Recent statistics reveal that almost 90% of brands have a loyalty program.
Loyalty programs have been around for decades: companies love them because they help increase customer retention, and customers love them because they get real benefits.
But what if there was a way to take this model even further?
Today, loyalty has moved beyond simple point systems.
Modern programs, especially those powered by mobile apps, can actively increase retention, personalize the customer experience, and turn occasional buyers into high-value customers.
In this guide, you’ll learn how to create a loyalty program from scratch, how to make it effective, and how to measure and benchmark its performance against industry standards.
Let’s start!
What Is a Loyalty Program?
A loyalty program is a marketing strategy that rewards customers for repeatedly engaging with a brand.
Usually, customers earn points for actions like buying a product, referring a friend, or interacting with the business. These points can then be redeemed and used for discounts, free samples, or exclusive experiences.
These programs are quite effective for two main reasons:
- They increase customer satisfaction with a brand, encouraging their loyalty.
- They help businesses build long-term relationships with their customers.
While traditional loyalty programs focused on basic rewards, like “buy 5, get 1 free”, modern versions are more dynamic.
They can live inside mobile apps, connect to digital wallets, personalize the rewards, and even gamify the experience to keep users engaged.
Loyalty Programs in Numbers
In 2024, the average US consumer was enrolled in around 19 loyalty programs, but actively used only nine, showing just how competitive the loyalty landscape has become (Statista).
Given their popularity, loyalty programs are now a core part of modern marketing strategies.
Last year, marketers in the US allocated about 30% of their marketing budget to loyalty programs, while marketers in China invested even more, roughly 51% (Statista).
And the returns justify the spend.
In one survey of over 2,600 marketers, 35% reported that their loyalty program generated five to seven times more revenue than it cost to run (Statista).
Broader industry research shows a similar trend: 83% of program owners who measure ROI reported a positive return on investment, which, on average, generated 5.2 times more revenue than what it costs (Antavo).
How to Create a Loyalty Program
Now, let’s get into practice.
To create your loyalty program, you need to address three main steps:
1. Define the Goals of Your Program
The first thing to do is to define the goal of your loyalty program.
Do you want to increase your purchases? Drive app engagement? Retain more users?
OpenLoyalty makes an interesting distinction between primary and secondary goals.
For example, primary goals can be acquiring new customers, improving customer loyalty or retention.
On the other hand, secondary goals could be increasing the number of orders placed, the time spent in the mobile app, or the visits to your website.
In other words, primary goals are the foundations of your program, while secondary goals are the actions that help you support those foundations.
2. Understand Your Customers
The second step is to understand your customers and what they want.
While every audience is different and may react to different things, the latest Antavo’s report on Customer Loyalty sheds some light on best practices for your loyalty program.
Overall, customers look for a smooth and frictionless experience, where there is also freedom to redeem the rewards.
More specifically, among the surveyed people:
- 40.7% would not like to have an expiration date for points.
- 40% want more ways to earn points.
- 33.6% want more flexibility when redeeming points.
- 22.8% are interested in custom rewards.
And if we look at what motivates people to join a loyalty program, we see that the top three spots are:
- Rewards, discounts, or cashbacks.
- Personalized offers.
- Free shipping and returns.
In general, try to design a program that is not too complicated, nor too strict when it comes to using the rewards.
3. Define How You’ll Reward Users
Lastly, you need to define how your program works in practice.
In general, loyalty programs differ in the type of rewards they provide and their mechanics. A few examples are:
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Points-based programs: Probably the most common one. Customers earn points for purchases or actions, and points can be redeemed for rewards like discounts, free products, or exclusive perks.
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Tiered programs: Customers advance through levels (for example, Bronze → Silver → Gold) based on spending or engagement. Higher tiers unlock better rewards, status, or exclusivity.
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Paid or subscription programs: Customers pay a recurring fee to access premium benefits, like faster shipping, exclusive content, VIP perks.
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Cashback programs: Customers receive a percentage of their purchase back as cash, store credit, or points.
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Visit-based programs: Reward customers after a set number of purchases or visits (for example, buy 10 coffees, get 1 free).
- Gamified programs: Incorporate challenges, levels, missions, or mini-games to make earning rewards fun. They are often app-based.
