Best Retail Loyalty Programs: Top Choices & Rewards

Personalization is no longer a bonus. It's a baseline. Your customers expect loyalty benefits to reflect their preferences, past purchases, and behaviors. This shift is fueled by growing access to customer data and AI-driven tools that help brands deliver one-to-one experiences at scale.

According to McKinsey's 2021 Next in Personalization report, 78% of consumers are more likely to make repeat purchases from companies that personalize the customer experience. Personalization increases customer satisfaction and creates emotional stickiness, making customers feel valued beyond the transaction.

In the modern e-commerce market, where acquiring new customers can be up to five times more expensive than retaining existing ones, loyalty is more critical than ever.

Here's how to pick the right loyalty model, the software practices that make it work, and how to set one up from scratch using Magento 2 loyalty program software.

Table of Contents

• How to choose the right benefits program for your business
• Best loyalty program software practices
• How to create a loyalty business model using Magento 2 Reward Points extension
• What we've seen go wrong with tier rollouts
• Final thoughts

How to choose the right benefits program for your business

Your first step is choosing the right approach. Loyalty programs differ depending on your business model and target audience. We recognize five models that are relevant to modern needs:

1. Tier-based.

As clients spend more, they unlock bigger rewards. This approach motivates users to climb the ladder, gradually increasing their level of engagement. Tier-based loyalty programs are the perfect fit for brands with upsell potential, like Sephora's Beauty Insider.

2. Point-based.

It's the simplest model: clients earn points for their purchases to later redeem them for discounts and other goodies. The point system is common yet effective, especially for frequent, lower-value purchases.

3. Cashback/discount-based.

A classic loyalty campaign system that gives back a chunk of spending as a discount or straight cash. It works best with price-sensitive segments, like the ones targeted by Target Circle and Uber Cash, where customers make purchasing decisions heavily based on price.

4. Paid/subscription-based.

Paid access to exclusive perks, which often include free shipping, early product access, and other consistent offers. A great type of loyalty retention program for bigger shopping brands. Amazon Prime is a textbook example of a powerful subscription-based loyalty program.

5. Gamified and mission-based.

Probably the most creative customer retention approach that features challenges, badges, quests, and other interactive elements that make purchases fun. Adidas' adiClub is a great example of combining fitness goals with reward points.

Loyalty Program Models – Quick Overview

Model	Core Idea	Best For
Tier-based	More spend = better rewards	Upsell-focused brands (e.g., beauty)
Point-based	Earn points, redeem for perks	Frequent, low-value purchases
Cashback / Discount	Get % back as discount or cash	Price-sensitive customers
Paid / Subscription	Pay for exclusive member perks	Big stores with loyal buyers
Gamified / Mission	Complete tasks to earn rewards	Lifestyle or community brands

The key to choosing the right approach lies in aligning your loyalty model with your customers' purchase frequency, behavior, and preferred engagement style.

Some models, like subscription-based ones, are better suited to recurring-purchase businesses, such as grocery stores or pet food delivery services. At the same time, tiered and gamified programs work better with fashion and beauty brands that aim to build communities. For a broader roundup of programs across categories, see our guide to the best ecommerce loyalty programs.

Best loyalty program software practices

Digital tools are the backbone of modern loyalty programs. Software enables real-time engagement, integration with online stores, multi-channel experiences, and gamified opportunities. Let's review some of the key software practices used in modern loyalty programs.

• Mobile apps. Mobile apps give users easy access to their points, rewards, and personalized offers. Push notifications drive instant re-engagement by alerting customers to expiring rewards, flash sales, or status upgrades. All of this increases conversion.
• CRM platforms. With the right integrations like Magento 2 modules, Klaviyo email flows, and loyalty program software APIs, brands automate and personalize communication, saving a bunch of headaches. Open Loyalty, for example, provides modular tools that let e-commerce brands build custom reward systems directly into their platforms. Together, these solutions make it easy to experiment with tiered incentives, referral bonuses, and time-sensitive offers.
• Analytics and A/B Testing. Top-tier platforms provide customer segmentation tools, campaign performance tracking, and A/B testing for rules or messaging to optimize what works and ditch what doesn't. Nike Membership spans the app, retail stores, and branded events, tracking purchases, user activity, and engagement across all touchpoints. It uses A/B testing to see whether exclusive content, early access, or product discounts drive more engagement from different user types.

