans and mortgages, increases in interest earned on savings accounts and CDs, and even reduced ATM fees. As long as your customers feel as though they are saving money or getting a great deal, they will be happy, and often more so than if offered something they didn’t necessarily want or need anyway.

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Loyalty program for retailers: 10 winning examples

In the current landscape, the retail sector is experiencing unprecedented levels of market saturation . The heightened competition among retail companies, exacerbated by the recent crisis, has underscored the necessity for a distinctive and appealing retail loyalty program. Merely having a loyalty program is no longer sufficient – it must stand out to capture consumer attention.

This article aims to provide inspiration for marketers in retail by showcasing some of the most successful and innovative retail loyalty programs implemented globally.

Key takeaways

• Loyalty schemes for retailers emphasize the numerous benefits of customer retail loyalty programs. These advantages include efficient data gathering for personalized services, an elevated customer experience, minimizing customer churn, and strategically advancing marketing efforts.
• The several popular types of retail loyalty programs include points-based loyalty programs, tier-based loyalty programs, partner retail loyalty programs, subscription-based loyalty programs, referral-based loyalty programs, and reward loyalty programs. Each type caters to different customer preferences and engagement strategies.
• There are many interesting loyalty programs in the retail sector. Leading the pack is the IKEA Family, followed by Samsung Rewards, Gap, Inc. Good Rewards, Timberland Community, Dell Rewards, LEGO VIP, Nike Membership, GameStop PowerUp Rewards Pro​​, The Nordy Club, and H&M Members. These programs showcase diverse attitudes to increase customer vitality, build affinity, incorporate unique features and incentives to keep consumers engaged and satisfied.

What are loyalty programs in retail?

Retail loyalty schemes are smart strategies aimed at building strong, long-term connections between a brand and its shoppers. Instead of just one-time transactions, these programs want to create lasting relationships, encouraging customers to stick with a specific brand over time.

‍ The main goal of brand loyalty programs is to encourage customers to come back and consistently choose a particular provider. They're common in various retail industries like fashion, electronics, and grocery, going beyond simple buying and selling to create an emotional bond with the consumer.

‍ Typically, customer loyalty programs give membership cards, digital apps, or online accounts to earn points or rewards based on purchases . These rewards can be discounts on future purchases, access to exclusive products, early sales access, and personalized offers based on individual preferences.

The data collected from these schemes is crucial for retailers. It helps them understand customer behavior, tastes, and spending patterns. This information is valuable for refining marketing strategies and improving the overall shopping experience, enabling retailers to offer targeted promotions, tailored recommendations, and a smoother, more customized journeys.

Rewarding customers and loyalty members becomes a fundamental aspect of any loyalty system, providing tangible benefits that incentivize continued engagement. Modern schemes often use technology to make things easier for clients. Many retailers have moved from traditional card-based systems to digital platforms and mobile apps. Some programs even use artificial intelligence (AI) and machine learning (ML) to predict customer priorities and offer highly individualized rewards.

Loyalty schemes are crucial for businesses aiming to make a mark in a competitive market. By nurturing affinity and appreciation among buyers, retailers ensure repeat purchases and cultivate advocates who authentically champion their brand . This ripple effect goes beyond conventional success metrics, influencing the very fabric of how businesses thrive in a landscape constantly shaped by evolving consumer dynamics. In essence, a free or paid loyalty program can become your strategy and a catalyst for sustained relevance and genuine commitment.

How do retailers build customer loyalty programs?

Building customer loyalty is a multifaceted process that retailers undertake to cultivate lasting relationships with their clientele. Retailers employ various strategies to foster this allegiance, recognizing that it goes beyond just transactional interactions.

‍ Here are some key aspects that contribute to the successful construction of customer loyalty in the retail landscape.

Personalized customer experience

Retailers prioritize offering a personalized and tailored experience to each customer. This involves understanding individual preferences, purchase history, and demographics to provide targeted recommendations and promotions. A customized experience makes customers feel valued and understood, fostering a stronger connection with the brand.

Rewarding loyalty programs

Implementing effective loyalty schemes remains a cornerstone for retailers seeking to build lasting relationships with their customer base. These programs offer exclusive rewards, discounts, or perks to repeat customers, incentivizing them to choose the brand over competitors. The sense of exclusivity and tangible benefits enhances buyer allegiance.

Seamless shopping journey

Ensuring a convenient and seamless shopping experience is crucial for customer retention. Retailers invest in user-friendly online platforms, mobile apps , and streamlined in-store processes. A hassle-free purchasing journey reduces friction points, making it more likely for users to return for future transactions.

Quality products and services

Consistently delivering high-quality products and services is a fundamental factor in building and maintaining customer fidelity. Retailers focus on product excellence, durability, and reliability, meeting or exceeding customer expectations. Positive experiences with the brand's offerings contribute significantly to satisfaction.

Community building and engagement

Establishing a sense of community around the brand is a strategy embraced by successful retailers. This involves engaging customers through social media, events, and online forums, creating a space where people feel connected to both the brand and fellow enthusiasts. A strong community fosters loyalty and advocacy, as clients become emotionally invested in the brand beyond the products.

Adaptability and innovation

Staying ahead of industry trends and embracing innovation is crucial for retailers aiming to build long-term loyalty. This includes adopting new technologies, incorporating sustainable practices, and adapting to changing consumer preferences. A brand that demonstrates adaptability and forward-thinking resonates with buyers, positioning itself as a leader in the market and encouraging continued loyalty.

‍ To sum up, building customer loyalty in the retail sector is a strategic and ongoing effort encompassing various customer experience elements. By focusing on exceptional service, personalized interactions, and a commitment to ethical and sustainable practices, retailers can work on the customer lifetime value and create a devoted base.

What are the benefits of customer retail loyalty programs?

In the era before the internet, advertisements were broadly targeted at the masses, resulting in less effective, inauthentic, and sometimes annoying campaigns.

Thankfully, modern marketing has evolved to offer various personalized promotion methods that enable direct communication with individuals, ultimately enhancing customer lifetime value. Among these methods, a retail loyalty program is a powerful tool.

Let's explore the multifaceted benefits of incorporating customer retail loyalty programs into modern marketing strategies.

Data gathering and personalization

Retail loyalty schemes are invaluable for collecting user data, particularly the coveted zero-party data . This data, voluntarily provided by people, offers deep insights into their preferences, habits, and demographics. With this wealth of information, businesses gain a nuanced understanding of each customer's buying behaviors, allowing for hyper-personalized marketing strategies.

Enhanced customer experience

Participating customers contribute to the success of the loyalty program and reap the rewards in the form of targeted offers and additional perks. These tailored incentives showcase a brand's appreciation for customer loyalty and enhance the overall shopping experience. By catering to individual preferences, businesses create a sense of uniqueness and satisfaction, fostering a stronger emotional connection.

Minimizing customer churn

One of the primary challenges in the retail industry is customer retention. Retail loyalty programs are pivotal in addressing this issue by significantly reducing churn . The personalized benefits offered through these programs create a sense of loyalty and commitment, making it less likely for clients to explore alternatives. This, in turn, contributes to a stable customer base, a fundamental element for sustainable business growth.

‍ Explore proven tactics for reducing churn in your loyalty program. Learn from the biggest players how to stop this from happening. 

