THE CLARUS Blog

The Best Retail Loyalty Programs and What You Can Learn from Them

Ninety percent of retailers say expanding their respective loyalty programs is a priority for 2021.

The days of “set it and forget it” loyalty programs are over. Consumers have too many choices today and, if they don’t see any value from your loyalty program, they will simply (and quickly) look elsewhere.

It’s getting harder for retailers to attract and retain loyal customers. In fact, nearly two-thirds of consumers say their loyalty is more difficult for retailers to maintain than ever before.

COVID-19 has changed consumer behavior significantly in the past year and, maybe, forever.

The task of earning customer loyalty was challenging for retailers before the pandemic. Now, it’s become exponentially more difficult as consumers have seemingly infinite options.

As many brands continue to rethink customer loyalty, which programs are the best ones?

Which ones should you consider before you launch yours?

Here are what we consider to be the best 15 loyalty programs today.

 

Amazon Prime

Type: Premium loyalty program

Benefits: Prime members are attracted to the program for its convenience (free two-day shipping), simplicity, and slew of benefits, including:

  • Prime Music
  • Prime Early Access to Lightning Deals
  • Prime Photos
  • Prime Now
  • Prime FREE Same-Day and One-Day Delivery
  • Prime Day
  • Prime Reading
  • Amazon Prime Rewards Visa Signature Card
  • Amazon Handmade on Prime Now
  • 5% Back at Whole Foods
  • Discounted Prime Offer for Medicaid Recipients
  • In-Car Delivery Exclusive to Prime

Background: This premium loyalty program launched in 2005 and has steadily grown (more than 150 million global members) and added desired benefits over time as well.

Amazon continues to truly listen to its customers and has moved into other areas of interest such as contentgrocery, and pharma.

Why it’s one of the best loyalty programs: Simply put, Amazon continues to listen to its customers, identify their pain points, and address them in the Prime program.

Sounds easy, but Amazon does this better than anyone else.

The membership numbers wouldn’t be anywhere near as high if this program didn’t hit on all cylinders, show consistent value, and offer desirable benefits.

Amazon officials have addressed consumer pain points since Day 1 and continually optimize the program.

The value customers find in Prime is clear: Prime members spend more than twice as much as non-Prime members.

It’s a program that Amazon customers find continued value in and are willing to pay for.

Learn more from our 5 Lessons From Amazon Prime webinar.

 

Nordstrom

Type: Tiered points program

Benefits: Members unlock higher status levels with additional benefits and rewards based on the net value of purchases made in-store and online at Nordstrom, Nordstrom Rack, and Nordstrom Locals as well as online at Trunkclub.com (collectively referred to as “Nordstrom locations”).

  • MEMBER – no minimum NPB (Net Purchase Balance)
  • INFLUENCER – minimum NPB of $500 at Nordstrom locations
  • AMBASSADOR – minimum NPB of $5,000 at Nordstrom locations
  • ICON – minimum NPB of $15,000 at Nordstrom locations using a Nordstrom card

Members receive exclusive benefits in the form of rewards, such as Nordy Club points and Nordstrom Notes, services, and event access. Nordstrom Debit and Credit Cardmembers will be eligible for additional special benefits associated with card membership.

Depending on what tier you’re in, member benefits include:

  • Free basic alterations
  • Lifestyle workshops
  • 3 or 4 Personal Double Point Days
  • Priority Access to Style events
  • Each tier of the loyalty program will also grant access to personalized experiences, such as the option to have Nordstrom’s in-home stylists make a house call

The top-tier shopper status, known as Icon, rewards shoppers who spend $15,000 annually with perks like unlimited free alterations, free same-day delivery, a complimentary dining or spa experience, and Nordstrom After-Hours, which allows Icon members to shop in private after stores close.

Background: Nordy Club launched in 2018 with a focus on personalization.

Consumers fill out a Nordy Portrait, which is a unique user profile each customer can create through their respective loyalty mobile app. Through the app, members can customize their style profiles, view their points balances, and see how much they need to spend to reach the next tier.

Why it’s one of the best programs: Nordy Club’s more than 10 million active members spend four times more and shop three times as often as non-member customers.

Nordstrom’s tiered, points approach gives all consumers options in this program and encourages movement among the tiers. The experiential aspects of the program are very attractive to consumers.

 

Sephora

Type: Tiered points program

Benefits: Include:

  • Beauty Insider Cash
  • Seasonal savings events
  • Free standard shipping
  • Samples rewards
  • Exclusive gifts and experiences
  • First access to products
  • Beauty classes

Background: Beauty Insider is one of the richest, most rewarding programs because it’s loaded with benefits that appeal to those who purchase beauty products, including tiers that recognize and reward members based on their overall value and spend with Sephora.

