Loyalty programs can significantly improve business sales, so long as each campaign is closely regulated with a loyalty program terms and conditions template.  

Over the years, business owners have devised different ways to boost their sales. Improving the quality of the product or running marketing ads are common options that businesses explore.  

However, successful business owners will tell you that it’s not really about getting new customers. The trick to maximizing profit is by retaining your existing clients. Here’s a fact: increasing your customer retention rate even by 5% can boost your profits by as much as 95%, and loyalty programs can be key to this. Statistics show that 75% of customers say they would switch brands for one with a better loyalty program. 

But creating a loyalty program is only half the job. You still have to ensure they are properly outlined in carefully drafted terms that clearly inform your customers about the opportunity and protect your business against costly errors. This article explains how to draft loyalty program terms and conditions, and provides a loyalty program terms and conditions template you can use today.  

What are loyalty programs?

Getting your customers to remain loyal to your business is essential. Sending out a “thank you” email to them may no longer be enough. Loyalty programs are marketing strategies that reward existing customers and encourage them to continue buying your product or service. In other words, loyalty programs encourage repeat sales and stronger customer relationships by introducing bonuses, rewards, and other sales incentives. 

Businesses need to take the time to create an effective loyalty program. If done improperly, you may end up achieving the opposite of your goals. Customers may feel cheated or deceived if they’re unable to claim their rewards because you failed to property communicate the terms and conditions of the loyalty program to them. In effect, the terms and conditions of loyalty programs are equally as crucial as the program itself. 

Features of loyalty program terms and conditions

The nature of the business and the specifics of the bonuses will determine how the terms and conditions of loyalty programs will be drafted. Nonetheless, there are elements that should be present in every T&Cs. Here are the essential ones: 

• Statement of the binding nature of the T&Cs 

• Explanation of rules of the program 

• Rewards or bonus terms 

• Responsibilities or obligations of parties in respect of the goods or services 

• Guarantees or warranties 

• Delivery terms (what, when, and how the reward will be delivered) 

• Intellectual property rights details (including data and privacy rights) 

• Complaints procedure and conflict resolution 

• Termination or expiration of the loyalty program 

• Governing law (including resolution of disputes) 

Guide to drafting terms and conditions for loyalty programs

Loyalty program T&Cs are not just a legal document to protect your business against liabilities. Terms and conditions of loyalty programs should be made to reflect your brand’s identity and further endear your clients. 

NOTE: The T&Cs should be written in simple language. The format shouldn’t also include too much ‘legalese’. Clear and concise short sentences, paragraphs, and easy-to-read and understand language should be used. These will help to promote transparency and trust for your business. 

It is also advisable to use a positive and friendly tone in the T&C. In essence, the points should follow a sequential order and flow. Arranging the points in bullet points or sections is essential. Here’s a guide to creating a simple T&C for loyalty programs: 

Application of the T&Cs

The T&C should ideally start with a clause on the mandatory condition of agreeing to the T&C to qualify for the loyalty program. This section is usually covered with the clause: By registering and participating in our loyalty program, you represent that you have read and agreed to these terms…. 

Objectives of the T&Cs

The following section contains an introduction to the T&C and highlights the purpose of the agreement. 

Obligations to the participating customers

There are certain obligations expected of you as the organizer of the loyalty program. Clients want assurances that they’ll be rewarded if they participate in the program. This section is used to identify the commitment of the business towards the satisfaction of customer’s needs. In addition to this, the business owner’s obligations toward fulfilling the ‘promise’ should also be indicated here. 

The rules of the program

The game rules are, no doubt, one of the essential parts of a T&C. The section should detail all the participation rules. It is important to state these in unequivocal and straightforward terms so as not to cause any confusion. 

Relevant details to identify here may include aggregate points to qualify for the reward, the nature of the prize (cash, product, etc.), and so on. 

Transactions ineligible for loyalty rewards

Usually, the transactions eligible for the loyalty reward would’ve been specified in the rules. However, most often, not all transactions make a participant qualified for the loyalty bonus. Such transactions should also be set in the terms and conditions. Some ineligible for loyalty rewards may include: 

• Unauthorized purchases; 

• Purchases of items excluded from the program; 

• Refunded purchases, and so on. 

Invalidation/withdrawal of rewards

Actions that may invalidate a participant from claiming their rewards should also be included in a T&C. Some of the nullifying activities may include the expiration of the loyalty points accrued by the client or unauthorized/fraudulent transactions. 

Expiration of loyalty points earned

The duration of time for which the loyalty points must be claimed should equally be specified. For instance, the T&C may contain a provision that loyalty points will expire if they’re not redeemed within three (3) months after they have been awarded. Depending on the nature of the business you run, loyalty points may also be stated to be deemed forfeited when the client closes their account with you. 

Tracking of loyalty points

When the loyalty points are to be amassed over several transactions, provisions must be made towards keeping an adequate record of the points. An ideal “terms and conditions” document should also contain information on how the participants can keep track or check their ‘loyalty points’. 

Rewards and other conditions

This section identifies the incentive(s) of the loyalty program. The reward section of the T&C requires peculiar attention. Hence, they must be specifically named. The purpose of the loyalty program is defeated if clients feel they’re being cheated out of the specified award. If different rewards are awarded based on levels of loyalty points, they should also be specified here. 

If the rewards may be substituted, other items they may be replaced with should also be identified. The purpose of this is to make sure that the T&C expressly contains every variable such that there would be no dispute on misinformation. 

Getting information or resolving disputes

An additional requirement of a T&C for loyalty programs includes information on how the clients can resolve disputes or give feedback on issues relating to the program. Hotlines to get in touch with relevant personnel has to be provided in the terms and conditions. 

Intellectual property and personal Information

The program may require the recording or use of some personal information of the participants. It is crucial that the T&C also contain how the information, intellectual property, or personal information (especially account, point, or rewards) will be used.  

Loyalty program termination

It is most unlikely that the loyalty program will run forever. The date the ‘promo’ will terminate is equally an essential feature of T&Cs. 

Reserving the right to change the terms and conditions

This section creates leeway for future events that may render it impossible to fulfil a reward or requirement. It is customary for T&Cs to contain a final clause that reserves the right of organizers to change or update the terms and conditions when necessary.