Strategic marketing advancement

Implementing a retail loyalty program signifies a shift toward a more practical marketing strategy. In contrast to the traditional mass marketing approach, this method allows businesses to tailor their promotional efforts to specific customer segments . As a result, marketing efforts become more efficient, resonate better with the target audience, and yield a higher return on investment.

‍ Discover 19 market-proven loyalty segmentation templates and differentiate campaigns and rewards.

What are the most popular types of customer loyalty programs?

Points-based loyalty programs.

A point based loyalty program is a widely used method to foster customer loyalty. In the most common configuration, customers accumulate points with each purchase, with the number of points correlating to the amount spent. This system encourages higher spending, as more significant expenditures result in more reward points.

These programs extend beyond transactional activities, with clients earning points for various non-purchase actions. This includes program enrollment, referring friends, celebrating birthdays, or engaging on social media. The accrued points can then be redeemed for rewards such as free products, exclusive offers, or discounts.

The appeal of points-based loyalty schemes lies in their ability to incentivize repeat business, thereby increasing the overall value of a customer over time. Additionally, these programs have a low barrier to entry and serve as valuable tools for gathering data. They prove particularly effective for businesses with frequent customer transactions, as well as those dealing in consistent product lines like fuel or multi-brand FMCG products.

Tiered loyalty programs

The tiered loyalty scheme is a widely embraced type of loyalty scheme in the retail industry. Companies prioritize providing enhanced rewards to their most valuable customers in this system.

Tiers represent specific segments within the program, where participants are elevated based on desired customer behaviors. These behaviors could be related to spending, accruing points, earning miles, or other parameters that signify customer engagement. Advancing through tiers grants customers access to superior offers, discounts, and additional privileges .

The tiers undergo regular reassessment in more sophisticated configurations of tiered loyalty programs . Consequently, clients must continue spending to maintain their position in a particular tier. This dynamic encourages ongoing customer engagement and loyalty.

Partner retail loyalty programs

Another viable option is implementing a retail loyalty program in collaboration with a strategic partner. This approach becomes particularly appealing if you aim to attract and retain customers through partnerships.

One illustrative model for this kind of loyalty campaign involves collaboration, wherein partners mutually exchange discount coupons during co-promotional campaigns. This joint initiative adds extra value for members participating in both loyalty schemes. The critical aspect of such collaboration lies in identifying partners within a similar industry but without direct competition to maximize the initiative's effectiveness.

An example of a partner retail loyalty scheme is 7-Eleven in cooperation with Velocity .

Subscription-based loyalty programs

Making loyal customers pay a membership fee for joining your paid loyalty program may sound controversial. However, the truth is that this type of loyalty strategy is becoming more and more popular. Charging a monthly or annual fee in exchange for free delivery, discounts, and other special offers is very attractive for repeat customers who spend a lot of money on your business anyway. The most popular loyalty program of this type is Amazon Prime .

Referral-based loyalty programs

Implementing a referral-based loyalty scheme proves beneficial for businesses with infrequent customer transactions or those aiming to expand their customer base. The concept is straightforward: a customer purchases a product from the brand, tries it out, and then advocates for the company to others. Consequently, the referrer reaps tangible benefits for their efforts in attracting new customers.

‍ The mechanics of a referral loyalty program vary depending on the chosen strategy. For instance, a client might receive a reward for each referral when the referred person joins the loyalty scheme or makes their initial purchase. Alternatively, the reward could be granted each time new customers complete a purchase.

More sophisticated referral programs operate on a milestone basis. In such instances, members unlock progressively better rewards as they successfully recommend more individuals to engage with the brand. This tiered approach encourages sustained efforts in expanding the customer base.

Rewards customer loyalty programs

The rewards program, another stalwart in the customer engagement landscape, operate on the principle of immediate gratification. Instead of accumulating rewards points over time, members receive instant rewards for their patronage. These rewards can take various forms, ranging from discounts and freebies to access to exclusive events or early product releases. By providing immediate value, rewards programs create a sense of instant appreciation, enhancing the experience.

The allure of instant gratification often translates into increased customer satisfaction and loyalty. Businesses implementing rewards programs strategically tailor their offerings to align with their target audience's preferences, ensuring that the rewards resonate with them personally, and fostering a deeper connection.

The 10 most interesting loyalty programs in retail

1. ikea family.

IKEA Family stands out as one of the most prominent and widespread brand loyalty scheme worldwide. As a member, individuals enjoy various perks, including discounts, exclusive offers, delightful birthday surprises, and complimentary hot coffee or tea during each visit to an IKEA store. To join, existing customers must create an account on IKEA's website and verify their phone number. Notably, the program amassed over 150 million members in 2020 and continues to expand daily.

IKEA Family's mobile app is a key part of IKEA's strategy. The brand sends text messages and push notifications to keep consumers engaged and updated on new products.

2. Samsung Rewards

Individuals using Samsung Rewards should initiate the process by creating a Samsung account to begin participating in the Samsung customer loyalty program. 

Subsequently, members can accumulate loyalty points by making qualifying and repeat purchases on Samsung.com, the Shop Samsung App, Samsung Pay, and the Samsung Galaxy store.

The loyalty program members can accumulate points when making purchases. Specifically, users receive 4 points for every $1 spent on QLED TVs, The Frame TVs, home appliances, and all accessories. Typically, points can be claimed between 15 and 30 days after the delivery date of the items. Once earned, these points are redeemable on Samsung.com or the Shop Samsung App, allowing users to use them towards future purchases.

3. Gap, Inc. Good Rewards

There are two simple ways to start reaping the benefits of the Gap Good Rewards customer loyalty program. The first method is to become a member by completing registration on the official Gap website. After registration, members can earn 1 point for every $1 spent on purchases from brands within the Gap family. These accumulated points can then be redeemed at a rate of 100 points for $1, which can be applied toward future purchases of Gap family products.

Users can choose a dedicated Gap credit card as part of our customer loyalty program. Users using this card'll accumulate 1 point for every $5 spent on Gap products in the first tier. Users earn 1 point for every $1 spent in the second and third tiers. To progress from the first tier to the second tier, users need to spend over $500 annually on Gap products using the Gap credit card. As an extra perk, users receive a 20% discount on their first purchase when they open a new credit card and use it for shopping.

4. Timberland Community

“We’re on a mission to create a movement for a more equitable and greener future. As part of our 2030 goals to be net positive, we want to create a membership program where our customers can share their voice, and together we’ll do something special. We’re also committing with our partner Treedom to create a ‘Community forest,’ helping to build a greener world. The Timberland Community will engage members and create a movement where they can share their experiences and feel part of it. We’ll surprise them with exclusive benefits and perks, tailored to their interests.”

Giorgio D’Aprile Timberland Senior Marketing Director

Users can also opt for a specialized Gap credit card as part of the customer loyalty program. With this card, users earn 1 point for every $5 spent on Gap products in the initial tier and 1 point for every $1 spent in the second and third tiers. To move from the first to the second tier, users need to spend over $500 annually on Gap products using the Gap credit card. Additionally, there's a bonus of 20% off their first purchase when users open a new credit card and use it for shopping.

5. Dell Rewards

Dell Rewards operates on a straightforward cash-back system. To participate, users must either sign in to their existing Dell Account or create a new one. Once registered, members can earn 3% back in rewards when they purchase at least $800 within 12 months or utilize Dell financing. As an added benefit, members also qualify for free expedited delivery.