Why it’s one of the best loyalty programs: Beauty Insider provides members with many experiential benefits. Consumers who sign up receive access to things like the Beauty Insider Community and beauty classes without having to spend anything at all.

Members that spend $350 annually gain access to the VIB tier. That equates to free gifts and one makeover per year. Members who spend $1,000 annually are upgraded to Rouge status where they have access to a private hotline and exclusive events.

 

REI

Type: Premium loyalty program

Benefits: Include:

  • Get special member pricing on REI Adventures trips; choose from more than 150 experiences around the world
  • Outside classes and events
  • Used gear trade-in
  • Insider tips
  • Members rent for less

Background: REI was founded in 1938 when a group of 23 climbing friends, united by their love for the outdoors, decided to source quality and affordable gear for their adventures.

Today the REI community has 19 million lifetime members, more than 13,000 employees and 168 locations in 39 states and the District of Columbia.

Why it’s one of the best programs: This program is appealing for many reasons, including a $20 lifetime membership, exclusive events (garage sales) and discounts, and an annual member dividend.

Experiential benefits represent a major theme of this premium loyalty program.

For members of REI Co-op, they can enjoy various adventures offered around the world. Anyone can go on an adventure, but they are heavily discounted for members.

As a member-owned co-operative, REI focuses on shared values.

While the program offers transactional benefits, the star attraction is the experiential element. This allows members to participate in and experience the brand lifestyle, which builds lasting emotional connections.

 

lululemon athletica

Type: Premium loyalty program

Benefits: Include:

  • A free pair of yoga pants
  • Free workout classes
  • Curated events
  • Free shipping

Background: The test program launched in late 2018 and has seen great success.

Competition is heating up in the athleisure market and Lululemon’s program satisfies that emotional need to shop smartly by offering benefits like free shipping and a pair of pants or shorts.

The program also awards members curated events and workout classes. Those are the experiences that are more memorable and unique to Lululemon, satisfying an emotional desire for exclusivity.

Why it’s one of the best programs: These kinds of experiences become so valuable to customers and often become a part of their daily lives.

Successful loyalty programs combine transactional and experiential benefits to create differentiation and build sustainable emotional connections.

Instead of putting the brand first, Lululemon puts its customers first.

This is what Lululemon does so well and builds brand advocacy because of it.

 

Bed Bath & Beyond

Type: Premium loyalty program

Benefits: Include:

  • Free shipping
  • 20% of your entire purchase, all the time
  • 50% off interior design services
  • Exclusive offers and member shopping events

Background: The Beyond+ program offers compelling, instant benefits to members for just $29 per year.

Everyone has come across the famous blue coupon. Valid for 20% off any single item, many consumers would collect them to use for multiple items.

Coupons like this can encourage consumers to simply wait for discounts and coupons to shop.

But one of the main reasons why company officials launched the Beyond+ premium loyalty program is because they saw a reduction in coupon redemptions.

Coupons are still an important asset, but Beyond+ provides company officials with better customer data so they can offer relevant value to members.

Beyond+ members shop more often, spend more frequently, and provide richer data.

 

Why it’s one of the best programs: Beyond+ is a simple, low price program that provides members 20% off and free shipping as well, all the time.

But the program, which launched in 2018, moves away from the various discounts that Bed Bath & Beyond has offered in the past. Beyond+ simplifies the thought process for shoppers and offers great value.

Although coupons are still part of the company’s marketing strategy, Beyond+ offers instant benefits in this successful premium loyalty program.

According to our 2020 Premium Loyalty Consumer Data Study, the top four benefits that would motivate a consumer to invest in a premium loyalty program include free shipping (66%), instant discounts that can be used whenever they shop (60%), free giveaways (56%), and faster shipping (47%).

 

Starbucks

Type: Tiered points program

Benefits: Include:

  • Mobile order ahead
  • Convenience
  • Multiple payment options
  • Credit and debit cardholders accrue points forever with no expiration

Background: More than 21 million global members say this program is well worth it.

Starbucks changed its loyalty program from visit-based to spend-based after listening to its customers. Company officials increased their investment in 1-to-1 marketing and personalization to better understand customers.

The company also has expanded its Mobile Order & Pay platform to give customers more options to order their favorite Starbucks beverage while on the go.

This program rewards frequently and focuses on ease of use and convenience.

Starbucks has gone through various iterations of its loyalty program since it launched the Starbucks Card rewards program in April 2008. Later that year, a Starbucks Gold Card was born that allowed loyal customers to reach an elite “gold” loyalty status with extra freebies and in-store benefits.

In 2009 it consolidated its Starbucks Card Rewards and Starbucks Gold Card into a single program: My Starbucks Rewards. Guests started at the “Welcome Level” and can work their way up to Gold Level status.