Here are a few examples of effective loyalty programs that put these practices into action:

1. Beauty Insider.

Sephora's tiered loyalty program is a masterclass in personalization and value. It offers free beauty classes, birthday gifts, and exclusive product launches based on a customer's tier. The program has grown to over 46 million members, driving up to 80% of Sephora's sales. It's such a strong example that we'll walk you through setting up a similar program using the Magento 2 Reward Points Extension in the next section.

2. adiClub.

Adidas combines gamification, fitness, and personalization in its loyalty model. Users earn points by shopping, reviewing products, and logging workouts via the app. Members unlock tiers that offer early product access, personalized gear, and invitations to exclusive events. This approach not only boosts purchases but also helps Adidas build deeper engagement through shared values around performance and community.

3. Starbucks Rewards.

Starbucks Rewards ties loyalty directly to the mobile ordering experience customers already use daily. The program now drives close to $13 billion a year, nearly 60% of U.S. company-operated revenue, from 35.5 million members.

4. Ulta Beauty Rewards.

Ulta's rewards program has grown to over 46 million active members, with roughly 95% of Ulta's total sales now coming from loyalty members (per the same Talon.One analysis above). That's proof a well-run points program can become the majority of a retailer's revenue, not just a side perk.

5. Amazon Prime.

Prime blends loyalty with logistics: free shipping and streaming perks show up in customers' daily routines instead of sitting in a rewards balance they have to remember to use.

6. Target Circle.

Target Circle pairs everyday discounts with personalized offers, so the program stays relevant between purchases instead of saving all its value for one distant annual threshold.

7. Walmart+.

Walmart+ follows the same logic as Prime: free delivery and fuel discounts are woven into routine shopping, not reserved for a reward that's months away.

What ties these programs together isn't the mechanic – it's how quickly the reward shows up. The strongest ones favor gamification, experiential perks, and member-only access over a flat points-per-dollar formula, and their value shows up in a customer's daily routine, not in a balance they have to remember to check.

Core features that matter most for fashion retail:

• Personalization engine: recommends rewards and products based on past purchases, not just spend totals.
• Tiered rewards: visible status, like Sephora's or Ulta's tiers above, gives shoppers something to work toward beyond the next discount.
• Omnichannel point tracking: points and tier status sync across app, website, and in-store purchases.
• Exclusive drops and early access: a strong lever specifically for fashion and beauty, where new releases drive repeat visits.
• Gamified engagement: badges, challenges, or app-based activities, like Adidas' workout tracking, that reward more than just purchases.

Where loyalty is heading in 2026: the shift is away from pure points accumulation and toward emotional loyalty, with roughly 70% of brand preference decisions now coming down to emotional factors rather than transactional ones. Real-time rewards matter more too. Nobody wants to wait months for a payout, so the programs winning right now credit customers immediately instead of batching rewards into quarterly statements.

How to create a loyalty business model using Magento 2 Reward Points extension

The easiest way to set up your loyalty program from scratch is by using specialized software. We already mentioned Sephora's Beauty Insider, so let's put it in the spotlight and try to create a similar program in practice using some of its rules.

For that, we'll use the Magento 2 Reward Points Extension and Loyalty Program, because it natively integrates with Magento architecture, making it easy to define earning and spending rules for reward points based on actions like purchases, reviews, registrations, and referrals. The extension also supports tiered loyalty levels, automatic point expiration, and detailed rule conditions while allowing customers to view and manage their point balance, which we'll need.

Let's start by separating customers into three groups based on the rewards they will get: Explorer (low-tier), Connector (mid-tier), and Champion (top-tier). These tiers differ in the module's reward amounts for the same actions.

Setting up tiers

Let's add the Explorer tier, the first group your customers join right after registration.

