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Brand loyalty — noun: the tendency of a consumer to continue buying the same brand of goods despite the availability of competing brands.
The idea of nurturing your frequent customers so that they keep coming back, i.e., fostering brand loyalty, has been around since profit-based businesses started (the Oxford Dictionary, which is where the definition above comes from, suggests its earliest known use was the 1930s) — but why?
Loyal customers provide a more predictable and reliable income than new customers, and in today’s economic landscape, being mindful of costs and offsetting opportunities is important.
According to data from IRP Commerce, the average cost per acquisition (CPA) across all ecommerce verticals was 7.52% of marketing spend in February 2024 which, granted, is less than it was in February 2023 (8.75%) — but it’s worth keeping in mind the rising costs of basically everything else.
On the other hand, retaining your customers with a loyalty strategy can help improve customer lifetime value and increase average order values. Research from Bond suggests program members spend more when they feel loyalty to a brand ($26 lift from program members and $50 lift from credit card holders).
Because of the gains you can make from loyal customers, loyalty marketing can help your store decrease or offset customer acquisition costs (CAC) as it grows.
But how do you generate brand loyalty? One effective method is using a brand loyalty program, which can help you pull levers at the right time in a customer’s journey and control the stages of brand loyalty.
In this guide, we’ll be talking about the four stages of brand loyalty, what customers are doing and feeling in each stage, and practical examples of methods to help your customers reach them.
For clarity, we’ve suggested that the first stage of brand loyalty is when a customer opts-in and becomes a member of your loyalty program.
Yes, you can argue that loyalty starts before joining a program, especially if your customer relationship building is on point. However, when a customer joins your loyalty program, you can start properly measuring loyalty performance and implementing strategies for building organic brand advocacy.
So, what are the stages of brand loyalty?
Let’s look at each stage in detail.
As mentioned, the first stage of brand loyalty is when a customer decides to become a member of your loyalty program. They might have read one of your post-purchase emails that mentioned your program, seen it as a page on your website, or even actively sought it out.
Some research from Bond’s 2023 loyalty report suggests the average U.S. consumer is a member of 18 loyalty programs — so getting your customer to join yours may not be as difficult as you think.
At this stage, your customer might think, “This brand seems like a good option compared to others,” or, in my experience, “I’ve bought products from this brand before, and I’ll probably buy more. Why not join their program?”
Customers at this stage are likely feeling curious, wondering what rewards they could get and if there are any benefits that they would most likely want to use.
Remember that we mentioned customer relationship building? To get your customer to start this brand loyalty journey, you’ll need to build a good relationship with them as soon as possible, which includes factors such as:
Each of these factors impacts the impression you give to your customers and whether they feel it’s worth their time and personal data to sign up for your program.
But even if you’re doing these things well, if your customers don’t know your program exists, they can’t sign up for it. Make sure you promote your program in post-purchase emails, on your website, and on social media.
Here’s an example post-purchase email from Dr Squatch:
The next stage of brand loyalty is engagement, where the customer decides to actively engage with the brand as a result of the loyalty program. You can attribute engagement to your loyalty program when a customer completes an activity that earns them points or another type of reward.
For example, if the customer wasn’t already following your brand on social media and saw that they could earn points by doing so, completing this activity and earning points counts as engagement with your brand.
At this stage, a customer might think, “Oh, I can get points even if I do this small thing,” or ” If I do these activities/challenges, I can earn enough points to get X reward.”
They’re likely feeling encouraged or pleased that they’re getting rewarded for largely non-transactional brand activities.
One key factor in getting customers to engage with your brand and program early is making it as easy as possible for them to do so.
Offer small rewards for low-effort activities to help build momentum towards high-effort activities for bigger rewards. Some examples of low-effort activities include points for:
Naturally, these types of activities tend to suit brands in the fashion or beauty industry, where they’re more likely to have stronger social media presence and the variety of products to warrant building an app.