In early 2016 Starbucks changed its rewards program from visit-based to purchase-based. Customers earn two stars for every dollar spent. Customers earn a free drink after 125 stars instead of after 12 visits.

In 2018 Starbucks launched its first credit card with Visa, which automatically enrolls users in the rewards program and allows users to earn stars based on purchases inside and outside of Starbucks.

Two years ago, Starbucks consolidated into a single-level rewards system with a new tiered rewards structure that lets users “cash in” at any point they choose.

 

Why it’s one of the best loyalty programs: Starbucks uses technology to highlight the program’s ease of use via mobile.

More than 40% of transactions are from Starbucks’ nearly 20 million loyalty program members.

Starbucks Rewards members have always had to use pre-loaded gift cards for payment.

But last year a change was made, and customers can now link their credit or debit cards, or PayPal accounts to pay within the app.

Starbucks always seeks to reinvent its relationship with customers and has captured enormous value through their investment into digital technologies.

A customer-centric focus always keeps brands on top of their games and ahead of their competition.

Given this many program members, Starbucks has an inordinate amount of customer data to leverage in a positive fashion.

 

Barnes & Noble

Type: Premium loyalty program

Benefits: Include:

  • 40% off the list price of the current hardcover Barnes & Noble Store best-sellers
  • 10% off the marked Barnes & Noble sale price of other eligible items
  • Bonus coupons ($60 worth after joining)
  • Exclusive member offers
  • Automatic renewal
  • Free shipping

Background: The program’s transactional benefits inspire the members’ ongoing experience of reading.

The Barnes & Noble Membership program launched in 2000.

Why it’s one of the best programs: Great discounts and free shipping! Barnes & Noble usually tests new offers tied to the program and members have responded well. Simplicity rules!

The level of service and personalization you receive when shopping at Barnes & Noble is always stellar. Store associates are always pleasant, extremely accommodating, and knowledgeable.

The transactional benefits alone within this premium loyalty program make a membership well worth it.

 

DSW

Type: Tiered points program

Benefits: Include:

  • Free shipping
  • Rewards
  • Birthday gifts for you and your friends

Background: DSW has invested significant money in promoting its loyalty program, a move that has paid off. Members receive consistent direct mail and give the program premium placement in-store and online.

DSW launched its initial loyalty program in 1998 and revamped it through DSW VIP in 2018.

DSW VIP, which offers members compelling benefits and experiences, offers three tiers: VIP Club, VIP Gold, and VIP Elite.

It also speeds up rewards. VIP Club and VIP Gold members get $5 birthday rewards, Gold and Elite members can give two $5 birthday gifts to friends, and VIP Elite members receive $10 birthday rewards.

All members earn 50 points by donating shoes at any U.S. DSW location, and all receive $5 rewards for every 100 points earned.

VIP Club and VIP Gold earn 1 point for every $1 spent, while VIP Elite earns 2 points for every $1 spent, and VIP Gold and VIP Elite members enjoy early access to exclusive offers and events.

All members receive free ground shipping and free in-store returns. VIP Gold members also receive free online returns, while VIP Elite members receive free two-day shipping and free in-store and online returns for a year.

Why it’s one of the best programs: This is a good example of how a retailer can get ROI from a loyalty program if it places it front and center. The program itself is compelling with a good blend of transactional perks (points that equal rewards and free shipping) and interesting extras (shoe donations and birthday gifts for you AND your friends).

DSW’s messaging is clear, concise, exciting, and on brand. This program demonstrates that DSW knows and understands its audience well.

It nicely balances transactional and emotional benefits.

 

Restoration Hardware

Type: Premium loyalty program

Benefits: Include:

  • 25% off all full-price purchases immediately after signing up
  • 20% off on all sale items
  • Free interior design services

Background: The RH Members program charges members an annual fee of $100 and then they receive the benefits instantly. The program is so popular for RH that about 95% of its business is driven by loyalty program members.

CEO Gary Friedman eliminated the company’s traditional discounting and promotions entirely and introduced its own premium loyalty program.

This simplified the value proposition for RH Grey Card members who, for a $100 annual fee, receive 25% off all full-price purchases.

Why it’s one of the best programs: It’s simple, straightforward, and offers value and instant benefits. It’s a win-win for customers and company officials.

The RH Members program nicely balances transactional and experiential benefits.

It gives program members 25% off every purchase, and then adds experiential benefits that make sense to its customers, such as complimentary interior design and concierge services.

When a brand can combine transactional and emotional benefits in a loyalty program, it completes the loyalty loop in a compelling way for members.

Transactional benefits let your customers feel smart, where experiential benefits let them feel special. Both have an emotional impact.