Go to: Marketing > Reward Points > Tiers, and create the Explorer tier. Fill in the required fields, provide a description, and set: Minimum sum of spent $ = $0. This ensures that new customers join the loyalty program right after signing up.

Next, create the Connector tier and set: Minimum sum of spent $ = $350.

Then the Champion tier with: Minimum sum of spent $ = $1000.

This way, your customers will receive a tier level based on how much they spend on your site each year. To apply this logic in the extension settings, set:

• Switch between tiers based on = Sum of spent $
• In determining tiers, take into account only the last N days = 365 days
• Use orders in status = Complete
• Automatically move customer to a lower tier if they do not meet minimum tier requirements = Yes.

This will allow your customers to move between tier levels depending on how much they spend on your site over a year.

In our example, we included tax, shipping, and discount in the spending calculation to help customers move between tiers faster, but you can adjust this logic to fit your needs (read more about creating tiers).

Setting up rules

After setting up the tiers, the next step is to configure the logic.

Sephora's program has over 15 rules that regulate bonuses and discounts. Covering all of them in a single article would be too much, so we've selected three examples to illustrate how the system works. Once you understand the logic behind them, you'll be able to create similar programs for your store using our extension.

Let's take a look at three sample rules from the Beauty Insider program:

• Beauty insider cache, Rouge insider cache, and Rouge exclusive levels
• Seasonal Saving Events
• Point Multiplier Events and Beauty Insider Benefits

Quick Redeem, Champion Savings, and Champion Exclusive

We'll use different names in our program: Quick Redeem (Beauty Insider Cache), Champion Savings (Rouge Insider Cache), and Champion Exclusive (Rouge Exclusive). Each rule is assigned to a specific customer group and offers a different number of points, depending on the user's tier.

The rules would look like this:

Quick Redeem: for every 500 points, your customers can get a $10 discount. This rule will apply to all three tiers.

Champion Savings: for every 1,000 points, they'll receive a $20 discount. This rule will apply only to the Champion tier.

Champion Exclusive: for every 2,500 points, they can get a $100 discount. Also applies only to the Champion tier.

And now, we'll set this up step by step. For convenience, we'll start with the last one, Champion Exclusive, since it's designed for the highest-value customers. Prioritizing this rule ensures it's triggered first and prevents these users from earning points through lower-tier rules (remember you can add new rules and customized settings later at any point).

Go to Marketing > Reward Points > Spending Rule and create a new rule with the following settings:

For Explorer and Connector tiers:

• For each spent X points = 0
• Customer receives Y discount = 0

For Champion tier:

• Points spending rule = Fixed
• For each spent X points = 2500
• Customer receives Y discount = 100
• Spend minimum = 2499
• Spend maximum = 2500

Also, set Priority = 3 and enable Stop further rule processing, so that this rule is triggered first and prevents other rules from being applied to the same action.

In the Reward points extension, a higher number means higher priority. Since we're working with three rules in this example, we assign 3 to this one to ensure it runs before the others.

Create the second rule (Champion Savings), which is also exclusive to the Champion tier. As in the previous rule, for Explorer and Connector tiers, we'll set:

• For each spent X points = 0
• Customer receives Y discount = 0

While for the Champion tier, set:

• Points spending rule = Fixed
• For each spent X points = 100
• Customer receives Y discount = 20
• Spend minimum = 999
• Spend maximum = 1000

Also, enable Stop further rule processing, but set Priority = 2, so this rule applies second in order.

Finally, create the third rule, Quick Redeem, following the same steps as above but applied to all three tiers. Set Priority = 1, since this rule should be applied last.

Seasonal saving events

Now, let's move on to the second rule. This mechanic offers different percentage discounts to our customer tiers: 10%, 15%, and 20%, respectively, during a specific promotional period.

In our module, percentage discounts are handled through proportions. Instead of setting a direct discount, we allow your customers to purchase additional store credit (in dollars) for a certain number of points. So, we'll configure the rules accordingly.

Since this is a time-limited offer, the rule should have a higher priority than the ones we created earlier to ensure it's triggered first. For example, you can set Priority = 10.

If you want only these discounts to apply during the promo period, make sure to enable Stop further rule processing.

