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5 Types of Customer Loyalty Programmes

Today we will be talking about the different types of loyalty programmes and each of their pros and cons.

1. Stamp / Punch Card

We’ve seen the stamp card system being commonly used by cafes and salons since we were kids. A rubber stamp is used to stamp on the printed card each time the customer orders. When the number of stamps fulfills the required quantity, the customer can redeem for a free drink or hair cut service.

Pros: Easy to start a loyalty programme. Just print and hand out the stamp card.
Cons: Doest not track the customer’s progress and the customer seldom completes the redemption.
Cost: Low

2. Annual Membership Card

The membership card system is often deployed by retails, attraction parks and hotels for a small annual membership fee. Registered members enjoys a long list of attractive deals which includes free meals & stays and various discounts on selected products. A newsletter is also sent out on a monthly or quarterly basis with vouchers and it showcases products that you can exchange with points.

Pros: Easy to acquire new customer because the deals are worth at least 10x of the membership fees.
Cons: Very minimum data analytic and customer loses interest fast after redeeming all the free deals.
Cost: High

3. Credit Card Cashback

The cashback systems took off when credit cards companies were competing with each other. When a customer uses their credit card for purchases, a small percentage of the payment amount is return to the customer and its cash value can be used to deduct for the next payment.

Pros: Customers saves money on the next payment.
Cons: The cashback value is usually disguise with a maximum limit per month and only the very big companies can have their own branded credit card.
Cost: Medium / High

4. E-wallet Cashback

Many e-wallet companies have appeared in Asian countries like Malaysia and Singapore. Customers can top up value through an app and spend across thousands of merchants by just using a QR code.

E-wallet companies also offer a cashback system as a form of loyalty feature. Merchants can decide to offer 5% or 10% cashback to be returned to the customer.

To give an example, Starbucks offers 10% cashback on all purchases. Joe who spent $100 at the outlet would receive $10 in cashback value in his e-wallet. He can use the $10 for his next visit to the outlet.

Pros: A loyal customer would return to spend their cashback.
Cons: It can get very expensive because the merchant would have to pay the e-wallet company for the total amount of cashback which was issued.
Cost: Medium / High

5. Online Loyalty Points & Rewards System

It is an online solution specifically for running a loyalty programme. Customer can login to view their loyalty card balance, flash their QR code to earn points and browse through the rewards store to redeem for a reward.

It also has other features build-in to increase store visits and revenue by getting customers to perform various actions.

Pros: Various ways for businesses to increase store visits frequency.
Cons: Can be time-consuming for business owners to setup the right rewards structure.
Cost: Low / Medium