Loyalty Points: How to Set up a Points Reward System

One of the essential elements of any customer loyalty program is its points reward system, or simply loyalty points.

Your points system is the backbone of your rewards program. Without a clear points-to-rewards system, customers won’t understand how your program works and what’s in it for them.

Most, if not all, of the world’s best loyalty programs have set up a points reward system. Customers gain points and redeem them at a later time for rewards and perks.

The process of redeeming points and getting rewards should be a smooth one. Gameball offers several redemption options that make your loyalty program a smooth experience for your brand and customers.

In this article, we’ll explain what loyalty points are, how they work, and how to set up a points reward system for your loyalty program.

Table of Contents

• What are loyalty points?
• How to set up a points reward system
• The value of points
• When do points expire?
• How can customers redeem points?
• Ways to Redeem Points
• Closed-loop vs. Open-loop points reward system
• Closed-loop points system
• Open-loop points system
• Merchant-wide points reward scheme
• Types of rewards you can offer: Coupons
• 1. Points-for-coupons
• 2. No prerequisite coupons
• Types of coupons in Gameball
• Percentage-based coupons
• Fixed amount or fixed-value coupons
• Flat-rate coupons
• Other types of rewards you can include in your rewards program
• Cashback rewards
• Free shipping
• Free product(s)
• Final tip: Create a custom redemption page
• Conclusion
• To set up your rewards program for success, check out these resources:

What are loyalty points?

Points are the currency your customers use to get rewards. As a business owner or marketing manager, you should set the value of your points. You should determine how much customers need to spend to earn a point or number of points.

For example, customers who shop at US-based beauty brands Sephora and Ulta get 1 point for every $1 spent. Similarly, The Body Shop’s points reward system gives customers 1 point for every GBP 1 spent in-store or online.

Further reading: Discover How to Retain Customers with 5 Ideas from the Ulta Rewards Program

When setting up your point redemption scheme, imagine what would appeal to your customers and pursue that.

Rewards are redeemable in many forms, such as cashback rewards, redemption at check out, exchange points for gifts, among others.

Remember, if your points are too hard to earn, customers will feel demotivated and abandon your loyalty program.

How to set up a points reward system

A well-structured points reward system, that lets customers earn and redeem points in many ways, will motivate your customers and increase loyalty.

There are several elements that make up any points reward system. These are:

• The value of points
• When do points expire
• How customers redeem points

Let’s look at each of these in detail.

The value of points

We’ve hit on this already. If you want to have a successful loyalty program, you need to clarify the value of points and how customers can earn them.

You may choose to let customers earn 1 point for every $1 spent or 1 point for every $10 spent. This usually depends on the value of products you sell. If your lowest ticket-item is worth $100 then letting customers earn points for every $1 spent will mean they get hundreds of points for every purchase.

But that’s not the whole picture. It’s not only to determine how customers can earn points, but also when they can start getting rewards.

For example, if customers get 1 point per $1 spent and their first reward comes after collecting 1,000 points, then it’s a long road to earning points. If that first reward is a $10 coupon, your customers won’t feel like they’re benefiting from your program.

Similarly, if customers don’t know the value of your points, they won’t know how much they’re likely to earn with each purchase. You may think that this vagueness keeps them interested, but the truth is, it wears them down and drives them away.

When do points expire?

The second important element you need to consider when setting up your points reward system is when your points expire.

Points in most rewards programs expire after one year. However, some businesses may decide to let points expire after 3 or 6 months.

The downside of having a short-term points-expiry is that customers may not be able to acquire the minimum number of points needed to earn their first reward. This can be very frustrating for customers, especially if earning points isn’t easy or if they don’t need to buy your products frequently.

For example, if a fashion brand has points that expire within 3 months, customers are unlikely to ever get a reward. You don’t shop for clothes or accessories every day or even every week.

It’s, therefore, imperative you clarify when points expire in your loyalty program explanatory page.

We also recommend notifying customers a month or two weeks before their points expire. This gives them the chance to use their points and engage with your program.

How can customers redeem points?

As a business, you need to define how customers can redeem points. This is an essential part of setting up your loyalty and rewards program.

Points redemption or redeeming points simply means customers exchanging their points for the rewards you’re offering.

It’s worth mentioning that as customers collect points, you can gather information about your customers’ behavior. You can use this data to

• create better and more personalized rewards
• gain insights about your customers’ buying habits and preferences
• improve your products and services
• increase customer satisfaction and retention

Ways to Redeem Points

Customers don’t want to collect points endlessly. They want to get the perks and rewards your loyalty program has to offer.

That’s why it’s essential you clarify how and when customers can redeem or exchange points for rewards.

Closed-loop vs. Open-loop points reward system

There are two main methods for setting up a points reward system. These are the closed-loop points system and open-loop points system.

Using Gameball, you can configure either for your business.

Closed-loop points system

The closed-loop points reward system allows customers to gain points when via one channel only. This can be in-store, or via your website, or via your mobile app.

In other words, if a customer earns points via your website, they can only redeem them via your website. They can’t be redeemed in-store.

Many e-commerce businesses begin with a closed-loop points reward system because they only have a website.

Open-loop points system

The second option is the open-loop points reward system, which allows customers to gain and redeem points through several channels.

Using the open-loop reward scheme, customers can redeem points for rewards across different channels, not just the one where they got the points.

