Glossary of Marketing Terms

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What is a customer rewards program?  

A customer rewards program is a marketing strategy implemented by businesses to incentivize and reward customers for their repeat purchases and engagement with the brand.  

These programs aim to increase customer retention, encourage customer loyalty, and drive future purchases. Rewards can include discounts, points redeemable towards purchases, free products, exclusive access to new products or events, and more.

What are the types of customer rewards programs?  

There are various types of customer rewards programs that businesses can implement to incentivize customer loyalty and engagement. Here are some examples:

  • Points-based programs: This is the most common type of rewards program. Customers earn points for their purchases or other actions, and these points can be redeemed for rewards such as discounts, freebies, or special offers  
  • Tiered programs: In tiered programs, customers are assigned different membership levels based on their engagement or spending. Each tier offers different benefits and rewards, with higher tiers receiving more exclusive perks.
  • Referral programs: Referral programs encourage customers to refer their friends or family to the business. In return, customers receive rewards such as discounts or credits when their referrals make a purchase.
  • Paid programs: Some businesses offer premium loyalty programs that customers can join by paying a membership fee. These programs provide exclusive benefits, personalized experiences, and enhanced rewards to members.
  • Gamified programs: Gamified programs turn the loyalty experience into a game, adding an element of fun and excitement. Customers can earn points, badges, or unlock levels by completing specific actions or achieving milestones.
  • Ethical programs: Ethical reward programs involve businesses pledging to take ethical or charitable actions with each customer purchase. Customers feel good about supporting a cause while also receiving the product or service they desire.
  • Perks programs: Perks programs offer customers special perks or privileges, such as early access to new products, exclusive events, or personalized services. These programs aim to make customers feel valued and appreciated.  
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How to setup a customer rewards program?  

Setting up a customer rewards program requires careful planning and consideration. Here are some steps to help you get started:

  • Define your objectives: Determine the goals of your rewards program. Are you looking to increase customer retention, drive repeat purchases, or generate customer referrals? Clearly defining your objectives will guide the design and implementation of your program  
  • Choose the right type of program: Consider the different types of rewards programs available and choose one that aligns with your business model and target customers. Options include points-based programs, tiered programs, referral programs, and more  
  • Select rewards: Decide on the rewards you will offer to your customers. These can include discounts, free products, exclusive access, or personalized benefits. Make sure the rewards are appealing and valuable to your target audience  
  • Determine the program structure: Define how customers will earn rewards. This could be based on purchases, referrals, or other desired actions. Decide on the criteria for earning rewards and establish a clear system for tracking and managing customer participation.
  • Choose a rewards platform: Consider using a customer loyalty rewards platform or software that can help you create and manage your rewards program effectively. These platforms often provide features such as personalized campaigns, tracking tools, and customer engagement options  
  • Promote your program: Develop a marketing strategy to promote your rewards program to your customers. Utilize various channels such as email marketing, social media, and in-store signage to raise awareness and encourage participation.
  • Track and analyze results: Regularly monitor the performance of your rewards program. Track customer engagement, redemption rates, and overall program effectiveness. Use this data to make adjustments and improvements to your program over time  
  • Continuously engage and improve: Keep your rewards program fresh and engaging by regularly updating rewards, introducing new promotions, and seeking customer feedback. Continuously evaluate and refine your program to ensure it remains effective and meets the evolving needs of your customers.

What are some customer rewards programs examples?  

The examples of customer rewards program are

  • Patagonia common threads initiative Patagonia's common threads initiative is a loyalty program with a focus on sustainability. Customers can return their used Patagonia products for recycling or store credit. This program fosters a sense of community and encourages customers to engage in environmentally responsible practices.
  • TOMS Shoes: TOMS Shoes rewards customers for social shares and content engagement. Customers earn points for their activities that indirectly benefit the company, such as sharing on social media. These points can be redeemed for discounts or exclusive products, creating a symbiotic relationship between the brand and its customers  

What are the benefits of the customer rewards program?  

Customer rewards programs offer several benefits for both businesses and customers. Here are some key advantages:

  • Increased customer retention: Rewards programs incentivize customers to continue purchasing from a business, increasing customer loyalty and reducing churn. By offering exclusive benefits and rewards, businesses can create a stronger bond with their customers and encourage repeat purchases  
  • Boosted customer engagement: Rewards programs provide opportunities for customers to actively engage with a brand. Customers may participate in activities such as earning points, referring friends, or providing feedback, which increases their interaction and involvement with the business.
  • Improved customer satisfaction: By offering rewards and personalized benefits, businesses can enhance the overall customer experience. Customers feel valued and appreciated, leading to higher levels of satisfaction and a positive perception of the brand.
  • Increased sales and revenue: Loyalty programs can drive additional sales by encouraging customers to make repeat purchases. Customers are motivated to reach certain milestones or spend more to unlock rewards, resulting in increased revenue for the business
  • Word-of-mouth promotion: Satisfied customers who benefit from rewards programs are more likely to share their positive experiences with others. This word-of-mouth promotion can attract new customers and expand the customer base.
  • Data collection and customer insights: Rewards programs provide businesses with valuable data on customer behavior, preferences, and purchasing patterns. This data can be used to personalize marketing efforts, improve product offerings, and make informed business decisions  
  • Competitive advantage: Implementing a customer rewards program can differentiate a business from its competitors. It can serve as a unique selling point and attract customers who are looking for additional benefits and incentives.
  • Brand loyalty and advocacy: Rewards programs foster a sense of loyalty and emotional connection between customers and the brand. Loyal customers are more likely to become brand advocates, recommending the business to others and positively influencing their purchasing decisions.

What are the differences between a customer rewards program and a customer loyalty program?  

Let’s explore the distinctions between customer rewards programs and customer loyalty programs:

Rewards programs:

  • Purpose: Rewards programs are tactical tools designed to encourage immediate customer action. Their primary goal is to boost short-term sales.
  • Incentives: These programs offer tangible benefits such as discounts, promotional offers, “buy one, get one free” deals, or exclusive access to products/services for a limited time.
  • Focus: Short-term, often linked to specific marketing campaigns or seasonal promotions.
  • Audience: Broad appeal, aimed at attracting as many customers as possible during the promotional period.

Loyalty programs:

  • Purpose: Loyalty programs focus on building sustained relationships between the brand and its customers. They reward ongoing engagement and emphasize brand loyalty over time.
  • Incentives: Customers accumulate rewards through continued business, leading to future discounts, special services, or exclusive access.
  • Focus: Long-term engagement, retaining customers over time.
  • Integration: Loyalty programs can include elements of immediate rewards to keep customers engaged while introducing them to long-term benefits.

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