Guide 01 · Strategy
How to start a loyalty program
Start with one business goal, such as more visits or bigger baskets. Choose the program model that rewards that behavior, budget the rewards as a liability, connect the program to your point of sale and customer data, then launch small and measure what members do against customers who did not join.
A loyalty program is a system that rewards customers for a behavior you want more of. The businesses that get most from one start with that behavior, not with a list of features. This guide walks through the five decisions that shape a new program, in the order they should be made.
Set the goal
What should your loyalty program achieve?
Pick one primary goal before anything else. The most common goals are more frequent visits, larger baskets, keeping your best customers, and knowing who your customers are. Each goal points to a different design, and a program that tries to do everything tends to reward nothing clearly.
The payoff can be large when the goal is clear. At Starbucks, Rewards members drove nearly 60% of US company-operated revenue in fiscal year 2025. McDonald’s chief executive has said loyalty members drive about 30% of its sales and eat at its restaurants about two and a half times more often. Those numbers describe mature programs at very large brands, so treat them as proof that loyalty can matter, not as a forecast for yours.
Then decide who the program is for. A program built for your most frequent customers looks different from one built to bring occasional customers back more often. McDonald’s, for example, has described separate approaches for guests who visit more than once a month, guests who visit about once a quarter and members who have stopped visiting. Naming the group you most want to move keeps rewards focused on the customers whose behavior can still change.
Write the goal as a behavior you can measure, for example “members visit once more per month” or “members add one more item per basket”. That sentence becomes the test for every later decision.
Sources for this decision
Starbucks reimagines its Rewards program with new levels and exclusive perks (about.starbucks.com) F-SBX-02
McDonald's to create tiered loyalty program to lure repeat visitors (Reuters) F-MCD-01
McDonald's to create tiered loyalty program to lure repeat visitors (Reuters) F-MCD-02
Choose the model
Which program model fits your business?
The model is the mechanic that turns the goal into a reward. This guide compares five common models, which programs often combine.
| Model | What members get | Works best when | What to watch |
|---|---|---|---|
| Points | Points on every purchase, exchanged for rewards | Customers visit often and spend similar amounts | Unredeemed points are a cost you carry |
| Tiers | Better benefits at higher spend or activity levels | A small group of customers drives much of your revenue | A top tier out of reach motivates no one |
| Member pricing | Lower prices for identified members at checkout | Shoppers compare prices and visit weekly | The margin cost is immediate and visible |
| Paid membership | Benefits in exchange for a fee | Members clearly save more than they pay | Renewal is the real test |
| Personalized offers | Targeted offers instead of a flat rate | You have clean data and an app or email habit | Needs segments and content to run |
Real programs show how the choice follows the goal. Sephora’s Beauty Insider uses tiers by calendar-year spend: VIB status starts at $350 and Rouge at $1,000. Tesco uses member pricing: Clubcard Prices are exclusive deals that shoppers get by scanning the app or card at checkout, which gives them a reason to identify on every visit.
If you are unsure, the program finder on our homepage gives a first answer from three questions about your industry, goal and size.
Budget the program
How much will a loyalty program cost?
Budget three things: the rewards, the platform and the people who run it.
Rewards are the largest and least visible cost. When members earn points, you owe them a future reward. Starbucks, for example, defers revenue for the Stars members earn toward free products and records a liability for them in deferred revenue. Agree with your finance team, before launch, how you will value and report points, and how you will estimate the share that is never redeemed.
The platform cost depends on the model. A simple points or member pricing program can often run on the loyalty features of your point of sale or e-commerce platform. Tiers, paid membership and personalized offers usually need a dedicated loyalty platform, integration work and an app or email program.
People are the cost most plans forget. Someone has to design offers, answer member questions, watch fraud and report results every month.
Connect your data
What data and technology do you need?
At minimum, you need to identify the member at the moment of purchase and record what they bought. That means a link between the loyalty system and every till, website and app where customers pay.
Decide early what customer data you will collect and why. Useful data includes purchases, contact details collected with consent, and preferences that customers choose to share with you. Privacy law shapes this choice. The California Consumer Privacy Act, for example, gives consumers the right to know what personal information a business collects about them, to delete it with some exceptions, and to opt out of its sale or sharing. Build those requests into the program from day one rather than adding them later.
If you plan to replace or buy a platform, write your requirements down before you talk to vendors. Our guide to writing a loyalty program RFP covers the questions to ask.
Launch and measure
How do you launch and measure the first year?
Launch small, measure honestly and change what does not work.
- Pilot first. Start with a region, a store group or a customer segment, so you can compare members with similar customers who have not joined.
- Measure the difference, not the total. Member sales always look strong, because your best customers join first. The number that matters is how members change compared with that comparison group.
- Report the full cost. Include rewards, platform fees and staff time next to the extra revenue.
- Refresh on a rhythm. Programs keep members interested by changing offers and challenges on a schedule. White Castle runs its Craver Nation Rewards in seasons; in the season that ended in September 2026, members saved a combined $5.1 million and redeemed more than 1.2 million offers.
- Revisit the model once a year. Starbucks relaunched its program in March 2026 with three levels, Green, Gold and Reserve, and moved to earning based on spend rather than payment type. Even large programs change their mechanics as they learn.
A first year that ends with a clear answer to “did members change their behavior, and was it worth the cost?” is a successful first year, whatever the answer is.
More answers
Frequently asked questions
How long does it take to start a loyalty program?
It depends on the model and your systems. A points or member pricing program built on features your point of sale already has can start quickly. A tiered or paid program that needs a new platform, an app and data integration takes longer. Plan the timeline after you have chosen the model and checked your integrations.
Do small businesses need a loyalty program?
Not always. A loyalty program pays off when you can change customer behavior at a cost lower than the value of that change. Many small businesses start with the loyalty features in their point of sale or e-commerce platform and only move to a dedicated platform once the program proves itself.
Should a loyalty program use points or discounts?
Points reward repeat purchases over time, while instant discounts, such as member pricing, reward identification at every visit. Points create a liability you must account for; discounts cost margin immediately. Choose the one that matches your goal and your customers' visit frequency, then measure the effect.
How do you measure whether a loyalty program works?
Compare what members do with a similar group of customers who did not join, over the same period. Look at visit frequency, spend per visit and retention, then subtract the cost of rewards and running the program. Member sales alone overstate the effect, because your best customers join first.
What data should a loyalty program collect?
Collect what you will use: purchases, contact details with consent, and preferences customers choose to share. Tell members clearly how the data is used, and make it easy to see, delete or opt out, as privacy laws such as the California Consumer Privacy Act require.
Sources
- F-SBX-02Starbucks reimagines its Rewards program with new levels and exclusive perks (about.starbucks.com)
- F-SBX-04Starbucks Corporation Form 10-K, fiscal 2025 (sec.gov)
- F-MCD-01McDonald's to create tiered loyalty program to lure repeat visitors (Reuters)
- F-MCD-02McDonald's to create tiered loyalty program to lure repeat visitors (Reuters)
- F-WC-01White Castle launches Craver Nation Rewards season 3 after members save $5.1M (QSR Web)
- F-SEP-02Beauty Insider Frequently Asked Questions (sephora.com)
- F-SEP-03Beauty Insider Frequently Asked Questions (sephora.com)
- F-TES-01Exclusive Clubcard Prices (tesco.com)
- F-CCPA-01California Consumer Privacy Act (CCPA) (oag.ca.gov)
- F-SBX-03Starbucks reimagines its Rewards program with new levels and exclusive perks (about.starbucks.com)