Loyalty Program Best Practices To Drive Engagement & Retention in 2025

As a business store owner, fostering customer loyalty is no longer optional – it’s essential for long-term success. A well-designed loyalty program can do more than reward repeat customers, it can create meaningful connections, improve customer retention, and boost engagement. But how to design a loyalty program that attracts participants and also keeps them coming back?

In this article, we’ll explore best practices to help you create a loyalty program that drives measurable results, delights your customers, and strengthens their relationship with your brand.

4 Key Practices for Core Principles

Customer-centricity

Customer-centricity is the foundation of successful loyalty programs. It means putting the customer at the heart of every decision and ensuring their needs, preferences, and pain points are addressed. For instance, instead of just asking, “What do customers want?” ask, “What annoys them most when shopping?” or “What makes them abandon a purchase?”

Incorporating customer loyalty program best practices, such as offering personalized experiences, can reshape how customers view your brand. For example, track where customers face difficulties on your website or identify common questions from customer service calls.

Amazon excels at improving customer experiences. In 2024, they upgraded their customer service tool, Amazon Connect, with advanced AI features. These updates helped customers with quicker, more personalized responses and ensured their information was smoothly shared across all support channels. As a result, Amazon maintained high customer satisfaction, scoring 83 out of 100 on the ACSI survey in 2024.

Value-driven

Being value-driven isn’t just about making a profit—it’s about offering customers more than what they pay for. This could mean adding small but meaningful features or solving problems they didn’t even realize they had.

For example, Patagonia noticed that customers worry about their clothes wearing out. To address this, they launched the “Worn Wear” program. It’s not just about selling clothes; it’s about making clothes last longer and helping the environment.

In 2023, Patagonia repaired over 63,000 garments at its Reno, Nevada, repair center, showcasing the program’s success in promoting sustainability and reducing waste. By prioritizing durability and repairability, Patagonia has built stronger customer loyalty and trust, highlighting the value-driven approach of its business model.

Simplicity & Clarity

Simplicity and clarity are essential when designing a loyalty program that resonates with customers. A straightforward program is easier to understand, join, and engage with, ensuring that customers know how to earn rewards. Complicated rules or unclear benefits can discourage participation and diminish trust.

Some tips to consider:

• Use clear language to explain how customers earn points and what rewards are available.
• Avoid overloading them with too many options or complex tier structures. A
• Ensure the process to sign up, track progress, and redeem rewards is seamless and user-friendly.

Brands like Starbucks excel in this area with their Starbucks Rewards program. Customers can clearly see how many stars they need for a free drink or snack, and the app makes earning and redeeming rewards effortless. By keeping the program simple and transparent, brands can encourage participation, foster loyalty, and maintain customer satisfaction.

Flexibility

Flexibility is a cornerstone of successful loyalty programs. It allows businesses to adapt to their customers’ diverse needs and preferences. A one-size-fits-all approach rarely works, so offering customizable options ensures that your program remains relevant and engaging.

For example, flexible redemption options can make a significant impact. Allow customers to choose how they use their points, whether for discounts, exclusive experiences, or charitable donations. Similarly, providing multiple ways to earn rewards—such as through purchases, referrals, or social media engagement—can cater to a wider audience and keep participation levels high.

Additionally, flexibility means adapting to changing trends and customer feedback. Regularly update your program to introduce new features or align with customer interests.

For example, Target emphasizes flexibility by allowing customers to shop in ways that suit them best—whether in-store, through curbside pickup, or via delivery.

For instance, their Drive Up service lets customers order through the app and have items delivered straight to their car. Features like specifying vehicle details and switching between Drive Up and Order Pickup after placing an order add to the convenience and personalization.

This level of flexibility has driven significant growth in Target’s digital sales. In the second quarter of 2024, same-day services such as Drive Up, Order Pickup, and Shipt experienced double-digit growth. Drive Up alone accounted for over $2 billion in sales during the quarter.

Best Practices for Program Design & Implementation

Define Clear Goals

Setting clear goals isn’t just about saying, “We want more sales.” It’s about being super specific about what success looks like. Think of it like planning a road trip: You need to know exactly where you’re going and how you’ll know when you’ve arrived.

