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3 companies that have established solid revenue streams through loyalty programs

Unless you have the kind of hardcore brand following enjoyed by Apple (NASDAQ: AAPL), retaining customers is a demanding job. Recent studies indicate that 80% of customers tend to opt for brands that provide some form of loyalty programs. With competition hitting a threshold in the retail space, companies are left with little choice but to innovate with customer loyalty programs.

Loyalty programs have some advantages of their own. On an expense basis, the spending required to retain customers is often less than acquiring new users. Loyal followers also give the company credibility in the eyes of investors, for the steady flow of revenues it brings.

Three firms have been doing exceptionally well with their loyalty programs. Let’s take a look.

Amazon

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The undisputed e-commerce leader is the best example of how innovative a loyalty program can be. In fact, the company’s real USP is this program, as most of its products are available outside its marketplace.

For a small annual fee, Amazon (NASDAQ: AMZN) offers a slew of enticing benefits including two-day shipping and Prime Day sales, besides subscription to its streaming service Amazon Prime Video. While on one end it gives access to multiple services to customers through a single subscription, on the other end, the company gets to ensure a steady expansion of loyal userbase. As per internal studies, Prime customers tend to spend more time on the site than non-Prime users.  

Starbucks

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Point system has become the new norm in loyalty programs. Coffee chain Starbucks (NASDAQ: SBUX) was not only one of the earliest adopters of the system but also tweaked the program by linking it to its own app. Credits were awarded based on the purchases made through the app, which made tracking of individual points and rewards easier.

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Starbucks’ successful app-based reward membership also helps the company keep track of customer preferences, which is helpful during the product development stage. Starbucks has consistently reported 12-15% growth in Active rewards memberships in the trailing five quarters.  

Costco

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Even as other department store firms lost ground with the onslaught of e-commerce companies, Costco (NASDAQ: COST) has remained mostly unfazed. The company knows loyalty comes at a high price and offers products at attractively low margins to customers who are willing to be part of its elite membership program.

Besides the perks, the upfront payment of membership fees encourages people to keep shopping from its outlets around the world. This has helped the company consistently report above 5% same-store sales over the past two years.

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