This means that when customers shop in-store, via your website, or using your mobile app, they can gain and redeem points on any of those platforms.

For example, if Andrew buys books from your physical store, he earns points. He can then redeem those points for rewards via your website or mobile app.

Omnichannel loyalty programs use the open-loop points reward system.

You can choose to invest in the open-loop points reward scheme if you’re planning on growing your business soon. Alternatively, businesses can upgrade or change their points reward method from closed-loop to open-loop.

It’s worth mentioning that the open-loop points method requires API integrations, which may not be available on all platforms. However, if you’re not sure or need help understanding the tech-side of the open-loop method, you can reach out to Gameball’s Support team for assistance. Email them at support@gameball.co.

At Gameball, we provide a wide range of APIs to enable the best open-loop experience with a wide range of SDKs for easier integration.

Merchant-wide points reward scheme

This is a type of open-loop points rewards system that not only encompasses multiple channels but also multiple brands.

Retailer groups that manage several brands often use this type of rewards program. Here, customers can gain points when they shop at multiple brands. They can then redeem their points at any brand under that large umbrella of brands.

For example, if Brand X manages or owns 3 brands. A customer can buy products and earn points at one brand and redeem those points for a discount or reward at another brand under Brand X.

Types of rewards you can offer: Coupons

With Gameball, there are several ways you can reward customers. These include coupons, cashback rewards, percentage-based discounts, free shipping, or free products, among other rewards.

One of those rewards is using ‘Coupons.’ There are several types of coupons in Gameball.

1. Points-for-coupons

Here, customers exchange their points for discount coupons. These can be flat-rate coupons, fixed-amount coupons, or ?.

We’ll explain each in detail below.

2. No prerequisite coupons

Put simply, customers don’t have to exchange points to get these coupons. You can offer them as gifts for the different types of loyal customers you have. Or you can offer them to customers who haven’t shopped in your store for a while and you want to pull them back in.

Here are a few examples:

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Types of coupons in Gameball

Percentage-based coupons

Here, customers exchange a number of points for a discount percentage.

For example, customers can exchange 1,000 points for a 10% discount coupon (or a 20% discount coupon). You set the value of the discount coupon against the number of points to be exchanged.

You can decide that 1000 points = 10% coupon, 2000 points = 20% coupon, and so on.  

Percentage-based discount coupons are a great way to attract customers and get them to increase their average basket size and average order value.

They’re also more effective than offers which are short-term and can chip into your revenues and profits.

Fixed amount or fixed-value coupons

In this case, customers can redeem or exchange points for a specific value or sum. For example, they can exchange 1,000 points for a $10 coupon, or 1,500 points for $15.

Here the points translate to a monetary value coupon. You can determine the value of points and value of coupons from your Gameball dashboard.

You can also determine the value in any currency. This is important especially if your business is present in several countries.

Flat-rate coupons

The flat-rate coupon is more of a rule than a reward option. You set the rule that gives each point a monetary value. For example, 1 point = 1 cent. So, 100 points = 100 cents = $1. You determine the value of each point in your points reward scheme.

Other types of rewards you can include in your rewards program

In addition to coupons, there are several types of rewards you can include in your customer loyalty program.

We’ll dive into each of these reward types and methods in separate articles. But here are a few examples of ways you can reward customers.

Cashback rewards

One of the most commonly-used loyalty program rewards are cashback rewards, where customers get a dollar amount, like credit, in their account after they’ve completed a certain purchase.

Free shipping

One of the most-sought after rewards is free shipping. Customers hate shipping fees. Many brands offer free shipping when customers pass a certain threshold like $100 or $50 per order.

Offering free shipping helps businesses increase customers’ average basket size and average order value.

Free product(s)

Customers can get a free product in exchange for a certain number of points. Choose a range of products to give customers a choice when choosing their free product(s). This is quite common among paid loyalty programs and beauty loyalty programs. Swarovski and Sephora are two brands that use this method.

Final tip: Create a custom redemption page

The best way to explain how your points and redemption scheme work is to explain it in yourloyalty program explanatory page.

This section should be clear and concise. It should cover these points:

• how to earn points
• how to use points
• when do points expire
• any other notes you wish to mention about points in your loyalty program

Conclusion

Listening to your customers will improve the entire customer experience and not just your redemption rates. Remember, what works for your program today might need some tweaks or an upgrade to stay on top of the game later on.

As you grow your business, you’ll learn more about your customers and their buying habits. You’ll learn more about what they like and what they don’t like, the rewards they prefer and those they don’t.

Regardless of the type of loyalty program you’re using, you’ll need to use points scheme or something similar. Doing so helps customers understand the value they’re getting and see how they’ll rise to the next level or earn the next reward.

You also don’t have to use points for purchases only. Diversifying how customers earn points can go a long way. They can earn points for providing their personal information, referring others, or following you on social media.

The important thing is to make sure that your customers know what it’s in it for them. This includes explaining how your program works and how the points scheme works.

Need help setting up your points scheme? Get in touch with our customer support team at support@gameball.co.

To set up your rewards program for success, check out these resources:

• 5 Must-Avoid Mistakes for a Successful Customer Loyalty Program
• How to Measure Loyalty Program Success: 7+ Metrics You Need to Know
• What Makes a Loyalty Program Successful? [Includes 11 Tips]
• 6 Simple Customer Retention Strategies to Boost Your Sales

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