For example, if a user buys a laptop for $1,500, they would receive $45 back in rewards. These rewards can be redeemed through the Dell Rewards member portal and typically appear in the account within 30 business days after the order's delivery date.

6. LEGO VIP

LEGO VIP is a customer loyalty program designed to reward individuals for purchasing LEGO products online through eCommerce and at physical stores. Unlike its name, LEGO VIP is open to anyone interested in signing up on the LEGO website. To join, simply users have to visit the LEGO VIP landing page and complete the registration process.

It's crucial to note that points can only be earned by purchasing LEGO products directly from the LEGO website and their official stationery stores. Purchases made through other retailers, such as Amazon, do not currently accrue points in the LEGO VIP program.

Besides points, they receive early access, which allows them to view and purchase certain LEGO sets before the customers who aren't members of the program. VIP also grants free add-on items and sets when buying specific LEGO products.

7. Nike Membership

Nike Membership is a retail loyalty program that doesn't revolve around earning points. Instead, users are given access to the community, deals, free shipping (and returns), and exclusive Nike products.

Upon registration, loyalty program members immediately enjoy exclusive perks, including free shipping and returns (available in the US), entry to the member shop featuring a unique collection of Nike products, and access to special offers. Nike Membership also unlocks four mobile applications: 

1. Nike App . A shopping application that informs loyalty program members about the latest products and personalized promotions.

2. Nike Run Club . An app designed to help runners enhance their performance with guidance from Nike coaches and athletes.

3. Nike Training Club. It offers diverse workouts for different fitness levels, styles, lengths, and intensity levels. It includes training programs, nutrition tips, and wellness guidance from Nike trainers.

4. SNKRS app . Providing a platform for users to explore and purchase exclusive Nike shoes and gear.

8. GameStop PowerUp Rewards Pro​​

The GameStop PowerUp Rewards Pro is a straightforward, intriguing, tiered, and rewards program. Users unlock a range of privileges by simply signing up and paying an annual fee of $14.99. These include a $5 monthly reward, a $10 welcome bonus, the ability to earn double purchase points, a 2% back in rewards points, and exclusive early access to various products.

9. The Nordy Club

The Nordy Club is a traditional retail customer loyalty program. To participate, individuals can either sign up as Nordy Club members or apply for a Nordstrom credit card. Under this scheme, users accrue 1 point for every $1 spent, regardless of the payment method.

If a Nordstrom credit card is utilized for payment, loyalty program members earn 2 points for every $1 spent. These accumulated points can be converted into Nordstrom Notes, which can then be redeemed for any Nordstrom products. What's more, Nordy Club members enjoy exclusive access to special sales, offers, and events.

10 H&M Members

To become a member of the H&M retail loyalty program , individuals must sign up either on the H&M website or through the H&M app. Once enrolled, members can accumulate points with each purchase and gain access to exclusive benefits and discounts.

For every $1 spent at H&M, you earn 1 point. Accumulate 200 points, and you can redeem them for a $5 reward. As a program member, you enjoy a 10% discount on your first purchase, free delivery on orders over $25, hassle-free online returns, birthday treats, exclusive invitations to shopping events, and digital receipts. Stay informed about promotions and fantastic deals through the H&M mobile app .

Retail programs signify a strategic shift in the industry, as discerning brands recognize the integral role these initiatives play in cultivating lasting relationships with buyers – from finely tuned personalized experiences to incorporating innovative models like subscription-based and partner programs, retailers are tactically refining their approaches to elevate customer loyalty.

Beyond the conventional realm of discounts, loyalty schemes serve as indispensable tools for brands, offering benefits such as data-driven personalization, effective churn reduction strategies, and nuanced advancements in strategic marketing. This discussion explains ten standout loyalty schemes, each exemplifying diversity and creativity – from the family-centric IKEA Family to the technologically sophisticated Samsung Rewards and the fashion-forward H&M Members.

‍ In an intensely competitive market, the linchpin for sustained success in retail schemes lies in their adaptability and innovative edge . The highlighted examples illustrate how leading brands, guided by a profound understanding of evolving consumer needs, consistently stay ahead of the curve. As consumers increasingly demand value that transcends traditional transactions, the future of retail loyalty hinges on seamlessly intertwining technology, hyper-personalization, and a genuine commitment to customer welfare. Whether an industry titan or an emerging brand, the unequivocal takeaway is this: invest in cultivating enduring relationships, and loyalty will organically ensue .

Get more inspiration from the Top 100 Loyalty Programs report, or see the future of loyalty schemes at Loyalty Trends research.

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Converting disconnects into loyalty opportunities

PwC Customer Loyalty Executive Survey 2023

of executives say their customers are more loyal than before the pandemic

of consumers say they’re more loyal than before the pandemic

of executives say their loyalty program should provide more rewards or benefits

As companies continue to navigate market volatility, securing and expanding their relationships with their customers is perhaps more important than ever. Short-term pressures such as inflation and uncertain supply chains can push some leaders to reactively focus only on retention. But if you don’t understand how your customers make loyalty decisions throughout their journey with your brand, your business won’t be able to turn loyalty into real growth.

PwC surveyed more than 400 executives who are either responsible for or share influence regarding customer loyalty or retention decisions. We wanted to learn how well their companies are capitalizing on customer loyalty opportunities as they address current challenges. The PwC Customer Loyalty Executive Survey 2023 followed our May 2022 survey of more than 4,000 consumers in the United States. Taken together, the two surveys can help illustrate openings, moments and other pivotal points when you can increase customer engagement with your brands and improve the chances that they’ll not only stay but develop deeper bonds that turn loyalty into a growth engine.

The price-experience gap: A disconnect between business and consumers on loyalty

Unlocking the customer loyalty mindset.

Companies often define loyalty differently than consumers do. While businesses may consider a wide range of customer actions as evidence of loyalty, consumers have a narrower view of what it means to be loyal to a brand. Understanding this discrepancy can help you better focus loyalty efforts and investments.

Executives and consumers differ on when brand loyalty is won. More than twice as many executives (25%) as consumers (11%) believe that good customer service is the key to winning loyalty, while only half as many executives (23%) as consumers (46%) believe that high-quality products are key.

There’s a big difference between executives and consumers on why customers leave a brand. Executives blame price changes or competition, but many consumers cite bad experiences with products or customer service. This “price-experience gap” reveals a disconnect on what can drive loyalty. To keep customers, focus on providing great experiences, not just low prices.

Bridging the gap in why customers leave can be critical as your company invests more in loyalty efforts. Nearly two-thirds (63%) of executives say their company’s loyalty program budget increased in the latest planning cycle, and businesses think of loyalty as a growth engine just as much as a retention tool.

Retention and growth can be crucial in light of the contrasting views on COVID-19’s impact on customer loyalty. While 61% of executives believe customers are more loyal now than before the pandemic, only 20% of consumers agree.

Personalized experiences can help drive loyalty, but some companies may not be delivering the right experiences in moments that matter. For instance, easy or fast access to products or services topped the list of what businesses provide to customers at 47%, but only 22% of consumers said that was most important in a personalized experience.

What’s helping and hurting customer loyalty?

