6 examples of ecommerce loyalty programs — and how to build your own

The ecommerce battlefield can be demanding. Razor-thin margins, sky-high customer acquisition costs, and sales that ebb and flow with the seasons – do these challenges sound familiar? If so, you’re not alone. Most ecommerce brands face these obstacles, but there’s a tool that can help you overcome them: a loyalty program. 

An ecommerce loyalty program is a customer retention tool designed to nurture and reward customers who shop with your brand. It’s like a VIP club for your best customers, offering them exclusive perks and benefits in exchange for their continued loyalty.

In this article, we’ll explore the benefits, best practices, and real-world examples of ecommerce loyalty programs, equipping you with insights to maximize your own customer relationships. 

The benefits of loyalty programs for ecommerce brands

Loyalty programs can transform the challenges above into opportunities for your ecommerce brand to thrive. Here’s how: 

Improving profit margins by lowering customer acquisition costs (CAC)

Customer acquisition is increasingly expensive for ecommerce brands, with research showing that costs have risen by 222% since 2013. This is particularly problematic for brands in industries that are characterized by intense competition and price sensitivity, where every click, impression, and conversion is fiercely fought over. This competition drives up the cost per acquisition, squeezing profit margins and eating up more of your budget. But here’s where loyalty programs come to the rescue. 

Incentivizing repeat purchases and fostering strong relationships with your existing customer base, loyalty programs reduce your dependence on high-cost acquisition strategies. Imagine the financial benefits of nurturing a loyal following who consistently return for your products, instead of chasing new customers who may be swayed by the next competitor’s discount. 

Increasing your customers’ average spend and purchase frequency

Loyalty programs are designed to get your customers spending more money, more frequently. 

When customers are rewarded with points or benefits for each purchase they make, it creates a tangible incentive for them to return to your store. The prospect of accumulating points towards valuable rewards motivates them to shop with you more often, thereby boosting the frequency of their purchases. This increased frequency translates into a more consistent stream of revenue for your brand, contributing to healthier profit margins and overall business sustainability.

On top of this, tiered reward structures can further drive up the average spend per purchase. For example, offering exclusive VIP experiences or benefits at higher tiers incentivizes customers to increase their spending to unlock these premium rewards. By enticing customers with the promise of exclusive perks, such as early access to sales or personalized services, you not only encourage them to spend more in a single transaction but also instill a sense of exclusivity. As a result, their average order value rises as they strive for VIP status.

Leveling out seasonal fluctuations

Seasonal sales fluctuations are a reality for many ecommerce brands, with almost 40% of all online sales happening in the last three months of the year. Revenue streams can be unpredictable, with peak periods overflowing with orders and off-seasons leaving warehouses quiet. This unpredictability creates operational headaches and makes it difficult to plan for future growth.

Loyalty programs act as a stabilizing force, encouraging consistent purchasing behavior throughout the year and mitigating the impact of seasonal dips. With a loyalty program, you can counterbalance fluctuations by offering special rewards or promotions during off-peak periods, incentivizing customers to keep shopping with you when they wouldn’t usually. You can also use your loyalty program to clear any slow-moving items or overstocked products by offering them as free gift rewards. 

Getting customer churn under control

Customer churn, the loss of valuable customers, is a regular concern for ecommerce brands. It translates to lost revenue, low ROI on acquisition efforts, and diminished growth potential. Loyalty programs play a pivotal role in reducing churn by delivering personalized experiences that make customers feel valued and appreciated. By proactively engaging customers showing signs of churn, loyalty programs can offer targeted rewards like bonus points or exclusive discounts. This timely intervention can reignite their enthusiasm and prevent them from jumping ship to a competitor.

Reducing reliance on price as a differentiator

In a crowded ecommerce landscape, regular price slashing can leave you caught in a race to the bottom. This is where loyalty programs come in as a game-changer. They offer an alternative battle strategy – one that focuses on building long-term customer value instead of short-term price wars.

Loyalty programs shift the focus from price to customer experience, exclusivity, and added benefits. By rewarding loyalty, not just discounting products, brands can differentiate themselves from the price-driven crowd. This fosters a deeper connection with customers, making them less susceptible to competitor discounts and more invested in your brand’s unique value proposition.

