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Refresher: What is a Points-Based Loyalty Program?
A points-based loyalty program is a type of loyalty program where customers earn points for making purchases or completing missions, which they can later redeem for rewards.
This approach is also a form of gamification, as it taps into the enjoyment customers get from earning and redeeming points.
Research in behavioral economics and consumer behavior has shown that this system effectively motivates and engages customers.
The business decides how customers earn points and what they’re worth. Usually, points are tied to how much money a customer spends.
There are two main things to keep in mind:
1. How much do customers need to spend to earn a certain number of points?
2. What the points are worth when redeemed, like the value of the rewards?
For example, a business might give 1 point for every dollar spent, but the points could be worth less when redeemed — like 1 point is worth only $0.50. Points can also be used for other rewards, like services or extra products.
Using the same example, let’s say a customer earns 1 point for every dollar spent. If they want to redeem a reward that costs 150 points, they need to spend $150 to get enough points.
If you’re wondering, the most common industries that use point-based loyalty programs are the retail, service, and FMCG industries!
Are Points Reward Programs Versatile?
Yes, points-based loyalty programs are highly flexible and can be combined with other types of loyalty strategies to create a customized program that covers multiple aspects of customer loyalty strategies.
Imagine you run a hair salon with a tiered loyalty program where members receive increasing benefits based on their tier.
If you want to introduce points into the mix, you can reward your most loyal customers in the highest tiers with more points.
This can also encourage customers to level up to higher tiers by earning more points, creating a system where both points and tiers work together to boost overall engagement and revenue.
Points-based programs are also effective for targeting specific customer segments, especially those who are inactive or have lower purchasing frequency.
You can do this by offering double points or other special rewards and motivating these customers to engage more with your brand.
Another advantage of points-based programs is their ability to be dynamically adjusted.
You can tweak the value of rewards, the amount customers need to spend to earn points, and the worth of points when redeeming.
This flexibility allows you to fine-tune your program’s effectiveness based on performance metrics, without making major changes to other parts of your program, like tiered benefits or referral rules.
Benefits of a Points-Based Loyalty Program (Why Is It So Popular?)
Incredible Versatility
As mentioned earlier, points-based programs are highly flexible, allowing you to adjust point values, redemption rates, and more.
You can also combine them with other loyalty strategies, such as tiered programs, referral rewards (where customers earn points for referrals), or attendance programs (where points are earned for regular visits)
Additionally, points programs enable you to target specific customer segments effectively, encouraging more brand engagement or higher spending through strategies like double point promotion campaigns.
The Instant Gratification Aspect
One of the best things about points-based programs is the instant gratification they provide.
When customers earn points, they feel a quick sense of satisfaction, which helps create a positive connection between buying from your brand and feeling good.
And it’s not just about earning points—redeeming them for rewards brings an extra boost of happiness.
Other loyalty programs, like tiered systems, don’t offer that same quick reward, which is why points-based programs are so great at tapping into this instant feel-good factor.
Drives Higher Customer Spending on Average
Over the years, we’ve worked with many clients, and from our experience, points-based programs are one of the most effective ways to boost customer spending and increase lifetime value.
Points work so well because they encourage customers to spend more with each purchase (thanks to that instant gratification we mentioned earlier). The more they spend, the more they’re rewarded.
When you pair points with personalized rewards that appeal to customers, it’s a powerful combination for not only increasing spending but also building long-term loyalty.
You can even take it a step further by offering secondary rewards, like advancing to higher tiers or earning stamps based on how much they spend.
One of the Best Ways to Track Customer Behaviors
Points are some of the best ways to track your customer’s behavior and create individual customer profiles. Here are some of the cool things businesses can track via points:
- Reward Preference: What type of rewards do specific customer segments prefer?
- Purchasing Frequency & Average Cart Value: How often do they make purchases, and how much do they spend each time? Are they frequent shoppers with smaller purchases, or do they shop less often but spend more per transaction?
- Gamification Preference: Do they prefer to earn points via brand interaction or just spending money?
- Redemption Methods: Where do customers redeem their rewards—online or in-store? If they redeem in-store, which location do they visit? What types of items are they most interested in redeeming?
Among all loyalty program types, points definitely give you the most data on your customers’ or members’ spending habits.
We highly recommend a point-based program when you’re first starting your loyalty program – as it can give you a head start on getting to know your customers!
Successful Points-Based Loyalty Program Case Studies
Nestlé Hong Kong
KlikNGo worked with Nestlé to create a loyalty program that combines points with other rewarding features.
This project stands out because we helped Nestlé partner with companies across different industries, allowing customers to redeem rewards not just for Nestlé products, but for things like amusement park tickets, hotel stays, gift cards, and more.
Nestlé also needed a way to accurately track points earned from both purchases and other activities, so we built a centralized rewards portal.
This made it easy for them to track customer behavior online and offline, even integrating with tools like barcode scanners for a seamless, omnichannel experience.
Results: Increased Loyalty Program Awareness & 100% Reward, and Redemption Tracking Accuracy.
Häagen-Dazs Hong Kong
Häagen-Dazs Hong Kong was looking for a user-friendly combination of a points program alongside a stamped one.
So our team made one that is easy for users to join and made it even easier to redeem rewards like free ice cream or discounts.
Other than that we also helped with voucher marketing (customers can redeem points or vouchers online or offline) as well as helped them with a gifting and delivery management platform.
Pacific Coffee
Pacific Coffee wanted a loyalty program that combined points, loyalty cards, and e-wallet integration.
They set up the program so that points earned from purchases would have flexible expiry dates, encouraging customers to use them sooner.