Executives and consumers largely agree on why a person will likely keep using or buying from a brand. The quality, reliability and consistency of products or services (executives 46%, consumers 48%) and good value for the price (executives 42%, consumers 53%) are the top two reasons by far on each list. 

But when it comes to the effects of the pandemic, some businesses are overconfident about loyalty and may be taking customer relationships for granted. Among executives, 61% say their customers are more loyal today; that number was higher in media and entertainment (79%), technology (75%) and consumer products (69%). But only 20% of consumers told us they’re more loyal to brands they bought from or used before the pandemic. By comparison, 75% of consumers said there’s been no change in their loyalty, while only 26% of executives say there’s been no change.

As for other impacts on loyalty in the last two years, the top negatives are familiar from news headlines: inflation, supply chain disruptions and talent shortages. The pandemic was actually cited by more executives as having a positive impact on loyalty (45%) than negative (33%). The developments most cited as having a positive impact on customer loyalty were digital distribution channels (such as direct-buy links from social media), changing customer behavior and changes to their formal loyalty programs.

What you can do

• Think long-term. Adjusting for current challenges such as inflation is understandable, but not at the expense of your long-term strategy. Consider how changes to your loyalty efforts in the near term also can help open opportunities for a lasting relationship.
• Be realistic. Acknowledge how the pandemic fundamentally changed some consumer preferences and behaviors. Don’t assume past approaches to loyalty will continue to drive customer growth in the future. 
• Keep the foundation in mind. Rewards points and a personalized experience are nice, but one of the best ways to draw in and retain customers is still by offering a rock-solid product or service.

Explore further

What executives think is boosting and hampering loyalty, loyalty budgets are up, but long-term engagement is elusive.

On average, executives told us their current annual budget for loyalty is about 5% of company revenue, with higher percentages in media and entertainment and consumer markets and lower percentages in consumer products. Loyalty efforts include a formal loyalty program at 70% of businesses, with retail (82%), tech (81%) and consumer products (80%) most common. In addition, 63% of executives say budgets for those formal programs increased in the most recent planning cycle.

Those investments make sense when you consider that an overwhelming majority of respondents — 91% — say they agree that their formal loyalty program should provide more rewards or benefits for members. Differentiation also may be a goal. Even as many executives touted their loyalty program’s unique benefits compared to competitors, 80% said their program is similar to others in their industry.

Stronger bonds with customers can help drive longer and deeper relationships. While frequency of engagement can vary by industry — supermarkets versus airlines, for example — seven out of ten executives say they define an active customer as one who has been active for 30, 60 or 90 days. Only 11% say 12-month active, and only 2% say 24-month active. With customer lifetime value becoming a more critical metric at many — and many types of — companies, expanding engagement and creating long-term loyalty beyond a few months of activity can be critical.

• Dig into what makes your  loyalty program  truly unique versus keeping up with the competition. Great rewards and benefits are still a powerful lever, but not if they’re indistinguishable from the rest of the pack.
• Go beyond your formal loyalty program and consider a customer’s end-to-end experience with your brand. With customer engagement in mind, focus on employee experience as well as customer experience and determine which model of customer centricity can be the most effective for your business.

Consumers show loyalty in fewer ways than executives think

Customer service alone can’t save you.

So how are companies approaching loyalty-building opportunities and challenges? Customer service is by far the most common department responsible for shaping customer loyalty goals (39%), more than twice as much as marketing (17%). No other department topped 10%. The top executive priorities for activating loyalty are enhancing customer service (61% say it’s a high priority) and personalizing the customer experience (61%).

There’s no question that customer service is important, especially in sectors where that interaction can go beyond customer retention to help win a bigger share of their wallets. And 32% of consumers told us in May 2022 that they stopped using or buying from a business after a bad experience with customer service. But that wasn’t No. 1 among consumers, as 37% said they left after a bad experience with products or services. In many cases, customer service can help handle immediate issues, but that’s often too far downstream in the customer relationship to solely drive loyalty.

Loyalty efforts should focus on several different points in a customer’s journey, including when you can win loyalty. But executives’ top response to when customer loyalty is won or lost was again centered around good customer service, while consumers — by a huge margin — said when they used a product or service and liked the quality was the key point when deciding to stick with a brand.

• Do you want your most frequent contact with customers to be through customer service? For loyalty to be a growth engine, define your customer relationship and the moments that matter. Consider the various touchpoints with customers as loyalty opportunities and understand what can help drive  customer attraction , not just retention.
• Realign and refocus. Customers are telling you exactly what matters most to them. Consider using customer research panels to help you prioritize customer wants, needs and preferences — and to validate your strategic approach.
• Experience can extend beyond employee interactions with customers. Reassess your core customer offerings to see where you can build deeper relationships and strengthen loyalty.

Consumers and executives differ on when loyalty is won

Striking the right balance with personalization.

Personalization can help you maintain and grow customer loyalty, but many businesses are still searching for the most effective mix. Consider what each group says about personal data. First, companies we surveyed said they generally collect more types of data to create personalized experiences than what consumers tell us they’re willing to share. Second, while there’s alignment on basic contact info and personal identifiers — email, birthday and sex — consumers are less open to more direct contact and sharing usage and location data.

A bigger disparity exists in personalized experiences themselves — namely number versus relevance. Companies in our executive survey on average provide four types of personalized experiences, led by easy or fast access to products or services (47%), loyalty programs with flexible rewards (43%) and discounts or rebates on products customers regularly use (40%). Consumers also said discounts and rebates (48%) and flexible loyalty programs (43%) were among the most important parts of a personalized experience, but nothing else came close. 

• Dig deeper into your data and analytics to determine what is generating greater insights for building loyalty. Then consider doubling down on those and scaling back on collecting data that is less useful.
• Look at how your customers interact with your brand to help pinpoint the moments that really matter. Focus on providing what personalized experience at those moments will likely resonate most and help secure long-term loyalty.

Companies want to personalize, but consumers have some limits

About the survey.

PwC surveyed 410 executives across a range of consumer-facing companies between October 15 and November 22, 2022. Respondents in the online survey included C-suite officers, business owners, upper management, directors and corporate board members in the US. Roughly two-thirds (64%) of respondents have sole responsibility for business decisions on customer loyalty or customer retention, and one-third (36%) share influence with others regarding business decisions on loyalty or retention.

The PwC Customer Loyalty Executive Survey 2023 follows the PwC Customer Loyalty Survey of 4,036 consumers in the US in May 2022. Respondents in that online survey were adults 18 and older, with demographic weighting to achieve census representation on age, gender, race, US region, income, employment status and marital status.

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Principal, Customer Transformation and Loyalty, PwC US

George Korizis

Customer Transformation Leader, PwC US

John Rolston

Customer Transformation and Loyalty Partner, PwC US

Anjali Fehon

Customer Transformation and Loyalty Director, PwC US

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Digital Innovation and Transformation

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• Assignment: Digital Winners and Losers

Starbucks: Winning on rewards, loyalty, and data

Starbucks Rewards Program generates customer loyalty, increased revenue, and data for the company to create meaningful 1:1 relationships and personalized marketing efforts.

