Opinion

Customer loyalty program usage is soaring – why this is not a tactic to miss

For businesses aiming to build or enhance their customer loyalty programs, Matthew Forzan, founder and managing director of Yoghurt Digital, reveals his expert strategies and insider tips to help brands build stronger loyalty programs that truly resonate with customers.

With customer loyalty program usage skyrocketing by 28% in 2024 and projected to rise higher in 2025, businesses are rushing to expand their programs to capitalise on the trend. However, in their haste, newcomers and even established brands testing new strategies may be disappointed with the results.

Consumers are 10% more likely to shop with a brand that offers an exceptional loyalty program. Rewards not only build customer loyalty but also prove to be a significant asset for businesses. A company’s most loyal customers are typically its most profitable. As the relationship deepens over time, loyal customers become cheaper to serve. Moreover, they evolve into brand advocates, purchasing more, paying premium prices, and referring new customers.

Despite this, companies still fall into the trap of treating rewards as short-term promotional tools or limited-time offers. While these tactics may drive temporary interest or attract customers, they often fall short of creating lasting loyalty and can become a financial burden. For example, a restaurant offering a blanket 25% discount to all customers can backfire. While it may attract short-term traffic, it often encourages price-sensitive behaviour rather than building repeat business, turning into a financial strain instead of a true loyalty driver.

Drawing from nearly two decades of experience working with major e-commerce brands like Adairs, Forever New, and Converse, here are three key tactics to maximise profitability from loyalty programs.

Credit: iStock.com/Hispanolistic

Elements of a valuable rewards program

When designing a loyalty program, it’s important to consider five key elements that can significantly enhance its effectiveness. Depending on your business type and customer journey, you can tailor these elements to create a program that aligns with your brand’s goals.

  • Cash value: Offering tangible financial benefits like cashback encourages customer engagement and makes the program more appealing.
  • Choice: Providing a range of redemption options, such as discounts, products, or charity donations, allows customers to choose what best suits their preferences.
  • Aspirational value: Rewards like travel perks or exclusive upgrades motivate customers to achieve new goals, enhancing their loyalty and engagement.
  • Relevance: Ensuring rewards align with customers’ needs and lifestyles, such as gym discounts or phone bill reductions, makes the program more attractive and meaningful.
  • Convenience: A seamless, easy-to-use program – like Starbucks’ app that automatically tracks rewards – boosts customer participation and encourages repeat business.

By focusing on these five elements, businesses can create a loyalty program that resonates with customers on a deeper level, fostering long-term engagement. Tailoring the program to meet customer needs and preferences not only strengthens loyalty but also drives increased profitability and customer retention over time.

Partnerships with other businesses

One way to make your loyalty program more appealing is through strategic partnerships. Businesses can overlook the impact of collaborating with other brands, but the right partnership can enhance customer experience, drive engagement, and create added value for both companies.

  • Mutual benefit: Partnering allows businesses to tap into each other’s customer base, increasing engagement and loyalty for both brands. For example, airline and hotel chains often collaborate on rewards programs, enabling travellers to earn and redeem points across both services.
  • Expanded reward options: Customers appreciate having more ways to use their points, making a program more enticing. A great example is Woolworths Everyday Rewards. While the program is primarily run by Woolworths, it partners with businesses like Qantas Frequent Flyer and Ampol. Customers can redeem points for grocery discounts or convert them into points for flights, giving them more flexibility and increasing the program’s appeal.
  • Complementary businesses: The most successful partnerships are between brands that offer complementary products or services, creating a seamless customer experience. The Myer and Qantas Frequent Flyer partnership incentivises customers to continue shopping by allowing them to earn Qantas Points with every purchase, both online and in-store at Myer. Customers can also redeem their points for discounts or products at Myer, creating a seamless experience for those who love shopping for fashion and lifestyle items while earning travel rewards. This collaboration bridges the retail and travel sectors, offering customers a rewarding experience while benefiting both brands.

Credit: iStock.com/SDI Productions

Tiered offerings

Maximising the benefits of loyalty requires recognising that not all customers are equal. Different customers bring different levels of value, so offering a variety of rewards can be key.

Recent research reveals punchcards are the least preferred, while cashback is the most favoured4. However, it’s important to recognise the pain points of each reward type: discounts may take too long to earn, cashback might feel too difficult to achieve, and free products sometimes fail to hold enough perceived value.

Successfully executing this strategy requires an integrated digital solution across multiple channels. By leveraging data, businesses can gain valuable insights into customer preferences and behaviours, allowing them to improve loyalty programs continuously. Ongoing refinement, driven by these insights, ensures the customer experience remains exceptional and the loyalty program stays relevant and compelling over time.

First step – how to get customers to sign up?

Once your loyalty program is developed, the next challenge is attracting customers to sign up. The team at Yoghurt Digital revamped Adairs’ Linen Lovers Membership program by using user research, experimental insights and Conversion Rate Optimisation techniques, to address key barriers to online sign-ups. Throughout the process we learnt that many customers were unaware of the benefits, often found the process confusing, and preferred signing up in-store.

To improve visibility and ease of access, the program was featured prominently across the site, especially at the point of purchase. A dedicated module was added throughout the website, including the checkout page, and moved above the fold for greater visibility. Key benefits like birthday rewards, sale access, and shipping discounts were highlighted to show the program’s value, with some rewards covering the cost of membership. The sign-up process was also streamlined to reduce friction.

These changes resulted in a 50%+ increase in conversion rates for the loyalty program, driving over $50,000 in additional sales and delivering a significant return on investment, with long-term growth through increased customer lifetime value.

However, it’s never just about the loyalty program

While a solid loyalty program is essential for maintaining customer engagement, it’s never the sole factor driving loyalty.

Research shows that three in five (60%) consumers feel loyal to a brand because of its great products, 75% value consistent customer experiences and service, and 50% are more likely to join a loyalty program if the brand’s values align with their own. This reinforces the idea that customer loyalty is built on much more than just rewards – it’s a combination of product quality, experience, and shared values.

Matthew Forzan is the managing director and founder of Yoghurt Digital.

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