Customers could also add money to their cards to earn even more points, which encourages them to keep adding funds. On top of that, they launched a coffee subscription service, where customers pay a monthly fee for a set number of cups of coffee.
Subscribers can redeem 20 points for a $1 rebate, making it a special perk for them. This not only boosts the value of points but also adds a unique benefit for those in the subscription program.
Results: Revenue increased across all outlets thanks to the subscription plans and loyalty program. By tracking points and customer behavior, they were also able to improve their operational management.
How to Set Up Your Own Points Program
Understand Your Industry Standard & Know Your Ticket Items
First things first, you have to understand that a points reward is a type of rebate. Use this as a rule of thumb when you’re starting your own points reward program.
In most industries, a common rate is a 1% rebate. This means a percentage of the total transaction value is converted into points. To give you a point of reference, here is the list of industries and their point rebate standards:
- Retail: 1%
- FMCG: 1%
- Services (Beauty, Oral/Healthcare): +- 5%
- Asset Purchasing (Vehicles, Property, Equipment): 7 to 10%
Depending on your profit margin and strategy, a good practice is to offer a slightly higher rebate rate than your competitors.
This is a good first start if you’re just getting started in your loyalty strategy because you’re not necessarily reducing your profits, but more of allocating a portion of it to enhance customer satisfaction.
So, why higher rebates? When you offer a higher rebate rate, you can stand out from your competitors, and encourage customers to return for more purchases or redemptions.
Think about it, as long as customers haven’t redeemed their points, it costs you nothing in terms of cash or physical rewards!
We would highly recommend you avoid offering a rebate rate that is lower than the industry standard, as it can reduce your competitive edge and hurt your branding.
Set Criteria, Requirements & Threshold
After that comes encouraging customers to sign up and become members. In this process, you’ll want to collect some basic information like:
- Name
- Contact Number
- Email Address
You could ask for more, but in our experience, this is what you’ll need to get started. Many businesses make the mistake of asking for way too much, way too soon – as it can deter customers from signing up.
You can always gather more information and build each customer’s persona throughout their journey.
After that, you’ll want to set up your point structure according to the industry standard rate from Step 1. Remember, following your industry standard should be fine.
Note that many businesses, especially in the fashion industry, set a minimum purchase requirement for free membership.
Some even charge a yearly membership fee in exchange for a membership card or exclusive physical gifts. You might want to consider these for your points loyalty program.
Use the Right Software To Help With Your Rewards Program
Since there are many requirements and criteria for a points program, doing it manually will take up valuable time and resources. As a result, you’re going to need the right tools and software for the job.
At this point, we assume that you’ve done some research or gained basic knowledge about loyalty reward systems. Many people think you need to create your own system from scratch to run a rewards program.
In fact, many SaaS solutions give you access to everything you need.
For example, our solution – KlikNGo gives you access to a wide range of software, alongside a custom direction plan through our free consultation to give you the best chance of succeeding.
Create Marketing Material, Program Info & Incorporate Staff Training
The next step is to create marketing materials that highlight your program and use them both online and offline. Make sure to incorporate these into your online marketing strategy as well.
After all, you need to let people know about the program for it to work, right? One of the best places to do this is during the checkout process, whether that’s online or in-store.
You can also consider offering instant rebates to encourage customers to sign up right away, making the process even easier.
Another important factor that many business owners overlook is staff training on the new system.
It’s not just the backend (like the system setup, requirements, and reward structure)—it’s also about how your team interacts with customers and handles the program in practice.
To be fully prepared, your staff should have a solid understanding of the program. No, it’s not just about knowing how rewards are earned and redeemed; it’s also about being able to explain why the loyalty program is valuable and important to your customers.
In our experience, the way your staff communicates and implements the program can make all the difference between success and failure.
Actually Start Recruiting & Promoting Your Loyalty Program
When it comes to promoting your program, consider offering extra benefits, points, or gifts for new sign-ups for a limited. This creates a sense of excitement and awareness among your customers.
The flexibility of your system is key here. A good, stable, and comprehensive system should be able to support multiple reward schemes to cater to different situations. It’s important to remember that a reward program is a long-term investment.
So, choose a solution that allows you to explore different reward options and scenarios as your business grows. Points are just the beginning—you’ll want to offer new rewards, tactics, and gamified features to keep customers engaged. Simply put, engaged customers typically spend more.
For online promotion, be sure to utilize social media and broadcasting (email, SMS, etc.)—how you promote it is up to you.
Offline promotions, on the other hand, could be dealt with by setting a weekly target for your staff to recruit new members or promote the program.
Take inspiration from techniques used by brands like Watsons, which always asks if customers have a membership or want to add on a product. Similar to how McDonald’s and Starbucks often ask if customers want to upsize their meals or drinks.
Remember, how your staff communicates with customers is crucial. The moments when they interact with customers are the best opportunities to introduce new products, promotions, and your brand’s culture.
So, Should Your Business Use Points in Your Loyalty Program?
Definitely! Businesses should consider using a points system in their loyalty programs.
It’s simple, yet one of the most effective and widely used options. When people think of loyalty programs, they often think of earning points.
Plus, points give customers instant rewards credited into their account, making them feel good about their purchases and creating a positive connection with your brand.
As we mentioned earlier, points also help you learn a lot about your customers, like what rewards they like and how they prefer to earn and redeem them.
Point-based programs are especially valuable in industries like fuel, utilities, or groceries, where the products are often similar across different brands.
In these cases, a loyalty program—especially one based on points—can be a great way to stand out, since these businesses often focus on high volume rather than repeat purchases.
It’s no wonder that big brands like ExxonMobil, Starbucks, and Sephora all rely on points-based loyalty programs.