For instance, instead of a vague goal like “improve customer loyalty,” set specific targets like “increase repeat purchases by 15% within 6 months” or “reduce customer churn by 20% in high-value segments.”

Starbucks demonstrated this perfectly in 2023 when they revamped their rewards program. They set clear targets to double their 75 million global Starbucks Rewards members within 5 years and expand digital and technology collaborations to elevate the partner and customer experience. By being this specific, they could track progress precisely and adjust their strategies when needed.

In fact, Starbucks reported that mobile orders accounted for 31% of total transactions at U.S. company-operated stores by the end of 2023, up from 27% in the previous year.

Start Small and Iterate

Think of your program like cooking a new recipe – you don’t immediately cook for 100 people; you start with a small batch and perfect it first. Start with a pilot program targeting a specific customer segment or geographic area.

For example, in 2023, Nike introduced a pilot program by adding new capabilities to its sports apps, Nike Run Club and Nike Training Club, in select locations. Before expanding further, they collected feedback, resolved issues, and added features based on real user experiences. As a result, Nike achieved a 34% growth in their digital business, having already refined the apps to meet customer needs.

Reward Diverse Actions

Don’t just reward purchases – think about all the ways customers interact with your brand. Consider rewarding things like leaving reviews, referring friends, participating in sustainability initiatives, or engaging with your social media.

In 2023, Sephora expanded its rewards to include points for recycling beauty packaging through its Beauty (Re)Purposed program, encouraging customers to bring in empty beauty containers for proper recycling.

Additionally, they introduced gamified experiences in their Beauty Insider program, allowing members to earn points by completing various challenges, such as attending virtual beauty classes or engaging with in-store tools like Color iQ.

For instance, Joy loyalty program offers a Referral Block feature that enables customers to generate and share unique referral links. This system rewards both the referrer and the referred friend, incentivizing word-of-mouth promotion and expanding the customer base.

Additionally, Joy’s platform supports the migration of customer data from other loyalty programs, ensuring a seamless transition and preserving essential information such as VIP tiers and point balances.

Structure Non-monetary Rewards Around Customer Values

Non-monetary rewards play a significant role in loyalty programs by offering meaningful benefits that align with customers’ values. These rewards go beyond discounts and points, fostering deeper emotional connections and reinforcing the customer’s relationship with your brand.

To structure non-monetary rewards effectively, start by understanding your customers’ priorities. For instance, eco-conscious customers may value sustainable practices, such as planting a tree for every purchase or supporting environmental causes. Similarly, fitness enthusiasts might appreciate exclusive access to events, expert-led sessions, or premium content.

For example, REI’s 2023 program offers early access to limited-edition gear, exclusive hiking trips, and conservation volunteer opportunities. These non-monetary rewards drove higher engagement than traditional discounts because they aligned with customers’ passion for outdoor activities.

Provide Multiple Enrollment Opportunities

One of the best practices for loyalty programs is to offer multiple ways for customers to enroll, making it as convenient as possible. When customers can easily sign up at their preferred touchpoints, participation rates increase, improving the overall user experience.

Here are a few ways to provide multiple enrollment opportunities:

1. Online Sign-Up: Join directly on your website or mobile app. Include a clear call-to-action on key pages, such as the homepage, checkout page, or account settings.
2. In-Store Enrollment: Provide the option to enroll at physical locations through cashiers, kiosks, or QR codes that direct customers to a digital sign-up form.
3. Social Media and Email Invitations: Use social media channels and email campaigns to invite customers to join your program. Include direct links to the enrollment page for quick access.
4. Point-of-Sale Prompts: Incorporate prompts during checkout, encouraging customers to join the program to earn points for their current purchases.
5. Event—or Campaign-Specific Sign-Ups: To attract new members, leverage promotional events or seasonal campaigns. Offer incentives, such as bonus points, for enrolling during a specific period.
6. Customer Support Assistance: Train your customer service team to guide customers through the enrollment process over the phone, chat, or email.

Gamify the Experience

Turn your program into an engaging experience rather than just a points-collection system. By incorporating game-like elements such as challenges, levels, and rewards, you can transform a routine experience into something interactive and exciting.

