The main types of customer loyalty programmes are points-based, tiered, paid membership, cashback, punch card, value-based, coalition, partner, gamified, referral, experiential and subscription discount programmes. Examples include American Airlines AAdvantage (1981), Amazon Prime, Tata Neu and Shoppers Stop First Citizen.
American Airlines launched AAdvantage in 1981, and the modern loyalty programme was born: fly more, earn miles, get rewards. Today loyalty programmes run from a coffee-shop punch card to Amazon Prime. In India, Shoppers Stop’s First Citizen programme dates back to 1994, and newer schemes such as Flipkart SuperCoins, Tata Neu’s NeuCoins, Swiggy One and Zomato Gold compete for repeat customers.
Each type rewards a different behaviour. Pick the wrong one and you pay for rewards that do not change what customers do. Here are 12 types, with what each is good for. For the strategy behind them, see customer retention strategies.
12 Types of Customer Loyalty Programmes
1. Points-Based
Customers earn points per rupee spent and redeem them for discounts or products. Simple and flexible, but rewards can feel slow and small.
2. Tiered
Benefits grow as customers move up levels (silver, gold, platinum) based on spend. Airlines, hotels and Sephora’s Beauty Insider use this to push customers to the next tier.
3. Paid Membership
Customers pay a fee for ongoing perks. Amazon Prime, launched in India in 2016, bundles fast delivery with video and music; members tend to spend more to get value from the fee.
4. Cashback
A percentage of each purchase comes back as money or wallet credit. Common with credit cards and payment apps.
5. Punch Card (Buy X, Get One Free)
The tenth coffee free. Cheap to run and easy to understand, ideal for cafés and salons.
6. Value-Based
Purchases trigger a donation to a cause customers care about, building emotional loyalty.
7. Coalition
Several brands share one programme so points can be earned and spent across them. Tata Neu does this across Tata companies.
8. Partner Programmes
Two brands team up, such as a credit card with an airline, so customers earn rewards in one and spend in the other.
9. Gamified
Badges, challenges and streaks make engagement fun. Fitness apps and some food delivery apps use this.
10. Referral
Customers earn rewards for bringing in friends, as payment apps did heavily in their early years.
11. Experiential
Rewards are experiences rather than discounts: early access, events, members-only products.
12. Subscription Discount
Repeat orders at a lower price, such as subscribe-and-save on household staples.
Choosing the Right Type
| Business type | Good fit |
|---|---|
| Café, salon, small shop | Punch card, simple points |
| Large retailer | Tiered points |
| E-commerce, delivery app | Paid membership, cashback |
| Group of related brands | Coalition |
| Purpose-driven brand | Value-based |
| Premium brand | Experiential, tiered |
Whatever the type, the reward must be worth having and easy to reach. A programme that takes a year to earn ₹50 builds annoyance, not loyalty. Related: importance of customer retention.