Explorer (10%):

• For each spent X points = 10
• Customer receives Y discount = 1

Connector (15%):

• For each spent X points = 7
• Customer receives Y discount = 1

Champion (20%):

• For each spent X points = 5
• Customer receives Y discount = 1

If you want, you can use the default Magento Catalog Price Rules or Cart Price Rules to create seasonal discounts on all products or just selected ones, with time limits. However, these discounts are typically applied at checkout and don't incentivize customers to return, as the transaction is already complete.

That's where loyalty mechanics have the advantage: giving your customers something to come back for. Still, our module is fully compatible with Magento's native discounting tools, so you can combine both approaches if needed.

Point multiplier events and other benefits

The third mechanic uses earning rules, which allow you to award points for specific actions. With this approach, different user groups can earn different numbers of points for the same behavior.

There are two possible earning strategies: one where everyone earns the same number of points for all products, and another where the amount varies depending on the product and the user's tier.

1. Explorer benefits rule.

Offers one point per dollar spent, available to all tiers. To do that, navigate to Marketing > Reward Points > Earning rule and apply the following settings:

• Type = Cart Rule
• Priority = 0
• Customer Earning Style = Give X points for every spent Y
• Number of Points (X) = 1
• Step (Y) = 1

2. Point multiplier events rule.

Offers different points for purchasing selected products. Create the rule with the following settings:

• Type = Cart Rule
• Priority = 1. This rule will be triggered first. If you want only this rule to apply, make sure to enable Stop further rule processing.
• Apply the rule only to cart items matching the following conditions (leave blank for all items) to specify which products the rule will apply to (e.g., category IDs 3 and 4)

Next, configure earning settings by tier:

Explorer:

• Customer Earning Style = Give X points for every spent Y
• Number of Points (X) = 1
• Step (Y) = 1

Connector:

• Customer Earning Style = Give X points for every spent Y
• Number of Points (X) = 2
• Step (Y) = 1

Champion:

• Customer Earning Style = Give X points for every spent Y
• Number of Points (X) = 3
• Step (Y) = 1

As a result, this rule will add one point to each tier by default, while the Point Multiplier Events rules will distribute additional points to your tier groups.

In our example, we reviewed three different mechanics that allow customers to either earn points or redeem them for discounts. Each mechanic also offers a different number of points depending on their tier level, based on the setup we defined earlier.

These three mechanics won't cover every scenario, but they show what the Reward Points extension can do and how to build on it.

What we've seen go wrong with tier rollouts

We support merchants who build tiered programs like this one, and the rollout rarely goes as smoothly as the plan on paper. One retailer with roughly 40,000 customers launched a four-tier program (thresholds from $1,000 to $5,000 in annual spend) right before a holiday campaign, and it took over a month to get tier assignment and reporting working correctly at that scale. Another multi-site retailer with a similar customer base caught several configuration bugs during pilot testing, before going live, which is exactly when you want to catch them.

The most common mistakes we see, in order of frequency:

• The tier cron isn't running. Tiers get configured in the admin, but customers never move up, because the scheduled job that recalculates tiers is off. Run it manually once and confirm the cron job is active before you trust the numbers.
• Point expiration and the tier calculation window get confused. They're two separate settings: one for how long earned points last, one for how far back tier eligibility looks.
• Tax and shipping sneak into the tier threshold. A $150 Gold threshold can trigger on $138 of product plus $15 tax, if you don't check whether the calculation includes them.
• Earning rules calculate off the discounted total. Spend points on a $100 order and it becomes $60, and by default the customer earns on the $60, not the $100, unless you enable that setting explicitly.

None of this is a reason to skip tiers. It's a reason to test the cron and the math before the campaign that's supposed to make the program worth it.

Final thoughts

Loyalty programs today aren't just about discounts anymore. Start with one tiered structure, like the Explorer, Connector, and Champion setup above, before layering on seasonal or gamified mechanics.

With the Magento 2 Reward Points extension, you get full control over loyalty rewards logic: from taxes and shipping to specific products and category rules.

You can explore our live demo to see how it all works in practice.