For example, introduce point-based systems in which customers earn badges or achievements for completing specific actions, such as repeat purchases, social media engagement, or writing reviews. You could also create leaderboards to encourage friendly competition among customers and boost their motivation to participate.

Another effective strategy is limited-time challenges and missions. These can include earning double points for certain purchases, unlocking exclusive rewards for completing a series of tasks, or participating in themed campaigns tied to holidays or events.

For example, in 2023, Chipotle launched a gamified rewards program that allowed members to earn badges, enhancing the sense of achievement and fun. This approach contributed to the growth of Chipotle’s rewards program, which surpassed 40 million members by 2024.

💡 Dive Into Our Article to Learn Everything About Gamified Loyalty Programs!

Best Tips for Customer Experience

Outstanding Customer Service

Today’s customers expect personalized, responsive service across all channels. Data from Digital Minds BPO shows that 78% of customers have canceled a purchase due to a bad customer service experience.

To prevent this, implement a comprehensive support system that includes:

• 24/7 chat support with response times under 2 minutes
• Personalized issue resolution tracking
• Proactive outreach when customers encounter website difficulties
• Regular customer feedback surveys with actionable follow-up
• Service team training focused on empathy and problem-solving

A notable example is how Chewy’s customer service team sends handwritten notes and holiday cards to customers, which increases customer loyalty and encourages repeat purchases.

Deliver Added Value

Delivery added value is about giving customers more than they expect. Instead of just offering points and discounts, think about what would actually make their lives better or easier. For example, a skincare brand could offer personalized video tutorials for different skin types, while a coffee shop might provide early access to limited seasonal drinks. These thoughtful gestures strengthen trust and loyalty.

If you run a coffee shop, offer members first dibs on limited edition seasonal drinks or invite them to coffee-tasting sessions. Send birthday treats that feel special – not just a generic discount code, but maybe a handpicked selection of products they might love based on their past purchases. The key is to surprise and delight in ways that actually matter to your customers.

Build a Community

A referral program can do more than attract new customers—it can build a strong sense of community around your brand. By encouraging customers to refer their friends, you’re fostering meaningful engagement and connection. To deepen customer relationships, make it worthwhile with unique rewards, like “friend and member” packages, or create member-only spaces such as online groups or exclusive events.

Ready to grow your community with a smart referral program? Joy Loyalty Program helps you set up rewards for both referrers and referees, such as points, discounts, or exclusive perks, ensuring everyone benefits from the program.

The app also includes options like branded referral popups and seamless tracking, making it easy for your customers to share and for you to manage results. Plus, Joy’s analytics tools help you monitor performance and optimize your campaigns for better engagement and conversions.

3 Essential Ways for Marketing and Communications

Promote the Program

Promoting your loyalty program is essential to ensure it gains visibility and attracts participants. Here are some best practices for effectively promoting your loyalty program:

1. Leverage Multiple Channels: Use email, social media, in-store signage, and your website to spread the word. Highlight the program in prominent areas, such as your homepage or checkout page, to catch customers’ attention.
2. Engage New Customers: Promote the program during the onboarding process. Include details in welcome emails or offer incentives for signing up, like bonus points or discounts.
3. Showcase Benefits Clearly: Use concise messaging to highlight key rewards, exclusive perks, and how customers can quickly benefit from participation.
4. Use Testimonials and Success Stories: Share real-life examples of satisfied customers who have benefited from your program.
5. Incentivize Word-of-Mouth: Encourage existing members to refer friends by offering rewards for both the referrer and the new member.
6. Run Targeted Campaigns: Create seasonal or limited-time promotions tied to the loyalty program, such as double points or exclusive rewards.

Effective Communication

Clear and consistent messaging is crucial for building trust with your audience. Ensure that all communications, whether through email, social media, or your website, convey the same core message and values.

Moreover, using AI-driven tools can enhance communication efficiency. For example, chatbots can respond instantly to common inquiries, increasing customer satisfaction rates by 20%.

Personalized Messaging

Generic messages don’t cut it anymore – people expect content that speaks directly to them. For example, sending personalized emails or notifications based on purchase history or browsing habits can encourage customers to redeem rewards or explore new products.

