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How To Build The Best Loyalty Points Program


With rising acquisition costs and fierce competition, more brands are feeling the need to start their own rewards program. With easy-to-understand structures and simple earning and redemption models, points programs are by far the most popular type of rewards program. The biggest question for most people, however, is where to begin.

Follow our 7 simple steps and you’ll be getting more repeat customers than ever with your own brand new points program.

Step 1: Set the goals for your loyalty program

A ship with no compass will end up going in circles. The same is true for loyalty programs–set a concrete goal before embarking on your journey to ensure you actually reach your destination.

All loyalty programs have one thing in common–they are a customer retention tool aimed at increasing repeat customers. This is because repeat customers are more profitable in the long run. But, every loyalty program can differ in how it accomplishes this goal and what additional metrics it prioritizes. Use metrics to benchmark your progress because they are easily measurable. Determine how much you want to increase your repeat purchase rate, average order value, or purchase frequency to make sure your rewards program stays on track.

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Step 2: Determine how customers earn points

After you’ve set your goals, determine how customers will earn points towards rewards in your program. It’s essential to give your members various options for how they can earn points. This will keep them engaged and encourage them to explore more of your brand.

The best way to engage your customers is by rewarding them for actions that make sense for the type of shopper they are. What are they likely to engage with? How do they interact with your brand? A great example of this thinking in action is in the beauty and cosmetics  market. As an industry that relies on social proof and visual product demonstrations, many beauty brands reward customers for social media interactions or photo and video reviews. Clearly, rewarding for more than just purchases is key!

A screenshot of April Skin’s rewards program explainer page. The page explains how the program works: Write, earn, and redeem. Up to $3 off immediately per one review. Text Review: write a text review on your purchase. Earn 20 petals and redeem $1 off. Your review should be more than 5 words. Photo Review: write a review with your photo! Earn 40 petals and redeem $2 off. Share your before and after selfies and raise the chance to be a best reviewer! Video Review: write a review with a video! or in 60 petals and redeem three dollars off. The video should be at least 15 seconds long. Share your before and after video and raise the chance to be a best reviewer! Best Reviewer of the Month: Share your review and be the best reviewer! Win a discount coupon of up to $50 that you can use on any purchase. Below that is a pyramid graphic showing the 1st, 2nd, and 3rd place reviewer rewards, which are a $50 coupon for 1 winner, a $30 coupon for 1 winner, a $10 coupon for 1 winner, and a free full-sized gift for all winners.
April Skin rewards customers for leaving reviews.

April Skin rewards its customers for leaving reviews, with additional points available for photo or video reviews. As a brand where customers want products that will get them results in their skincare goals, this type of user-generated content is invaluable. April Skin incentivizes reviews even further through unique “best reviewer of the month” rewards, such as $10-$50 off coupons and free products. Earning points for simply sharing their experience will motivate customers to  interact with the brand more often, meaning April Skin keeps them as a customer for a longer period of time!

Reward your customers for the following actions to maximize the effectiveness of your loyalty program:

  • Setting up an account.
  • Celebrating a birthday.
  • Making a purchase.
  • Engaging with your store on social media.
  • Reviewing a product.

Step 3: Choose how you will reward your members

Selecting the rewards you will offer is one of the most important steps because they are the primary motivator for your customers to earn points. Don’t make the common mistake of thinking that customers only want to earn points–rewards are what actually motivates them!

Offer your customers a healthy variety of rewards to choose from to maximize the probability that they will see them as desirable. Put yourself in their shoes–would you stay in a loyalty program that gives you 5% off coupons as a reward, even though they regularly run 25% off events? Of course not! In a program with that rewards structure, you would see very little value.

Echt’s rewards program explainer page showing images of the exclusive reward-only products in the rewards panel. The rewards include a free nylon belt bag for 250 points, and Free Holders Club Hoodies in light grey, blue, blush, and black for 500 points each.
Echt offers exclusive free product rewards. 

Australian fitness apparel brand, Echt understands that its customers are looking for high-performance gear to improve their workouts and identify them visually as part of the brand community. As a result, they offer exclusive access to branded workout gear and accessories that they can’t simply buy from the store. This allows them to please every single customer who shops at their store, from the one looking for a trendy belt bag to the one looking for a hat to keep everything in place during their intense workout.

Get your customers motivated to earn points by offering these rewards:

  • Free products.
  • Free shipping.
  • Dollars-off discounts.
  • Percentage discounts.
  • Experiential rewards.

Make your loyalty program irresistible by offering valuable rewards that customers cannot pass up.

Step 4: Decide on the value of your currency

The value of your loyalty point currency is the determining factor if a customer will stay in your program or not. You can offer many ways to earn points and desirable rewards but if it requires thousands of dollars in purchases over multiple years to claim a single reward, it’s unlikely anyone will remain a member of your program. A good rule of thumb is to make it possible for customers to redeem their first reward after 1-2 purchases.

Smile.io recommends giving 3-10% back in points for every dollar spent.

The key is to strike a balance between the cost of points for you and the value of points for your customer. The ideal scenario is to have rewards with a high perceived value that make points feel beneficial but have a low actual cost for you. This will ensure customers are driven to actually earn points, redeem rewards, and ultimately remain loyal to your brand.

Francesca’s rewards program explainer page and rewards panel. The page shows a graphic with multiple levels of rewards. Surrounding these graphics are images of women wearing jewelry, gift boxes, and product shots of jewelry. The rewards are: Spend $300 for a $15 voucher, spend $500 for a $30 voucher, spend $1000 for a $60 voucher, spend $2000 for a $150 voucher, and spend $3000 for a $300 voucher. The rewards panel shows the various ways to earn points including signing up, purchases, and interacting on Twitter or Facebook.
Francesa offers generous point bonuses for signing up and interacting on social media.