Starbucks Reward Loyalty Program

The Starbucks Reward Loyalty Program has a staggering 16 million active members (as of March 2019), with 11% growth of their user base in Q2 2018. Starbucks attributes 40% of its total sales to the Rewards Program and has seen same store sales rise by 7%. The Reward Program is available on mobile devices as the Starbucks app, and has seen impressive membership and growth since 2008, with multiple iterations on its original form. The investment made into the mobile interface has increased the frequency and spend of both regular and occasional customers. Starbucks uses this tool to individually market specific products and features based on data collected from the app about its users. Customers can order and pay through the app ahead of arriving at a physical location, as well as earn stars (rewards) that translate into free drinks, food, and merchandise. Starbucks is a clear winner that has reinvented their relationship with customers and captured enormous value through their investment into digital technologies.

How does Starbucks create value?

Customers benefit from using the app by:

• Ease of payment in store through mobile app
• Ability to order and pay ahead of arriving in store (and therefore skip any Monday morning rush lines by having a separate ‘mobile order pickup’ station – which in itself serves as a highly effective marketing tool for the app)
• Rewards and benefits: such as free refills on brewed coffee and free drinks on member’s birthdays, relatively quickly earned other rewards from purchases, such as free food/drinks/merchandise
• Special member events
• Ability to send other members and friends gift cards through the app
• App integration with other platforms such as Spotify to discovery music playing in store (a big part of Starbucks and more generally coffeehouse culture)
• Members are first to know about upcoming seasonal and new product releases

Starbucks reaps many of its own ‘rewards’ from the app:

Pathways to a Just Digital Future

All these features have created an intense loyalty for customers to the app and reward program, which kicks back nicely for Starbucks. Members of their rewards program are feeding in valuable data that Starbucks can then mine to personalize marketing efforts to individuals and create a uniquely direct relationship with their customers. Besides drawing in the ‘occasional user’ to come back and increase their frequency of purchase (key in this business), the app has also been seen to increase the frequency and spend of regular and super-user customers. According to CFO Patrick Grismer, “We know from our experience that when customers join our rewards program, their total spend with Starbucks increases meaningfully”.

Aside from the increase in revenue associated with the app, the real value lies in the innovative potential uses for the large amounts of user data collected, which forms the base of Starbucks’ digital strategy. Starbucks has begun experimenting with digital menu boards in their physical locations to allow for a dynamic menu based on customer demand (varying with regional preferences and times of day), that would ideally continue to boost same store sales. The decision of where to place new stores and how to expand has also been informed by this user data. The ways in which this user data can be used in the future are important in the ever more personalized retail world, where customers want less of being ‘talked at’ and more of being included in a conversation.

What’s Next?

Starbucks continue to prove itself to be truly customer centric, building innovation around the core theme of their relationship with customers. Their willingness to adapt and invest in their digital technology has allowed them to create and capture enormous value for both customers and the company. As Starbucks gets access to more customer data, the ability to continue to create more meaningful, personal relationships with customers will only increase, and this is how Starbucks is positioned to win in the future. They have continued to innovate on ease of use with the app, now integrating voice as a feature when ordering for mobile pickup. Of course, Starbucks will have to continue within this theme of digital innovation to remain a winner in the future. Use of consumer data builds a strong base for a number of potential technologies to harness in the future, but it doesn’t guarantee success.

https://www.e-zigurat.com/innovation-school/blog/companies-digital-transformation-strategies/

https://www.restaurantbusinessonline.com/marketing/starbucks-rewards-program-pushes-chains-growth

https://www.usatoday.com/story/money/2019/03/19/starbucks-redesigns-its-loyalty-program-so-you-get-free-stuff-sooner/3174227002/

https://zinrelo.com/loyalty-rewards-case-study-new-starbucks-rewards-program.html

https://themanifest.com/app-development/success-starbucks-app-case-study

Student comments on Starbucks: Winning on rewards, loyalty, and data

I loved this post, Leah! (Not just because I’m a Starbucks junkie and heavy user of the app.)

One thing that I think about whenever I use mobile ordering is the way my experience has changed in the store – I spend less time on the transaction, keep my headphones in, and don’t have to interact with anyone behind the counter. This is a huge positive for me (e.g., when I’m in a rush) and probably makes me lower cost-to-serve for Starbucks, but I wonder does the presence of in-and-out customers like me make non-mobile users’ experience worse? Are they served more slowly? Do they no longer enjoy lingering over a book in Sbux’s “third place” when there’s a constant stream of mobile customers with headphones in, coming and going? Maybe this is why Starbucks is doubling down on its Reserve Roastery high-end concept, to segment out the grab-and-go types like me from the coffee shop experience-seekers.

To generalize, it seems that greater investment in/growth of digital channels can negatively impact traditional channels if not addressed proactively.

Really good point!

Great article highlighting Starbucks, Leah!

Your blog post reminds me of our first case in class on Dominos Pizza. At one point, Dominos was considered a huge winner in the app/delivery space as they were an early adopter of app & ordering technology. But as competition moved quickly, other players such as UberEats and DoorDash threaten the competitive advantage these single-brand apps, such as Dominos, had developed. I sat in class wondering if Dominos could follow the Starbuck’s app model and develop a loyalty program, or if selling pizza vs. cappuccinos are just too different of business models?

Interesting read! I think the membership programs that have become increasingly common in retail are an interesting way for traditionally analog companies to begin to experiment in the digital world. There is clearly value on the table for both the company and the consumer so I can imagine it would be an easier internal sell than some other digital transformation projects. I wonder how Starbucks will continue to improve their application to build an experience that connections the physical and digital worlds for their consumers and differentiate against other big chain coffee shops.

Thanks Leah for the interesting post. I completely agree that the reward loyalty program is an effective initiative to reduce the customer churn due to the entry of new coffee players. However, I believe that it is even more important to improve the customer experience by creating new products that match with the evolving preferences of customers. As you mentioned in the article, data will play a critical role in the future to offer a more personalized service. Starbucks has developed some initiatives in this line. For example, in 2019 Starbucks installed 1,900 Mastrena II expresso makers, which have IoT sensors for preventive maintenance purposes. This initiative will allow Starbucks to reduce machines’ failures, reduce customer wait time and improve customer experience. In the future, Starbucks should continue working with data to improve their products and increase customer retention.

Great analysis Leah and really unique viewpoint on what’s next for Starbucks! As brands continue to focus on building a deeper connection with their consumers loyalty programs that collect more personalized data and usage trends will help organizations better differentiate their service and product offerings. I am curious as Starbucks begins to really leverage big data what major changes do they decide to implement. There may be opportunities to decentralize operations and curate offerings providing localized products, location designs, and services which can further help Starbucks capture a larger share of wallet.

Great post, Leah!

I feel conflicted about Starbucks’ shift to the digital channel that allows for a greater number of customers to be served in a shorter amount of time. Personally, I’m the type of customer that spends hours at coffee shops for the quiet and relaxing ambiance, smell of coffee, and calming music. These days, Starbucks stores feel more like McDonald’s and the relaxing user experience has been completely lost. While they’ve now lost me as a customer, I recognize that they’ve gained 8 in my place that probably result in higher profitability. A win for Starbucks, but unfortunately a loss for me.

Great post! This is super interesting to me – I had no idea this was such a powerful tool. There is one main thing I’m wondering about: What do you think allowed Starbucks to be more successful than other coffee shops with their Rewards program? Was it more the technology, the convenience, the recommendations, or the combination of everything together? I guess my thought is that I don’t know why more companies haven’t been able to replicate this.