It’s important that you define exactly how your customers will be rewarded and what actions will lead to the reward.
Is it just purchases, or other engagements as well?
Today, more and more companies are using a hybrid program.
For example, during the holiday season, Starbucks launches its “Starbucks for Life” program.
The program is based on the so-called Merrython, a game in which Starbucks users run through a city collecting red cups.
The prizes vary: from free beverages and merchandise to a free Starbucks for life!
How to Increase Customer Retention
According to a study by EY Loyalty, 49% of companies want to increase customer retention with their loyalty programs.
One way to achieve this is to transform your program into a habit for your customers, giving them a reason to come back.
Here are a few ways to do this:
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Make rewards feel achievable and don’t wait too long for your first reward. Programs with low redemption thresholds keep users motivated because they see value early. If rewards take too long to earn, users lose interest.
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Use personalization to keep engagement relevant. As you read earlier, users like custom rewards. So combine your loyalty program with CRM data: you can send personalized offers, recommended products, or tailored missions. This moves your program from “generic discounts” to “value created just for me”.
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Add gamification to make engagement fun. Challenges, badges, missions, and streaks turn loyalty from a passive into a game-like experience. Some companies even add offerwalls to their loyalty program to take this even further.
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Reward more than purchases. Retention improves when users can earn value from different actions. Consider rewarding behaviors like daily or weekly app opens, leaving reviews, referring friends or participating in events or surveys. This lowers the effort required to stay active and gives customers more reasons to return between purchases.
- Use offers to bring customers back at the right moment. Well-timed notifications can recover inactive users, remind them about unredeemed rewards, or highlight new challenges. The key is timing: send reminders when customers are most likely to act.
How to Benchmark Your Loyalty Program Against Industry Averages
Now your program is ready, but how do you make sure that it’s going well?
Industry benchmarks are on your side here.
The first thing to do is to identify the key metrics to compare.
Usually, key metrics to consider are:
- Activation rate
- Participation rate
- Points redemption rate
- Reward usage rate
- Customer lifetime value (CLV)
- Return on investment (ROI)
Let’s take a look at some common industry benchmarks*:
| Activation rate | Between 41% and 60% |
| Participation rate | Between 61% and 80% |
| Reward redemption rate | Between 41% and 60% |
| Average annual ROI | Between 10% and 20% |
Of course, these are only benchmarks and can vary greatly from industry to industry.
But they can be used as opportunities to understand where to optimize.
If your redemption rate is low, simplify rewards. If participation is low, improve onboarding or offer a stronger join incentive. If ROI is well below industry averages, experiment with personalized offers or more frequent progress triggers.
*The data in this section was taken from the EY Loyalty Market Study. The study was conducted on 397 professionals from various sectors, but mainly retail, consumer packaged goods, food and beverage, and hospitality sectors.
One More Tip: Why Don’t You Use Games?
We’ve already mentioned this: gamification can give your program a nice boost.
But why don’t you take this even further and use games?
More and more companies are adding new ways for users to earn points, besides the classic ones.
A good example of this is ANA Group, a Japanese airline.
Like many other airline companies, ANA Group has its loyalty program, which allows you to collect air miles just for moving. Take the plane, the train, the subway, or go for a walk: all these actions add up to your miles.
However, they also added a new Games section in their app, to allow users to earn air miles by playing mobile games.
The addition turned out successful.
There was a clear engagement growth, and they were able to exceed their revenue target by 45%.
Mobile games work for a few reasons:
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They are engaging. Gamification is a proven strategy to increase user engagement. Adding a games section to your loyalty program can make the experience even more rewarding for your users.
- They provide a secondary reward stream for users. As we mentioned earlier, having different reward streams is beneficial, because your users are more likely to come back often. In this way, you aren’t rewarding just purchases but also app engagement.
How To Create a Loyalty Program: Final Thoughts
Now you can start building your own program.
Remember: the key is to keep it simple, rewarding, and engaging.
Give users clear value early, offer multiple ways to earn, and personalize the journey where possible. All these elements will turn your program into a habit, and not just a way to get a discount.
At the end of the day, the main goal of a loyalty program is to retain customers and turn them into advocates, and providing them with real value is how you do it.