 

Target Circle

Type: Points program

Benefits: Include:

  • Earning 1% on every Target run to redeem later
  • Having a positive impact in their local community by voting to direct Target’s giving initiatives
  • Receiving personalized deals and perks, including a birthday surprise
  • Getting early access to special sales throughout the year

Background: Target tested its new loyalty program in Dallas-Ft. Worth, Charlotte, Denver, Indianapolis, Kansas City, and Phoenix for more than 18 months before rolling it out nationally in September 2019.

Target Circle members save and spend more than guests who are not enrolled in the program. The program has more than 80 million members.

Why it’s one of the best programs: As part of Target’s longstanding commitment to giving back, Target Circle members can cast votes to help direct Target’s giving to approximately 800 nonprofit organizations in their local communities.

Millennials want to find ways to make an impact when they need to be tighter with their cash compared to other generations. That’s why it’s so important for brands to stand for something and create loyalty on a deeper, emotional level.

Target listened to its customers and designed a personalized program that was simple to understand and filled with value.

 

Kohl’s Rewards

Type: Points program

Benefits: Include:

  • $10 Kohl’s Cash for every $50 spend during a designated earning period
  • Personalized perks
  • Special birthday gift

Background: Kohl’s Rewards launched in September 2020 and unified the company’s three best-in-class loyalty programs: Kohl’s Charge, Kohl’s Cash, and Yes2You Rewards.

The program is simplified since it’s all on one platform based on Kohl’s Cash. It offers customers a greater opportunity to earn more Kohl’s Cash coupons, every day, on every purchase.

Members of Kohl’s Rewards, a free, tender-agnostic loyalty program, will earn 5% Kohl’s Cash every day no matter when or how they choose to shop, as well as personalized deals and perks throughout the year, and a special birthday gift.

Other new program elements include: Printing out a customer’s Kohl’s Rewards balance on the shopping receipt, digital reminders of available Kohl’s Cash coupons, and syncing Kohl’s Rewards balances across channels.

Why it’s one of the best programs: Kohl’s officials pride themselves on the personalization aspect of the program, which has yielded increased traffic and conversion.

It’s quite the “rewarding” rewards program, evidenced by the opportunity to earn 5% Kohl’s Cash every day no matter when or how you shop.

Kohl’s company officials have said of Kohl’s Rewards: “We believe Kohl’s Rewards will become the new standard in loyalty – simple, compelling, and rooted in value customers will find only at Kohl’s. It’s designed to give every customer an opportunity to win.”

 

Walmart+

Type: Premium loyalty program

Benefits: Include:

  • Same-day delivery of groceries
  • Fuel discounts at 2,000 locations
  • Access to Scan & Go (which allows customers contactless checkouts with their phones so they can skip lines)

Background: Amazon was one of the first to launch a premium loyalty program, back in 2005.

With more than 150 million members, Prime is now, arguably, the best loyalty program of all time.

Other retailers have launched premium loyalty programs since then, including CVS, GameStop, Wayfair, Barnes & Noble, Restoration Hardware, and Lululemon.

The launch of Walmart+ cements this trend toward premium loyalty.

Points aren’t enough to keep consumers loyal.

Walmart took a page from the Amazon playbook by launching a premium loyalty program, but Walmart’s target audience is different.

Walmart will target the budget shopper with Walmart+ and likely focus on grocery.

 Why we think it’s one of the best programs: Walmart is making it clear that the future of loyalty is going to include premium loyalty in a big way.

The annual membership fee for Walmart+ is $98 ($21 less than Prime). Amazon has an advantage in the number of products available for fast, free shipping, but Walmart+ has advantages of its own. Launched in September 2020.

Clearly, people are interested in paying a membership fee for the products and services they find valuable.

For example, look at the popularity of Netflix (as of Q1 2020, Netflix had more than 182 million paying subscribers) and Spotify (As of the second quarter of 2020, Spotify had 138 million premium subscribers worldwide).

It’s becoming non-negotiable now that Walmart, the world’s largest retailer by revenue, and Amazon, the world’s largest online marketplace, are onboard.

Most Americans live within 10 miles of a Walmart. With 5,000 stores, Walmart has the advantage when it comes to grocery delivery.

Early returns revealed Walmart+ could be well on its way to reaching membership levels of Prime: Consider that in the first two weeks of the Walmart+ launch, 11% of Americans became members.

Not every retailer will launch a premium loyalty program, the launch of Walmart+ means that most are probably having a conversation.

 

What Common Thread Is Found in These Great Loyalty Programs?

Common among these 14 great loyalty programs are compelling and valuable benefits.

Your loyalty program members won’t stay long without them.

Another common theme is the value of premium loyalty programs and tiered programs. These types of programs offer great value and different goals to shoot for from its members.

The third critical theme is these programs combine transactional and experiential benefits. By doing this, you raise your loyalty program from a competitive one to a leading one.

This also creates emotional connections that lead to lifelong customer relationships.

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