What is loyalty program and how it is calculated ?

Retailers use loyalty programmes as a tactical marketing tool to build enduring relationships with their customers. They also manage and administer these programs. Customers who participate in these programmes get access to special offers, discounts, gifts, prizes, and other incentives that are intended to improve their shopping experience and promote repeat business. These benefits eventually help to improve customer retention and strengthen brand loyalty.

In a loyalty program designed by the retailer, customers are eligible to accumulate reward points for every purchase they make, thus facilitating a beneficial exchange that enhances customer satisfaction. These accumulated points can then be utilised by the customer to unlock discounts on their total bill amount, providing them with financial savings for their continued loyalty. Alternatively, customers also have the option to redeem their points for a diverse selection of gifts, serving as an additional incentive for their loyalty to the business.

How loyalty is calculated

One of the most important aspects that directly corresponds with the unique requirements and preferences of customers is the loyalty point calculation. I want to talk about a well-known loyalty program that is a mainstay for a lot of retail stores. Within the retail industry, companies frequently assign points to consumers after conducting a thorough evaluation that usually entails a number of computations related to the customers’ purchase histories and brand interactions. Most retail businesses assign points based on the following calculations:

Points accumulation

The buyer is entitled to receive a point for every Rs 100 spent on their bill total, which translates to a scenario where if the bill amount reaches Rs 10000, they will have a grand total of 100 points credited to their account as a reward for their purchase.

Points redemption

When buyers make a purchase, they are entitled to a discount of Rs 1 on their bill for every point they redeem. This means that by using 100 points, a buyer can enjoy a Rs 100 deduction from their total bill, allowing them to save on their purchase and make their shopping experience even more rewarding.

Free points

Upon the initial entry of buyers’ details into the Point of Sale system, a complimentary allocation of points is provided to them as a gesture of goodwill, fostering a positive and engaging experience for customers engaging with the system for the first time.

Extra bonus points

During the point of sale (POS) billing process, the retailer may offer additional points to the buyer if no balance is required. This scenario often occurs when the remaining amount is insufficient to provide change to the buyer. In such cases, the retailer has the flexibility to replace the change with reward points that hold equivalent value.

Other feature in loyalty calculation

The retailer has the flexibility to establish both the minimum and maximum points that customers can use for redemption purposes, offering a comprehensive range of options for point utilisation.