Another effective approach is segmenting customers based on their activity levels or interests. This allows businesses to deliver targeted offers or recommendations that resonate with each group, increasing the likelihood of engagement.

Look at how Bank of America has customized their mobile app notifications based on spending patterns. By providing personalized insights and real-time alerts, they help clients manage their financial lives more effectively.

This approach has led to increased digital engagement. In 2023, clients logged into their accounts 12.8 billion times, contributing to a total of 23.4 billion digital interactions—a record high.

Best Practices for Measurement and Optimization

Track Key Metrics

Tracking key metrics means focusing on numbers that actually matter for your goals. For example, if you’re running an online course, don’t just track total enrollments. Instead, track specific engagement points like completion rates of each module, time spent on challenging sections, quiz attempt patterns, and which supplementary materials students download most.

In 2023, Coursera reported that 77% of learners experienced career benefits, such as getting a new job or earning a promotion, after completing their courses. They specifically monitored factors such as the inclusion of graded assessments in the first week, which significantly increased the likelihood of course completion.

Similarly, Instagram Business accounts that tracked their Stories’ “tap-back” rates (people going back to rewatch certain segments) alongside regular view counts saw improved engagement. Monitoring metrics like tap-forward and tap-back rates helps businesses understand how users interact with their Stories, indicating which content resonates most with their audience.

Analyze Data

When analyzing data, look for patterns that tell a story about user behavior. Start by grouping related metrics together. For instance, combine your website’s bounce rate with time on page and scroll depth to understand whether people are actually engaging with your content.

A real-world example: In 2024, Spotify analyzed user listening habits to enhance its recommendation algorithm. By examining factors such as listening history, search history, and playlists, Spotify’s algorithm identifies user patterns and similarities to suggest tracks that align with individual preferences. This approach has been instrumental in personalizing user experiences and improving engagement.

Make Adjustments

Making adjustments means taking specific actions based on your data findings. Here’s a practical approach: First, identify one clear metric you want to improve. Then, make one change at a time and measure its impact.

For instance, Mailchimp users who tested email subject lines found that personalization, such as including the recipient’s first name, can significantly boost open rates. Additionally, using compelling and relevant subject lines can lead to higher engagement. Testing different subject line variations helps determine which messages resonate best with your audience.

Another example is how TikTok creators improved their video retention rates by adjusting video pacing based on viewer engagement. By analyzing when viewers tended to drop off, creators introduced engaging elements, such as “hook” statements or visual changes, early in the video to maintain interest. This strategy led to increased watch-through rates.

The lesson? Small, measured changes based on specific data points often lead to significant improvements.

Final Thoughts

I hope you find this post helpful in understanding the best practices for loyalty programs and how to create a strong connection with your customers. By focusing on simplicity, value, and meaningful rewards, you can build loyalty programs that truly work. Start small, stay flexible, and watch your customer relationships thrive!

Best Practices for Loyalty Programs: FAQs

What is the best practice for customer loyalty?

The best practice for customer loyalty programs is to offer tailored rewards based on customer behavior, like exclusive discounts for frequent buyers or points for engaging with your brand on social media. Use data analytics to understand their preferences and provide exceptional service to build trust and long-term relationships.

How do you structure a loyalty program?

Start by outlining clear rules for earning and redeeming rewards, ensuring they are simple and transparent. Then, incorporate attractive incentives like discounts, free products, or exclusive experiences that resonate with your customers. Next, choose the right technology, such as loyalty management software, to streamline tracking and integrate seamlessly with your existing systems.

What are the three R’s of loyalty programs?

The three R’s of loyalty programs:

• Reward: Provide tangible benefits, like points or discounts.
• Recognition: Celebrate milestones like anniversaries or big purchases.
• Relevance: Offer rewards that align with customer interests, like eco-friendly options for sustainability-conscious buyers.

How do you design a successful loyalty program?

Research your audience to understand their needs. Start small with a pilot program to gather feedback. Focus on offering diverse rewards to ensure a smooth and straightforward user experience. Use metrics like customer retention rates and reward redemption rates to optimize the program.