Turning customers into brand evangelists 

When it comes to ecommerce, social proof reigns supreme. Positive reviews, customer referrals, and social media engagement are powerful tools that influence buying decisions. With a loyalty program, you can incentivize all of the above by rewarding customers with points and rewards for completing desired actions. By rewarding these positive behaviors, you not only boost your online reputation, but also transform your loyal customer base into a force of brand advocates, driving organic growth and trust.

Engaging customers outside the typical buying cycle

Loyalty programs allow you to connect with customers throughout their entire journey, not just at the point of purchase. Imagine offering exclusive content that keeps them interested, personalized recommendations that feel like thoughtful suggestions, and interactive experiences that foster deeper engagement. This ongoing connection goes beyond the checkout line, building stronger customer relationships and ensuring your brand stays top-of-mind throughout their buying journey.

What customers want from an ecommerce loyalty program

Understanding what your customers really want is the key to crafting a program that resonates and drives retention. Here’s a breakdown of what typically tops their wishlists:

• Effortless engagement: Forget complex point systems and confusing rules. Customers want programs that are simple to understand and navigate. A user-friendly experience encourages participation and keeps them coming back for more.
• Rewards worth chasing: Customers want rewards that are valuable and relevant to their interests and shopping. This could include discounts on future purchases, free shipping, early access to new products, or exclusive deals.
• Crystal clear communication: Transparency is key. Customers want to know exactly how to earn points, what actions qualify, and how to redeem their rewards. Clear and consistent communication builds trust and keeps them actively engaged.
• A personal touch: Personalization goes a long way. By leveraging data to tailor offers and recommendations, customers feel valued and understood.
• The VIP experience: Feeling special is a perk! VIP tiers, early access to sales, or exclusive member events create a sense of exclusivity that fosters deeper brand loyalty.
• Flexibility: Customers appreciate being able to earn points through a variety of actions, such as making purchases, writing reviews, referring friends, or engaging with the brand on social media. Similarly, offering multiple ways to redeem points allows customers to choose rewards that best fit their needs.

Types of ecommerce loyalty programs 

There are several types of loyalty programs to choose from, each with its own advantages and considerations. Understanding the different options can help you choose the best loyalty program for your ecommerce brand.

Points-based loyalty programs

Points-based loyalty programs are a tried-and-true method for keeping customers coming back for more. These programs reward every purchase with loyalty points that customers can collect and redeem for exciting perks like free products, free shipping, or exclusive experiences. The ongoing accumulation of points keeps members consistently engaged with your loyalty program, and the simplicity of these programs makes them easy to implement and scale as your brand grows.

Points-based loyalty programs are best suited to ecommerce brands with frequent, smaller transactions, for example, fashion brands. They’re also suited to brands who are struggling with low order values. The bigger the purchase, the more points a member earns, so customers are always encouraged to spend a little more per order. 

Value-based loyalty programs

Value-based loyalty programs focus on building deeper connections with your customers by rewarding actions that align with your brand’s values, such as social responsibility, sustainability, or community involvement.  

Emphasizing your sustainability efforts through a value-based loyalty program could be the solution you’re searching for to retain more customers if you struggle with high customer acquisition costs. These programs foster loyalty by resonating with customer values, turning members into passionate brand advocates who organically attract new customers. This emotional bond reduces churn and lessens the need for expensive acquisition campaigns.

Tiered loyalty programs

Imagine a loyalty ladder. The higher you climb, the sweeter the rewards. Tiered loyalty programs categorize customers according to their spending habits or engagement levels, providing increasingly valuable rewards as they move through the tiers. For ecommerce brands struggling with low engagement, this option can be highly effective. The tiered structure adds a gamified element to the shopping experience, incentivizing customers to boost their spending or participation, which in turn elevates overall engagement.

Tiered loyalty programs are also a great choice for ecommerce brands struggling with low purchasing frequency. Members are consistently motivated to make their next purchase faster in order to reach higher tiers and unlock better rewards. 

Subscription loyalty programs

Subscription loyalty programs are becoming increasingly relevant in the ecommerce landscape due to the popularity of subscription services. These programs provide premium rewards to customers who sign up for regular product deliveries, such as a monthly coffee subscription.