Australian jewelry brand, Francesa has configured its point earning and redemption levels perfectly. With generous sign-up and social media bonuses, customers can earn up to 220 points before even making a purchase–this is nearly 75% of the points needed to reach that first $15 discount valued at 300 points. Since every dollar spent equals 1 rewards point, customers will likely only need to make 1 purchase before hitting that first reward. After that, customers can choose to cash in or save their points for a higher discount. Either way, Francesa has valued its points currency in a way that is motivating and exciting for customers without causing too much financial strain on them as a business.

Set the value of your currency at a fair balance between value for your customers and your business.

Remember, you want your customers to actually be earning rewards – that’s what will truly drive brand loyalty.

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Step 5: Brand your loyalty program

Branding your loyalty program makes it feel connected to the rest of your store and easy to remember, and there’s no one who knows that better than Starbucks.

A screenshot of Starbucks’ rewards program explainer page: Free coffee is a tap away. Join now to start earning rewards. There is a green Join Now call-to-action button and a large star on the righthand side of the page designed in yellow and multiple shades of green.
Starbucks’ rewards program explainer page.

Starbucks has created an entire brand for its loyalty program and as a result, it’s one of the most famous and effective coffee rewards programs in the world.

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Paying attention to these types of details will make sure that your rewards program is the one that stands out in your customers’ minds. From your loyalty program name to the way you design your explainer page, creating a memorable loyalty experience will allow you to create a program that breaks through the noise.

Use these strategies to get your customers coming back again and again:

  • Give your program a memorable name.
  • Call your currency something catchy.
  • Stylize using familiar colors.
  • Add graphics that complement your loyalty program.

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Step 6: Launch and advertise your program

You’ve come this far and now have a great rewards program ready to go live, but don’t forget that you need to actually tell people how great your program is! If customers don’t know it exists, how can they get excited to participate?

Creating an explainer page is a great way to tell people about your program. This standalone page uses visuals and short text to demonstrate how customers can earn and spend points in your rewards program.

The Writer Bloc rewards program explainer page with text explaining how the program works: Sign Up For Exclusive Writer’s Bloc Perks. Write With Benefits. When you become part of the Writer's Bloc, you earn Notes towards future purchases and gain access to a ton of exclusive perks. Step 1: Create an account. Step 2: Earn Write Notes by following, sharing, or purchasing Write Notepads & Co. Step 3: Keep unlocking levels for even more Bloc perks Step 4: Redeem your Write Notes for $$$ towards future purchases. There are two call-to-action buttons below that text: Join Now and Sign In. The background of the page is designed with a white and light grey graphic filled with stationery icons like scissors, pens, rulers, and more.
Write Notepad’s loyalty program explainer page.

By looking at Write Notepads’ explainer page, we understand everything there is to know about their program in seconds. Creating an explainer page is extremely beneficial in convincing new customers to join because no one is going to join a confusing program and sift through the fine print to figure out how it works.

Once you’ve actually launched your rewards program, it’s highly recommended to send an email to your customers alerting them that you’ve launched. Your existing customer email list is a great resource to leverage because they already have an interest in your brand. Showing them the value of your program will make joining an easy sell for these already engaged customers.

Social media is another great tool for loyalty program marketing. Whether you’re announcing your points program for the first time or promoting a bonus points event, it’s good to leverage the channels you’re already speaking to customers in. The best marketing channels will depend on your brand and your customers, but explainer pages, emails, and social media are all great places to start.

Ensure your rewards program is successful by following these steps:

  1. Build an explainer page that illustrates how to earn and spend points.
  2. Launch your program and address early customer feedback.
  3. Send an email to your customers letting them know you’ve launched.
  4. Promote the loyalty program on social media.

Step 7: Never stop improving

As much as you might wish otherwise, a rewards program is not a set-it-and-forget-it revenue generating mechanism. However, with continuous experimentation and learning you can create a program that effectively and continually builds customer loyalty and profits as a result.

Continuously experimenting with your rewards program will ensure it’s better tailored to your customers and ensures there is high customer engagement with your program. This experimentation can take any number of forms, but the ones we’d highly recommend would be event-based marketing initiatives like bonus points events. This type of campaign encourages customers to get even more engaged and keeps your program feeling fresh and exciting.

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In the months following the launch of your rewards program, it becomes very important to learn what your customers are responding well to. Your loyalty program is a great feedback tool and you can continuously experiment with it through things like A/B testing, or feedback surveys. You can boost engagement in the beginning by offering new rewards, new ways to earn points or bonus points. You should think about these strategies as adding wood to a fire–don’t let it die out!

It’s more important than ever to launch your points program

We know that the cost to acquire new customers is increasing, so it’s more important than ever to shift your focus to retaining the customers you already have. This will allow you to bring in additional revenue by keeping your customers more engaged with your brand and making it tougher for them to switch to your competitors.

Simply following the 7 simple steps we’ve laid out will get your points program up and running, with the opportunity to improve it over time. Not every rewards program is perfect from inception, and yours doesn’t have to be either! The key is simply getting started, so what are you waiting for?

Editor’s Note: This post was originally published on March 13, 2018 and was updated for accuracy and comprehensiveness on May 2, 2023.

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This originally appeared on Smile.io and is made available here to cast a wider net of discovery.
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