A second thought is just that the power of this loyalty seems so strong that it may be impossible to disrupt, despite lower prices elsewhere. We see new coffee shops popping up all the time, and I’m not sure any of them stand a chance knowing this.

Thank you for sharing! This has opened my eyes to how important loyalty is and how brands can work on building that with customers.

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How The Minifig Co. Uses Embedded Loyalty to Drive Sales

LEGO© is so much more than a toy brand. The colorful tiny blocks are a global phenomenon and have opened doors for endless creativity for children and adults alike. Starting in 1949 with simple plastic bricks, LEGO© has continuously evolved, adding new products to its collection. 

One notable addition was the LEGO© Minifigure—small posable figures that brought the toys to life. This revolution opened doors for other creative brands. Brands like The Minifig Co. , a DTC brand that sells premier custom-printed LEGO© minifigs, minifig accessories, and building kits.    

View this post on Instagram A post shared by The Minifig Co - Custom LEGO Minifigs (@theminifigco)

The Minifig Co. founder, Garett Milks, shares his experience building a passionate community of loyal LEGO© lovers. With a loyalty program powered by Smile.io , The Minifig Co. has encouraged customers to shop with them over competitors. 

The Challenge: earning customer loyalty in a competitive niche market 

As a custom LEGO© minifig seller, The Minifig Co. operates in a competitive market, competing with a giant toy brand. Customers have a variety of brands from which they can choose, so providing an incentive for repeat purchases is vital. That’s where The Minifig Co.’s loyalty program comes in handy. 

The Minifig Co offers 1 Stud (point) per dollar spent on purchases. Shoppers can also earn points by signing up, celebrating a birthday, or interacting on social media. Customers can then cash their points in for a variety of rewards like discounts on future purchases or exclusive free products like drink koozies, pint glasses, fanny packs, and more. 

“The items we offer are generally exclusive to the rewards program, so everyone feels special using points for them,” Garret explains. “We usually brainstorm things people may use that we can have branded or off-the-wall quirky items that are too hard to pass up. Like the fanny packs.”

The Solution: Make retention obvious with a seamlessly embedded loyalty program

The Minifig Co. configured a motivating rewards program to attract customers to its store over competitors. But simply having the program is not enough to attract, engage, and retain customers. 

Not only does The Minifig Co. offer motivating rewards, but they’ve made the program hard to ignore by embedding loyalty content throughout its website . 

Points information on product pages 

No matter what product a customer is browsing, they’ll find all the relevant information they need. This includes how many points they would earn by purchasing the product. 

The Minifig Co. uses Smile.io App Blocks to seamlessly embed points information onto every product page . The branding matches the online store’s theme to enhance, not disrupt, the customer experience. 

The App Block also seamlessly uses the store’s custom points currency name, Studs , and automatically calculates the points based on the product’s price. With no manual effort, The Minifig Co. can easily keep its loyalty program information relevant on every product page with a few clicks of a button. 

Points information on the customer account page 

The Minifig Co. makes points front and center again on customer account pages. Since Smile.io automatically integrates with Shopify customer accounts, shoppers can find all their loyalty program information on their store account page. 

When customers view their individual store accounts, they’re greeted by a bright yellow message telling them how many points they have, encouraging them to redeem them, and guiding them to learn what they can redeem. 

When a customer clicks on the “Ways to redeem” button, the loyalty program panel automatically opens and reveals all the rewards they can redeem and how close they are to the next reward. 

Integrating loyalty program information into a critical touchpoint in the customer journey is a great way to encourage reward redemption and motivate customers to make another purchase. 

The Outcome: 52% YoY growth in rewards redemption rate  

The Minifig Co. is cashing in on the value of embedded loyalty content. It’s evident from a user experience point of view how these prominent reminders are helpful. 

Using the embedded content, The Minifig Co. has achieved impressive results with its loyal customers:

• 52% increase year-over-year in its rewards redemption rate. 
• Active loyalty program participants spend an average of 57% more per order .
• 893% more total average orders from customers who redeem rewards.

These impressive lifts in rewards redemption rates, average order values, and total orders indicate that customer retention pays off .  

The Minifig Co. team puts the same attention to detail in its loyalty program that it does with its meticulous minifigs. After nearly a decade of trendsetting for LEGO© lovers, The Minifig Co. isn’t slowing down any time soon. 

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CStore Decisions

Getting the Most From Loyalty Programs

By Elie Y. Katz | May 1, 2024

Loyalty programs are everywhere in the retail industry. Customers encounter them multiple times almost every day—whether shopping at a convenience store, buying a cup of coffee, or even purchasing a new car.

Retailers have many questions about implementing a loyalty solution. Do loyalty programs really work? Can they influence people’s behavior and entice them to spend more money? Will a loyalty program reduce the likelihood of customers shopping at one of your competitors?

An Oracle loyalty study found that retailers that can develop and sustain distinctive loyalty programs that change customer behavior will create a true competitive advantage.

There is a clear need for loyalty programs in the retail industry.

However, rather than simply copying current programs, which will only lead to a competitive stalemate and increased costs, retailers — both those planning to introduce a loyalty program for the first time and those wanting to tune up their existing program — should design loyalty program offerings to yield a true competitive advantage and showcase a brand’s identity.

The benefits of loyalty are many. According to Loyalty 360’s newly released 2024 State of Loyalty Report, brands putting effort into their loyalty strategies are experiencing increased sales and greater customer retention.

A strong 63% of consumers cite a willingness to pay more to shop with the brands they’re loyal to — up from 59% just a year ago. Even better, this positive movement is observed across age demographics, from Gen Z to Baby Boomers. Consumer behavior is evolving. And with it, marketing tactics that allow us to provide more human experiences — more personalization, more relevance, more timeliness.

Loyalty 360, a loyalty marketer’s association, also found that consumers have developed a taste for these experiences and are rewarding the brands that can provide them with loyalty. This loyalty becomes a major differentiator during times like now.

If you want true customer loyalty, you must become an active listener to your customers. The 2024 State of Loyalty report found that listening is just as important as speaking to your customers. Retailers must give customers opportunities across touchpoints to voice their preferences, motivations and interests. Ultimately, these data points will enable chains to deliver the relevance today’s consumers demand.

The Loyalty 360 report identified four key areas on where to focus your loyalty program efforts. They are:

Personalize. Deliver contextually relevant messages to consumers on an individual level. Leverage basic data points and create message triggers to improve relevance even with limited customer knowledge. This will give you time to expand your data profiles with richer zero-party data.

Incentivize and Reward. Play to the economic desires of consumers. Provide discounts or coupons in exchange for data sharing, and ensure you recognize and reward loyal customers.

Optimize the Human Experience. Treat your customers like humans, not machines who are merely receiving data. Work to create more seamless experiences by uniting your marketing channels and eliminating silos.

Communicate Brand Purpose. What is your mission? Your purpose? Is your brand doing good for the world? The answers to these questions matter, especially to younger consumers.

To accomplish all of these goals, retailers need to make sure they have a trusted partner. A major challenge of executing loyalty is offering a personal touch that differentiates your program from the countless others whose appeals start and end with points-for-purchases.

