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What is a Customer Rewards Program?

Defined: Customer Rewards Program 

Customer reward programs are the point-based programs loyalty programs designed to increase customer engagement and purchases in exchange for discounts and other benefits.

Types of Customer Reward Programs 

Customer loyalty programs have been around for hundreds of years. From the early “buy 3 get one free” style punch-card programs, all the way to the multi-tiered VIP, and everything in between, you can use customer loyalty programs to increase engagement, brand recall, and purchase frequency from your customer base.  

Depending on your brand, your customers, and your industry, different types of reward programs may work better than others. Here are some examples and how you can use them for your business. 

1. Referral program.

Referral customer reward programs are among the simplest of programs you can set up for a modern ecommerce business. The concept is simple:

  • Customer is sends a friend a referral to your store 

  • Referred customer gets a discount on their next purchase 

At a bare minimum, that is all that is technically required to create a referral program, but unless you add some modifications to it, it is unlikely to deliver the results you (or your customers) are looking for. Two additional features you should add to your referral program to make it a success are:

  • The referring advocate who is sending the referral should also be given a reward in exchange for telling their friend

  • Their reward should be in the form of loyalty points, not a straight discount

Adding these two changes will incentivize your customers to make referrals, since there is now a benefit to them and not just to their friends. Having their reward in the form of points instead of a discount will then motivate them to perform other earning activities to increase that points balance, which in turn should help their next purchase be even larger than if it had been the original plain discount. 

A referral customer rewards program that benefits the sender and the receiver is the best way to use referrals to generate new, low cost-per-acquisition sales for your business, all without having to spend as much on the increasingly expensive acquisition through ads.

2. Points program.

Typically, a referral program and a points program go hand-in-hand, largely because of the increased impact that combining points with referrals brings. On its own, a points program can be as simple or as complex as you want it to be. The level of complexity varies depending on the types and number of earning and redeeming actions you want to provide for your customers. 

At its core, a points rewards program involves customers performing an activity, earn points for completing that activity, and then after a certain amount of points are earned, they can be cashed in for a reward. 

Examples of earning actions:

  • Customer account creation

  • Points per dollar spent on purchases 

  • Social engagement, following, or sharing 

  • Newsletter sign-ups 

  • Leaving a product or business review 

Examples of redemption rewards:

  • Percentage discounts off purchases

  • Dollar amount discounts off purchases

  • Free products

  • Free shipping 

There are dozens of ways you can motivate your customers to engage with your brand. Many of the more complex or unique earning and redeeming actions are possible thanks to integrations between loyalty platforms and the other apps in your ecommerce tech stack. By integration the technology you use together, you supercharge them all and help create more rewarding, delightful customer experiences. 

VIP Program 

Combining the best of referral and points together, along with the psychological principle of gamificationbrings you to a VIP program, which is essentially a points rewards program with the added feature of member tiers. 

As loyalty members engage more and more with your program, they hit different “thresholds” that move them from one tier into a new one. As they move into the new tier, they are rewarded with additional or increased benefits compared to the previous tier, such as:

  • Increased point-for-purchase multiples (2 points per $1 vs 1 point per $1) 

  • Welcome points 

  • Early access to sales

  • Exclusive products 

  • Behind the scenes insights 

  • Etc. 

There really is no limit to the kinds of benefits you can offer your customers as they engage and demonstrate more and more loyalty to your brand as they move up the ranks of your tiers. The key is to ensure that the points needed to get to the next tiers are high enough to be challenging (ensuring that you are not giving away too much for too little) but low enough that they are still achievable. 

With the right combination of exclusivity and motivation, you can make engaging with your brand, fun, exciting, and rewarding for everyone from your first time customers to your life-long brand advocates. 


At their core, all well-configured reward programs are designed to enhance the total customer experience and create long-term repeat customers because of the value they create. 

No matter what kind of customer loyalty program you are interested in setting up, the goal is for each interaction with your program to either create value for your customers or to generate value for your business. If you take the time to make as rewarding of an experience as possible, you do both, and continuously motivate customers to engage, advocate, and come back to your store to make purchases again and again.

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