Subscription loyalty programs offer numerous benefits to ecommerce brands, like recurring revenue and reduced customer churn, but they’re best suited to brands with a high purchase frequency (for example, brands selling pet food, deodorant, coffee, protein powder etc). 

Hybrid loyalty programs

Hybrid loyalty programs are the ultimate remix, blending elements from different program types to create a truly personalized experience for your customers. Imagine offering points for purchases combined with a tiered system that unlocks exclusive benefits for your high-spending VIPs. However, managing and communicating a hybrid program requires careful planning. It’s crucial to clearly explain how the different elements work together and contribute to earning rewards.

Coalition loyalty programs

Coalition loyalty programs, also known as “shared loyalty programs”, involve two or more brands pooling together to create a powerful loyalty program that customers can use across all participating stores. The convenience of being able to use one program across multiple stores can enhance the perceived value of the program, keeping customers engaged and motivated. But on the flip side, managing a coalition loyalty program requires strong collaboration with partners, and working with the wrong brands could negatively impact your brand identity.

Planning your reward structure 

The reward structure is the beating heart of your loyalty program. It’s here that you translate customer engagement into tangible benefits, ultimately driving program success. By following these key steps, you can ensure your rewards resonate and deliver long-term value:

• Define your objectives. Get clear on exactly what you’re hoping to achieve with your loyalty program, whether it’s encouraging customers to spend more per purchase or drive acquisition through referring friends. 
• Get to know your customers. Data is your best friend. Analyze customer data to understand your key demographics and their buying habits. What motivates them? What products do they love? Conduct surveys and research to gain a deeper understanding of what would truly incentivize your customers.
• Choose the value of your points. Determine the monetary value of each point and how it translates to various rewards. For example, if your program is set to give 5 points for every $1 spent and a $5 money-off reward requires 500 points, a customer would need to spend $100 with you to earn that $5 off. It’s important to strike a balance between offering attractive incentives and maintaining profitability.
• Pick your rewards. Choosing the right rewards is a key aspect of crafting a successful loyalty program. Your rewards should be enticing, relevant to your customers’ preferences, and aligned with your program objectives. Use data gathered in step two to inform your decision here. It’s also important to factor in the impact of your rewards on your profit margins. For example, if you offer a 10% discount on a product with a 30% profit margin, the effective margin drops to 20%.
• Decide how your customers can earn loyalty points. Identify the actions or behaviors that your customers need to do to earn loyalty points. This should tie back to your objectives in step one. Whether it’s making purchases, referring friends, leaving reviews, or engaging with your brand on social media, ensure that the actions align with your overarching goals for the loyalty program.

Measuring the success of your loyalty program

Knowing how your loyalty program is performing is crucial for fine-tuning it into a customer retention powerhouse. So how do you know if your program is hitting the mark? While specific goals may vary, here are some key metrics that define success in the ecommerce loyalty game:

• Customer retention rate: This is your loyalty program’s core test. Is it keeping customers coming back for more? A rising retention rate indicates your program is fostering brand loyalty and driving repeat purchases.
• Average order value (AOV): Loyalty programs should incentivize members to spend more. Track AOV to see if your program is encouraging customers to climb the reward ladder by increasing spending per transaction.
• Purchase frequency: A successful program should lead to customers buying more often. Analyze purchase frequency to see if your loyalty program is effectively driving repeat business.
• Customer lifetime value (CLV): CLV helps you understand how much a customer is worth across their lifetime of shopping with you. Your loyalty program members should have higher CLVs than shoppers who aren’t enrolled.  
• Referral rate: Loyal customers become brand advocates. Track your referral rate to see if your program is motivating members to spread the word and bring in new customers, reducing your acquisition costs.
• Engagement beyond transactions: Loyalty goes beyond points for purchases. Look at program enrollment, participation in special offers, reward redemption rates, and interactions on social media. High engagement signifies a program that resonates with customers and keeps them actively involved.

Examples of successful ecommerce loyalty programs 

• Edgard & Cooper

Edgard & Cooper started with a simple dream: delicious, healthy pet food that’s kind to the planet. Their eco-friendly mission resonated with pet owners, and soon their business boomed. But they wanted more than just sales, they wanted a loyal community. So they launched a loyalty program with LoyaltyLion. 

