Customer loyalty program FAQs

This guide will help you learn more about customer loyalty programs and how they can be used to elevate your store and build a loyal customer base.

Is a customer loyalty program right for me?

What is a customer loyalty program?

A customer loyalty program is a long-term marketing tool used by many ecommerce merchants. Loyalty programs motivate repeat purchase and customer retention by offering rewards to shoppers who demonstrate loyal buying behaviours. Some stores also offer rewards for behaviours beyond purchasing – such as sign-ups, social referrals and follows.

In retail loyalty programs, these rewards are generally discounts, special offers, one-off deals or freebies. They also help increase the lifetime value of a customer by driving up average order value and increasing purchase frequency.

Why do I need a customer loyalty program?

Finding new ways to engage and retain customers is a huge part of ecommerce success. Across the board, customers are becoming harder and more expensive to reach. In fact, data shows that only 9% of digital ads are viewed for more than a second. Advantages of loyalty programs include attracting shoppers back to your store without spending lots of time and money acquiring new customers.

Loyalty programs help you identify your most loyal customers, focus your marketing efforts on them and increase their lifetime value. And, with the ecommerce market growing by 13% every year a loyalty program can help you differentiate yourself from the competition. Most importantly, a loyalty program shows your customers that you value them as individuals, rather than just another number.

Read our free ebook, The quick guide to customer retention, to learn more about factors affecting customer loyalty and how to retain your existing customers.

How do loyalty programs work?

As a store owner, you can choose to reward your most loyal customers with points for activities including purchases, birthdays, social media likes, referrals and more. Customers can then collect these loyalty points and redeem them for rewards to use at your store further down the line.

Beyond rewarding points, a loyalty program can increase customer loyalty and engagement and transform shoppers into loyal advocates of your brand. A tiered loyalty program will boost your customer engagement as your shoppers will always be looking for ways to move up to the next tier. This means that they’re more likely to engage to get the points needed. And, rewarding points for reviews and referrals will encourage your customers to act as advocates on your behalf.

Have a read of the free ebook, Customer loyalty: the stress-free guide to getting started, to learn how to build a business case and kick-start your loyalty strategy.

Why is a loyalty program important?

Loyalty programs are particularly important in today’s marketplace. More and more online stores are launching every day, making it hard for stores to stand out from the competition. A loyalty program gives you a key differentiator that sets you apart from other stores – and particularly big name brands like Amazon.

A loyalty program acts as a cost-effective customer retention strategy. They improve a customer’s lifetime value and the points-based system motivates them to return to your store more frequently, often spending more money. Also, if you reward points for reviews and referrals, customers will act as advocates on your behalf and your customer base will expand.

Discover more about the importance of a loyalty program at the LoyaltyLion Academy – our free, educational resource packed with loyalty program best practise.

What are the benefits of a customer loyalty program?

A loyalty program offers many benefits. When it comes to nurturing your customers, a loyalty program will give them a reason to return to your store and use their points. Not only that, but they’ll feel like they are appreciated as individuals, rather than just another number.

In terms of revenue, a loyalty program encourages your customers to spend more over a longer period of time. If they’re trying to acquire points or redeem an offer, they will be more likely to increase their basket size to meet the requirement. And, once they have earned points, they’re incentivised to return to your store and spend them long into the future.

Finally, a loyalty strategy offers a strong branding opportunity. You can incorporate your store’s look and feel into the program which helps publicise your brand and connect with your customer base on an emotional level. And, if you get the right names for loyalty programs and promote them correctly, retail loyalty programs can act as a valuable way to communicate your brand values.

Discover more loyalty program benefits.

How much time does it take to run a loyalty program?

The main time you’ll have to put into a loyalty program will be spent setting it up. It’s important to pay close attention to the kind of loyalty program you’re building, and the loyalty rewards you’re offering so that it seamlessly matches your customers’ needs and store identity. Once you’ve spent the time laying the correct foundations, your loyalty program will maintain itself.

You may need to put in a little time further down the line to adjust your points balance or the actions your customers take to earn points, but this will be quick and easy to review and change.

Check out the LoyaltyLion Academy to learn how you can successfully manage your loyalty program.

What type of ecommerce store does a loyalty program work best for?

When deciding if a loyalty app is right for your store, take a look at your product offering. In general, ecommerce customer loyalty programs work best for stores that sell products with a high purchase rate – such as, food and drinks, clothes or cosmetics.

Also be sure to think about whether you’re competing with stores similar to you every time a customer makes a purchase. Could your customers buy their desired product from your store one day, and your competitor’s the next? If you’re finding that this is the case, a loyalty program offers the perfect opportunity to differentiate yourself from the competition.

Although these are general cases, there are many other ways to determine if a loyalty program is right for you. Visit our website to read case studies on how other stores are using their loyalty program.

Is my store big enough for a loyalty program?

On the market there are many loyalty program solutions for every size store – from small business to global enterprise. We believe that there’s no point in delaying the launch of a loyalty program or waiting around for your orders to increase. You could be losing out on valuable customers who want to join. Also, the sooner you implement your loyalty program, the sooner you’ll get your employees on board and sharing out rewards.

Want to know when the best time to launch your loyalty program would be? Read more on our blog, or find out more about understanding customer experience throughout the customer journey.

