Is a loyalty program right for your store? Five steps to decide

People often ask us: is a loyalty program right for our store? To help answer this, we’ve put together an easy 5 step guide to help you decide whether a loyalty program would benefit your store. These steps are:

  1. Is your store Share of Wallet or Supply of Choice?
  2. How similar is your product?
  3. Factor in your purchase frequency
  4. Factor in your customer acquisition costs
  5. Making a decision


Step 1: Is your store Share of Wallet or Supply of Choice?

Retail stores fall into one of two categories; the first is share of wallet and the second is supply of choice.

Share of Wallet: is when your store competes with other similar stores every time a customer makes a purchase, examples include pharmaceuticals, travel, fashion or computer games. An easy way to think of it is: can the customer can buy the product they need from your store one day and a competitor’s the next? If yes, your aim is to increase the “share of wallet”.

Supply of Choice: is when customers choose you as a supplier and buy from you for a set period of time, for example; mobile phone contracts, utilities, and insurance. The goal here is to retain customers when the contract is up for renewal.

Loyalty programs work for both categories but are most successful for share of wallet stores.


Step 2: How similar is your product?

How many competitors do you have and how easy is it for your customers to switch to a competitor?

Product similarity is a driver for the need of loyalty programs. The more alike your products are with competing offerings, the more you will need to differentiate yourself. In this case, a complementary program which adds long term value on the first sell is a must.


Step 3: Factor in your purchase frequency

How often do your customers need to buy your product? The more often a customer can purchase from you, the more you can gain from a loyalty program.

LoyaltyLion powers hundreds of loyalty programs around the world. The stores with high repeat purchase rates are those that sell either disposable products like cosmetics, foods, and pharmaceuticals or goods with changing markets like fashion, sports, travel.

Loyalty programs add the most benefit to share of wallet businesses with high purchase frequencies.


Step 4: Factor in your customer acquisition costs

If your store has high customer acquisition costs, you’ll need to retain those customers in order to make a profit.

Every retail store invests time and money into customer acquisition. One of the most popular ways of achieving this is through Google Ads. This is a successful strategy because the searcher is already looking to acquire your product, however, the best keywords are expensive.

For example: imagine you sell gluten-free cakes online and you want to use Google Ads to acquire customers. If you run a campaign using the following keywords: “gluten-free cake”, this will cost a maximum of £7 for every 40 clicks. If we assume a 1% conversion rate, this means acquiring a new customer will cost £17.50.

Even if the profit on your average first purchase is over £17.50, solely relying on customer acquisition isn’t sustainable or preferable. The investment of £17.50 should work towards retention as well as acquisition.

If your store requires repeat purchases to make a profit then your priority must be customer retention and this is where a loyalty program would benefit your business.


Step 5: Making a decision

Now it’s over to you. If you need more information to help you decide, or if you have any questions please contact us using

Subscribe to our newsletter

By signing up, you agree to our terms and conditions.

Connect with a Loyalty Analyst

Speak to a member of the team to find out how LoyaltyLion can help you drive customer loyalty and engagement.

Talk to us