Bubblehouse

The case for smarter loyalty in the current macro environment

If there's one word that describes doing business in 2025, it's uncertainty.

Worries about tariffs and inflation are weighing heavily on shoppers. A recent survey by The University of Michigan showed a 15-month low in consumer sentiment in February. These concerns are likely to affect spending in the months ahead.

For brands, economic unpredictability is shifting budgets and strategies, especially when it comes to acquiring new customers. Customer acquisition costs have never been higher, and they continue to rise year over year. In the 5-year period between 2018-2022 alone, they increased by 60%.

To drive sustainable growth in 2025, retailers must look beyond costly acquisition and shift the focus to retention and lifetime value. And one of the best ways to drive repeat purchases and foster brand advocacy is through a well-designed loyalty rewards program that reflects your brand’s unique vision.

Understanding loyalty program structures

Whether you’re building a rewards program from scratch or leveling up an existing one, you need to understand the different options and features that are available. This will help you to both refine your strategy and choose the right loyalty system for your needs.

Types of loyalty rewards

There are three main types of rewards you can offer members of your loyalty reward program:

Points for purchases: Points are the most popular type of loyalty rewards and with good reason. Shoppers are familiar with how they work, so there’s a level of comfort when joining and little need for customer education. Plus, brands can incentivize a wide variety of actions with points, and offer flexibility to trade points for discounts or products. The drawback is that your loyalty program may not stand out from your competitors.
Discounts for signing up: As part of this type of program, members receive ongoing incentives for joining—exclusive discounts, special offers, and promotions. Drugstores typically offer these types of rewards on a limited-time basis. The sense of urgency can drive more customer engagement and purchases, but the constant discounting can be a drain on your bottom line.
Exclusive access: These rewards are often part of a paid loyalty program, where users pay a fee to receive exclusive benefits. An example of this would be Amazon Prime, where paid members get free 2-day shipping and access to streaming content. The main challenge with this type of program is ensuring that customers are receiving enough value to justify the fee.

Loyalty methods and features

Once you’ve decided on the rewards you want to offer, you’ll need to figure out how you want to structure the program, and how to make it engaging for your customers.

Tier-based loyalty programs—where customers unlock different levels and better perks the more they spend—can be a powerful motivator for your customers. Higher VIP tiers can include benefits like free shipping, testing new products, or early access to sales, allowing you to create exclusivity and promote a more active brand community. The main challenge with this type of program is finding ways to keep members engaged once they’ve reached the highest tier.

Achievements—where loyalty members unlock exclusive rewards by completing specific actions—allow you to gamify the loyalty experience. For example, you could offer a free gift or extra points once a customer spends a certain amount or refers a defined number of friends to your brand. For customers, this makes loyalty fun, though some brands may struggle with creating fresh challenges to maintain customer interest.

Interactive elements like voting and quizzes are a win-win for brands and members alike when incorporated into a loyalty reward program. Brands get a treasure trove of insights into their loyal customers, which they can then use to create the personalized, relevant experiences that shoppers want. While effective, these loyalty features can be resource-intensive to build and deploy.

Referrals and loyalty programs work better together. By incentivizing referrals with points and perks in addition to the bonus they receive for referring someone, you’re leveraging your best customers for acquisition while rewarding them with double the value for their advocacy. Referrals are easy to implement and highly effective.

Subscription milestones combine the retention power of loyalty and subscriptions to supercharge your LTV. By offering personalized rewards like free gifts, points bonuses, one-time discounts, and gift cards when customers make subscription purchases, you can reduce churn and retain more revenue. In order to leverage this feature, you’ll need to ensure that you choose loyalty and subscription solutions that are fully integrated.

The best loyalty programs combine the right mix of these features to deliver a customer experience that’s unique to your brand while staying flexible, engaging, and providing real value for members.

Building the right loyalty reward program for your brand

Before you build a loyalty program, it’s important to determine which metrics will define success for you. Return on investment? Customer lifetime value? Highlighting the benchmarks you want to hit will ensure that your program has the right components to meet your goals.

The same goes for upgrading an existing program, along with some additional considerations. Which parts of your loyalty reward program are working or not working? Where are your highest churn points?

It’s also important to map out your customer journey and identify each touchpoint that can be strengthened by incorporating loyalty into it. For example, if you struggle with cart abandonment, display available redemption points at checkout to encourage shoppers to complete a purchase.

Once you’ve answered these questions and completed your customer journey mapping, you’re ready to create a unique loyalty system that’s on-brand and meets your core objectives. No matter which features and perks you choose, there are some loyalty best practices to keep in mind:

Personalization is key. A generic loyalty program won’t drive long-term engagement. Tailoring rewards and experiences to their preferences and behaviors allows you to create a program that truly resonates with them.
Visibility matters. It’s not enough to put a Rewards link in your footer and hope customers find it. Consistently highlighting your program and reinforcing customer rewards will keep your members interested and engaged.
Integration leads to adoption. By incorporating loyalty features seamlessly into all key touchpoints in the customer journey, you can ensure that your program is efficient and effective, and that your customers are engaging with it at every step.
Data drives optimization. Ensure that you have the right tools in place to measure the success of your loyalty program and its impact on your customer retention rate.

It’s also important to remember that loyalty isn’t a set-it-and-forget-it undertaking. You should continuously monitor the success of your program, test new strategies and features, and iterate when necessary. Having the right loyalty partner can help.

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Futureproof your customer retention with the right loyalty system