Regardless, it’s also a good idea to make the available points customers get from these activities total up to either a low-value reward (e.g., 5% off their next order) or just below a higher-value reward ($10 off or another offer relative to your product price points). This way, your program helps to encourage customers to the next stage of brand loyalty: repeat purchasing.
One brand loyalty example using this strategy well is Astrid & Miyu, with earning options for social media follows, birthdays, mailing list sign-up, and it’s recycling program (which accepts jewelry from any brand).
As a result of their loyalty strategy, Astrid & Miyu’s program had over 50k signups in a nine-month period, 220% more purchases from redeeming program members, and a 40% increase in overall revenue.
The next stage of brand loyalty is repeat purchasing — your customers love your products and keep coming back to buy more after engaging with the loyalty program and developing a preference for your brand over competitors.
As mentioned in the previous stage, as customers start earning more points for non-transactional activities, they’ll start accumulating enough points to put towards a reward on a purchase.
At this stage, your customers are likely thinking, “I have X amount of points; I can use that now for X reward,” or even, “If I buy something now without using my points, I could earn more points towards an even better reward later.”
The latter line of thought is even more likely if you use a tier-based loyalty program — where the goal of earning more points is to push customers into higher tiers to help them earn better rewards, which comes from a psychological phenomenon known as the “goal gradient effect.”
Once a customer has started engaging with the program and earning points, you’ll want to periodically remind them that they have points banked that they can use to “buy” a reward.
You can have an interactive loyalty widget that shows up while a customer is signed in on your site — though this method is most effective when the customer is actively shopping.
Another method you can try to draw your customer’s attention toward their points when they’re away from your site is to use loyalty emails.
Personalized loyalty emails highlighting point accumulation and recommending a matched reward is a great strategy for driving customers to checkout. Our research found that loyalty emails have an average click-through rate of 20% compared to the e-commerce industry benchmark of 5.4%.
Here’s an example of this kind of email from Taco Bell:
The final stage of brand loyalty is brand advocacy, where your customers actively promote your brand to others through word-of-mouth or referrals.
This stage is where loyalty marketing pays significant dividends. Your loyal customers are acquiring your brand, which is important because 89% of consumers trust recommendations from friends and family the most.
At this stage, your customers are likely to think, “This brand is amazing! I have to tell people about it,” or “I feel connected to this brand’s mission, and I want to help them achieve it.”
They’re likely to feel a sense of camaraderie and perhaps even pride in being part of your brand’s mission.
Loyal customers become brand advocates when they genuinely believe in the value the brand and its products add to their lives and when you give them the tools to be advocates in a rewarding way.
Regarding the former, simply having a great quality product isn’t typically enough to inspire feelings of advocacy — you need to build an emotional connection with your loyalty members by offering more than financial-related rewards. Exclusive experiences, such as workshops, events, or otherwise exclusive content and priority support, are a great mechanism for nurturing these feelings.
On the latter, building a referral program within your loyalty program, and offering a high-value reward for referrals is an exceptional tool for helping your customers become advocates while rewarding them for word-of-mouth referrals.
Another option is to reward customers who create user-generated content, such as reviews with images or videos.
A tremendous example of this strategy is action comes from The Pulse Boutique with their Pulse Perks program, which rewards customers who create written reviews with 50 points and reviews with an image 150 points, using LoyaltyLion’s Okendo integration:
This strategy has led to a 39% increase in repeat purchase rates, a 19% increase in average order value, and $200k in earned rewards purchases.
As shown in the graphic below, taking your customers from guest shoppers to brand advocates is a journey that takes time and effort. But it’s all worth it when you have a community of loyal customers advocating for your brand and helping your business grow.
Each stage requires a different approach to help move your customers toward the path of advocacy, including:
So, if you’re ready to grow your community of loyal customers who can make up a significant amount of your profit, check out our loyalty program plans and find one that suits your business.