With some customized development, they created a four-tier program to reward their customers (and their furry companions) with points known as “belly rubs”. Members have to complete certain challenges to earn belly rubs (adding an exciting layer of gamification) and can spend their points on feeding rescue dogs, planting trees, or earning a discount on their next order.

By aligning their rewards with ethical consumerism, Edgard & Cooper’s loyalty program empowers pet parents to make a real difference with every purchase. And the results speak for themselves. The folks at Edgard & Cooper smashed their goals by achieving a 22% AOV uplift, a 35% increase in active customers, and a 38% increase in their retention rate.

• Clevr Blends

Clevr Blends is a women-led wellness brand selling mood-lifting lattes and beverage ingredients. As part of their subscription loyalty program, they reward customers who subscribe to auto-ship with monthly loyalty points, early access to new products and special discounts. Subscribers also save 15% off their products, making it a very compelling option. 

• Waterdrop 

Waterdrop‘s mission is simple: help people stay hydrated with delicious, healthy alternatives to plain water. Their flavored hydration cubes are a refreshing hit, but the Waterdrop team craved a solution to keep customers subscribed and fuel even faster business growth.

To achieve this, Waterdrop utilized LoyaltyLion’s integration with ReCharge to create an on-brand loyalty program that includes a subscriber tier. This tier offers exclusive benefits, like early access to new flavors and community giveaways, demonstrating the value of ongoing subscriptions.

To spread the word, Waterdrop built a dedicated loyalty program page, clearly outlining the benefits of membership. Furthermore, they leveraged LoyaltyLion’s integration with Klaviyo to seamlessly connect their email marketing efforts with their loyalty strategy. 

By placing loyalty at the core of their marketing strategy, Waterdrop achieved impressive results. Customer spending soared by 90%, and the repeat purchase rate jumped by a remarkable 70%.

• One Good Thing 

One Good Thing customers can earn loyalty points through a variety of actions, such as following the brand on Instagram, referring friends, or signing up for the mailing list. Subscribed members earn five points for every £1 spent, whereas regular customers earn only two. This means their subscribed customers are consistently rewarded more for their loyalty. 

• MAC

MAC have kept their products at the heart of their loyalty program. It’s a technique that works especially well for ecommerce brands in the beauty industry, as the products are so visually appealing. By allowing members to redeem their points for products, MAC ensures that members can select rewards they genuinely desire.

• Never Fully Dressed

Never Fully Dressed (NFD), a rapidly growing fashion brand, wanted a way to enhance their brand identity while simultaneously incentivizing repeat purchases. 

Enter LoyaltyLion! 

With LoyaltyLion’s platform, NFD implemented an on-brand tiered loyalty program titled “Loyalty Love Rewards.” 

The program features three distinct tiers: Pink, Gold and Black, and customers seamlessly progress through these tiers based on their purchase history and engagement levels.

Recognizing the importance of clear communication, NFD developed a dedicated loyalty page on their website. This page serves as a central hub where members can readily access critical information such as their current point balance, available rewards, tier status, and program details. 

Thanks to a strategic blend of financial and experiential rewards, NFD now generates a significant portion of its revenue (32%) from loyal customers. Most notably, the program has spurred a 59% increase in member spend compared to non-redeeming members.

Choosing your software 

The right software is the backbone of a loyalty program that drives sales and customer love. But with so many options, how do you find the perfect fit for your ecommerce store?

Here’s your shortcut:

• Features: Does it cover everything you need? Points, tiers, rewards, referrals, marketing integrations?
• Scalability: Can it handle growth as your business expands?
• Ease of Use: Is it user-friendly for both your team and customers?
• Integrations: Does it connect seamlessly with your existing ecommerce platform and marketing tools?
• Support: Is reliable customer support available to address any issues?
• Cost: Does the price fit your budget and deliver a good return on investment?

By prioritizing these factors, you’ll choose a platform that fuels customer engagement, drives repeat business, and supports your overall business goals.

Ready to see how LoyaltyLion can help you pick the best loyalty approach for your brand? Take a quick, three-minute product tour to discover the power of a loyalty platform built for success!