Quantifying your loyalty program’s success and keeping a finger on the pulse of your audience becomes much easier when your marketing solution can intelligently synthesize reporting metrics and customer insights. This is why listening to your customers is so important.

So, what do consumers want from loyalty programs? According to the 2024 State of Loyalty report, customers seek various incentives when participating in a loyalty program. Customers polled by Marigold Research for the 2024 Loyalty Report said these key incentives include:

• Points/Reward Systems, 55%
• Exclusive product or service discounts ,54%
• Exclusive access to products/events/services, 32%
• Ability to take part in contests, sweepstakes, or challenges, 25%
• Product/service recommendations based on loyalty program usage, 24%
• Communications via preferred channels, 21%
• Ability to connect with others who like the brand, 14%
• Community recognition, 12%

Today’s retail customers are not only technologically savvy, but they crave programs that fit their lifestyles and appreciate their loyalty. Don’t lose your customers to competitors who can execute better rewards programs. The data shows that loyalty is the backbone top-quartile marketers can count on to protect their business.

Elie Y. Katz is the CEO and president of National Retail Solutions (NRS).

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CASE STUDIES

The results speak for themselves.

Our clients have experienced great results from the Lift & Shift loyalty platform, seeing growth in Transaction Sizes, New Customers, Visit Frequency, Average Spend and Total Spend.

Enhancing Existing Loyalty Program Rewarded with 78.5% Sales Lift

When a rewards program isn't working as expected, it's important to re-evaluate and look for program weaknesses and opportunities. In this example a program audit found valuable opportunities for growth.

Dealer Rewards Program Increases Sales over 34%

Lift & Shift Loyalty has helped this wholesale distributor of aftermarket performance parts and truck accessories increase sales by over 30%, with a 50:1 ROI on their dealer rewards program!

Tire Distributor Increases Target Tire Sales 179%

This midwest tire distributor effectively marketed its agricultural tire line, outpacing the competition!

Manufacturer Partner Bonus Offer Enjoys 56% Increase in Sales Impact

B2B loyalty programs enjoy the most success when sales teams and channel partners are included in marketing the program. This distributor partnered with one of their manufacturers with excellent results!

5 yr Study: Dealer Engagement Increases Across All Key Sales Metrics

A wholesale tire distributor enjoys consistent dealer engagement with a data-driven reward program.

Building Sales with Downstream Customers Drives O ver $5 million in Customer Sales

A kitchen and bath surface manufacturer gains significant market share, sales and awareness of their brands and products by differentiating themselves from its competitors. 

Loyalty Program Targeted Bonus Offer Reverses Negative Sales Trend

Our client, an independent distributor of auto parts was experiencing declining sales in a product category. Read how we developed a strategic category-based bonus offer to reverse the trend.

Driving Incremental Sales for In-House Brands Generates ROI of 300%

A large U.S. distributor of off-road and 4x4 aftermarket accessories wanted to raise the profile of its four in-house brands and add stickiness to their customer relationships. This campaign paid off in many ways! 

Manufacturer Builds Direct Channel to Influence End User Buying Decisions

Distributors tend to be very protective about their relationships with end users. How can a manufacturer access sales information about their downstream customers when the proprietary data is held by the distributors? Use Distributor Data Direct™!

New Product Launch with 1000% ROI

A manufacturer of fluid handling products  launched a new product tied to their rewards program, which led to an over 1,000% ROI in a two-phase campaign! 

Hardware Distributor Sees Member Sales Grow by $14M

A hardware distributor was looking for a way to incentivize their existing customers to increase their category purchases as well as entice those using competing distributors to shift their business to them. The results were impressive!

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• Bureaus and Offices
• Contact HRSA
• Continuation Funding
• Apply for FY 2024 Behavioral Health Service Expansion

BHSE Frequently Asked Questions

Read this along with the Behavioral Health Service Expansion (BHSE) notice of funding opportunity and example forms. Find these and additional technical assistance resources on Apply for FY 2024 Behavioral Health Service Expansion .

Patient impact

Budget requirements.

• Allowable use of funds

Minor alteration and renovation (A/R) and equipment

Scope of project, general application.

Why do you require treatment services in the work plan?

For many communities, health centers are the first point of access to any health care service. To support more patients receiving behavioral health services, you must propose at least one mental health treatment activity and at least one substance use disorder (SUD) treatment activity in your BHSE work plan. 

(Added: 4/30/2024)

How can I use health center services to implement recovery and support activities in my project? 

Recovery and support can include enabling services, such as transportation or translation services. It can also be case management services, such as eligibility assistance to support patient access to programs for health-related social needs.

Examples include:

• Working with street medicine groups, housing programs, drop-in centers, and emergency rooms to create a system for referrals to your health center for people who need behavioral health services
• Making your pharmacy an authorized drug collection site for safe disposal of unused or expired medications
• Hiring staff to provide family support such as parenting services, family therapy, or services for children of parents with a mental health condition or SUD
• Developing programs to reduce stigma related to mental health conditions and SUDs

Visit Recovery and Recovery Suppor t for more ideas.

How can I use BHSE funds to increase patients’ access to treatment with medications for opioid use disorder? 

One way to do this is by expanding your pharmacy’s role in administering MOUD (formerly known as medication-assisted treatment or MAT). Your pharmacists may dispense buprenorphine, naltrexone, and naloxone without a prescription from another provider, in accordance with state law. In addition, you can offer patient education and resources to support patients’ consistent engagement in their treatment plans.

Can I apply for BHSE funding if my health center’s 2023 UDS data does not include any mental health, SUD, or MOUD patients?

Yes. We encourage you to apply for BHSE funding to start providing mental health services, SUD services, and MOUD. Your baseline data on the Patient Impact form can be 0 for any or all of these services. 

How will you measure my progress toward the BHSE objectives?

We’ll use UDS data. 

• For mental health services, we’ll use Table 5: Staffing and Utilization, Line 20: Mental Health Services (PDF - 2 MB) .
• Table 5: Staffing and Utilization, Line 21 (PDF - 2 MB) : Substance Use Disorder Services, plus
• Appendix E: Other Data Elements, Question 1b (PDF - 2 MB) : Medications for Opioid Use Disorder (MOUD)

To decide funding beyond year 2, we’ll use 2025 UDS data showing increases in the number of visits and patients receiving mental health and SUD services, including patients receiving MOUD. 

See Apply for FY 2024 Behavioral Health Service Expansion for a sample Patient Impact Form.

Do I need to project a minimum number of patients in my Patient Impact Form?

No. You should estimate patient increases that are realistic and achievable. 

• The number of mental health and SUD services patients in your 2023 UDS report
• The need for services in your service area
• Provider capacity
• Patient increases based on previous service expansions
• Your proposed BHSE activities

Can BHSE affect my H80 patient target?

Yes. We may add your estimated new, unduplicated health center patients to your H80 patient target if your BHSE award continues beyond the 2-year period of performance. 

Do I need to increase both the number of patients receiving mental health services and the number of patients receiving SUD services?

Yes. You must propose activities that will increase both the number of patients receiving mental health services and SUD services, including patients receiving MOUD, even if you already provide one of these services.

How should I present my BHSE budget request on the SF-424A?

You can request up to $600,000 in BHSE funding for year 1 and up to $500,000 for year 2.

In Sections A, B, and C of your SF-424A, record information for year 1. 

In Section E, record information for year 2. 

Leave Section D blank. 

More details:

• Section A: Request year 1 federal funding (up to $600,000) by subprogram: CHC, HCH, MHC, PHPC. List non-federal funding by subprogram, if applicable.
• Section B: Break out year 1 federal (up to $600,000) and non-federal funding by object class category.
• Section C: Break out year 1 non-federal funding by source.
• Section E: Request year 2 federal funding (up to $500,000) in the “first” future year column by subprogram: CHC, HCH, MHC, PHPC. Leave other columns blank.

If funding continues beyond year 2, we’ll base it on your year 2 BHSE funding request (up to $500,000).

What non-federal funding should I include in my BHSE budget?

Include the non-federal funds that will support your BHSE project. Do not duplicate non-federal resources included on your H80 award or any other Health Center Program award. 

Enter non-federal funds in both your SF-424A Budget Information Form and Budget Narrative attachment.

Allowable uses of funds

What are examples of allowable uses of BHSE funds?

You may use BHSE funds to support a variety of costs for your project. 

• Hiring licensed providers, community health workers, peer recovery specialists (PDF - 1 MB) , or case managers to provide counseling and care coordination
• Contracting with a specialist to provide your staff training and technical assistance in evidence-based approaches for treatment with MOUD
• Providing group counseling for patients with post-partum depression.
• Developing a tobacco cessation program for patients receiving MOUD
• Supporting certification, training programs, continuing education, and mentorship opportunities to improve your providers’ capacity to care for patients accessing behavioral health services

May I use BHSE funding to increase the FTE of a staff member who is currently less than 1.0 FTE?

Yes. You may use BHSE funds to increase the FTE of a staff member if the staff member does not exceed 1.0 FTE across all awards. Personnel compensation must align with your existing written policies and procedures and 45 Code of Federal Regulations C.F.R. § 75.430 . 

Can I use BHSE funding for recruitment incentives?

Yes. You may include recruitment incentives in a salary package that you support with BHSE funding. You should cover incentives through your indirect cost rate, if applicable. If you do not have an indirect cost rate agreement, you may charge recruitment incentives as direct costs.

Can I use BHSE funding to pay recruitment agency fees?

Yes. You may use BHSE funding to pay costs or fees for an outside recruitment agency to hire personnel for your BHSE project.

Do I need to add a certain type or number of personnel as part of my BHSE project?

No. We do not require you to add a specific type or number of personnel. You may use BHSE funding to support a range of personnel that will contribute to increasing the number of patients receiving mental health and SUD services, including MOUD.

Can I use BHSE funding for patient incentives?

Yes. You may use BHSE funds for incentives if you need them to meet your project goals.

• Have written policies and procedures for using funds for incentive costs
• Document that you’re following your policies and procedures
• Describe the types of incentives in detail in your budget narrative
• Explain how the cost is reasonable and necessary to encourage patient participation in your BHSE project activities
• Maintain appropriate records and cost documentation as 45 CFR §75.302 requires

You cannot use BHSE funds:

• For cash gift cards, food, or other costs prohibited under 45 CFR 75 or other federal regulations
• To persuade people to select your health center as their provider

You may also use non-grant funds, leverage partnerships with other community organizations, or use donations from local businesses to offer small rewards as incentives. For example, you may offer a nominal gift card to a local store, food, a meal, or a free admission voucher to a local event or attraction.

For questions about the potential impact of incentives and the federal anti-kickback statute, email the Department of Health and Human Services (HHS) Office of the Inspector General (OIG) at [email protected] . 

Can I use BHSE funding to support contingency management, such as vouchers or prizes?

HHS considers contingency management an evidence-based intervention for SUDs. You may include contingency management activities and expenses in your BHSE application if you have established policies and procedures and follows all rules and regulations related to incentives. 

Clearly describe the activities and costs in your application. If awarded, you must submit a prior approval request to your Grants Management Specialist before you start your contingency management activity or program.

Follow this guidance:

• You may use incentives to reward treatment compliance.
• The maximum value of each contingency management incentive is $15.
• The maximum value of contingency management incentives per patient per year is $75.

What types of minor A/R projects or equipment purchases align with BHSE funding?

Examples of minor A/R projects include:

• Converting an underused area to a group visit space
• Enhancing exam rooms to optimize privacy and safety
• Adapting a space to help integrate primary care and behavioral health teams

Examples of equipment purchases include:

• Virtual reality headsets and software to help patients change their behavior, develop coping skills, and manage cravings
• Point of care testing systems, such as options to test for stimulants
• Audio-visual systems to support virtual group visits with remotely located patients

If I propose to use BHSE funding for minor A/R, do I have to submit a Landlord Letter of Consent? 

If you do not own the property where the site is located, you must provide a Landlord Letter of Consent signed by the property owner. See the Landlord Letter of Consent Sample on Apply for FY 2024 Behavioral Health Service Expansion .

If I propose to use BHSE funding for minor A/R, what are the environmental and historic preservation requirements?

For information on these requirements, see Environmental and Historic Preservation Technical Assistance . Minor A/R projects typically do not require a full Environmental Assessment under the National Environmental Policy Act (NEPA). 

But you may need to comply with other requirements as applicable:

• If your project involves exterior work (for example, windows or signage) or work on a building that is over 50 years old, it may require State Historic Preservation Office (SHPO) consultation under Section 106 of NEPA.
• For buildings constructed before 1985, you may need to submit a hazmat study and abatement plan.
• If your site is in a coastal state, your project may require you to comply with the Coastal Zone Management Act.
• If your project is in a 100- or 500-year floodplain, it may require you to comply with E.O. 11988, Floodplain Management.

If I use BHSE funds to purchase a mobile unit, can I also use the mobile unit for other purposes?

Yes. But the primary purpose of the mobile unit must be to provide mental health and SUD services, including MOUD. 

How do I know if my BHSE project will require a change in scope?

Use the materials on Scope of Project to assess your scope of project (Form 5A: Services Provided and Form 5B: Service Sites). Contact your H80 program specialist for additional guidance. 

Can I make changes to my scope of project through the BHSE application?

No. However, you may submit a change in scope (CIS) or scope adjustment request through the Electronic Handbooks (EHBs). We recommend that you submit such requests 60 days before making the change. You may submit a CIS before receiving your BHSE award.

Will my application be competitive if I do not currently provide behavioral health services?

Yes. We encourage health centers that do not currently provide behavioral health services to apply. In fact, the review criteria support health centers that propose to use BHSE funds to start providing one or more behavioral health services for the first time.

Your application will receive 5 points if your 2023 UDS report included 0 mental health patients, 0 SUD patients, or 0 patients who received MOUD. Applicants with numbers greater than 0 in all of these categories will not receive these points.

How do I complete the Application for Federal Assistance (SF-424)?

For detailed instructions, see Section 5.1 of the Two-Tier Application Guide (PDF - 704 KB) . This table includes information on how to respond to specific sections.

How do I make changes to my application once I submit in EHBs?

Your authorizing official (AO) can reopen and edit your application any time before the EHBs deadline. For additional details and step-by-step instructions, refer to Reopen Submitted Applications . The AO must resubmit the reopened application in EHBs by 5 p.m. ET on the EHBs due date for us to consider your application.