Do loyalty program members spend more?

In our experience, they do. If you offer points for spending, customers are more likely to increase their basket size to make the point threshold. Then, if they continue to engage with your loyalty program, they’ll accumulate points that they will use on purchases further down the line. This increases their lifetime value and the amount they’ll spend with you long-term.

The numbers even speak for themselves. Our customer, 100% Pure saw their loyalty program members spend 72% more than non-members.

See which other stores are using their loyalty programs to encourage their customers to spend more.

Are loyalty programs GDPR compliant?

We believe that GDPR offers an opportunity to improve your loyalty program so that it lives up to your customer expectations. When GDPR was introduced, customers became empowered and more selective with who they shared their personal information with. As a result, shoppers are now choosing to opt-in with brands they trust and care about.

Because of this, any customer who joins your loyalty program is incredibly valuable. They’re engaged with your brand and are a more accurate representation of your customer base. This means that your loyalty program insights will show accurate data and you can focus your marketing efforts on the right people. Secondly, when a customer trusts you with their data initially, they are more likely to share more valuable insights further down the line – as long as they believe they’ll be rewarded in return.

Can a customer loyalty program solve my challenges?

How do I increase customer engagement?

The best loyalty programs comprise of savvy ways to keep your customers engaged without breaking the bank. By rewarding points for on-site activities (such as social follows) and purchases, you are encouraging your customers to engage with your brand regularly and spend money with you further down the line.

When you initially onboard a member onto customer loyalty programs, be sure to establish a good relationship early on that will drive ongoing engagement. Then, once a member is on board, you can send personalised loyalty emails that encourage them to return to your store and keep engaging. After all, loyalty emails have click through rates as high as 35% – way above the average 18% for other marketing emails.

Head over to the LoyaltyLion Academy today to learn more ways loyalty strategies can improve your customer engagement.

How do I increase my repeat purchase rates?

Repeat purchase rate is the percentage of customers that have shopped more than once at a certain store. They’re also referred to as reorder rates, customer retention scores or repeat customer rates. It will range from 0-100% and a higher percentage means that more customers are returning to your store.

An ecommerce loyalty program encourages customers to return to your store, shop with you again and spend more, therefore improving your repeat purchase rate. By rewarding customers points for purchasing and on-site behaviour, you are incentivising them to come back again to spend these points further down the line on other purchases.

Learn more strategies to increase your repeat purchase rate over on our free, educational resource, the LoyaltyLion Academy.

How can I re-engage at-risk customers?

Identifying which of your customers are at-risk of shopping elsewhere is essential to retaining them. To re-engage them, you need to pre-empt their dissatisfaction and combat it with the correct re-engagement strategies.

If you have a loyalty program in place, you can send out highly targeted and personalised emails to remind your customers that you’re there and why they trusted you in the first place. You could even credit them with points, rewards or special promotions if they return to shop with you. You might even consider bumping a customer up to a higher tier of your loyalty program. This will give them a valid reason to return and engage with the new perks offered to them, and increase customer loyalty and satisfaction.

If you want to learn more ways to re-engage at-risk customers head over to the LoyaltyLion Academy – our free, educational resource.

How can I increase my average order value?

Do you need to increase average order value? Average order value (AOV) is the total value of every order placed with your store over a specific period of time. It helps you define your most valuable customers and spot when a customer’s spend is decreasing.

Top loyalty programs award points for purchases and encourage customers to spend more to unlock larger rewards. In fact, the average basket size of a customer using a loyalty reward in a purchase is 39% higher than the basket size of a customer who doesn’t.

Learn more about improving your average order value over on our LoyaltyLion Academy – our free, educational resource.

How do I increase my customer lifetime value?

Customer Lifetime Value (CLV) is the net profit attributed to the overall relationship you maintain with a customer. It is one of the loyalty program KPIs that measures how valuable a customer is to you now and the projected value of all your interactions in the future.

A loyalty program helps you to calculate exactly what the CLV is for each of your customers so you can increase it. This way, you’ll be able to pinpoint and invest in the right members to further build and sustain a relationship. When you identify those worth spending time on, you can target them with personalised points that encourage them to repeat spend with you down the line.

Head over to the LoyaltyLion Academy to learn how to calculate and increase your customer lifetime value and find out more about methods of measuring customer loyalty and loyalty program effectiveness.

 

How do I improve customer satisfaction?

A loyalty program is an easy-to-implement solution that will improve your customers’ satisfaction. Loyalty programs make customers feel important and show that you care. By using your loyalty strategy to reward your most loyal customers with personalised points, you will also ensure that they’ll keep coming back to shop with you.

To maximise the positive effect of your loyalty program software, be sure to keep your loyalty strategy simple. Make it clear to your customers the actions they have to take to earn rewards and how easy it is for them to earn and spend their points. You could even integrate your loyalty program with a help desk provider. This will empower your customer service team to gift loyalty points to customers if they have a bad experience.

Use your Net Promoter Score to ask customers how likely they are to recommend you to their friends or family. By observing the answers, you can instantly gauge how satisfied your customers are with your store, and better understand how well customer experience and loyalty are working together for your brand.

Learn more about discovering your Net Promoter Scores and improving your customer satisfaction here.

How do I build a community around my brand?

A loyalty program is a clever way to communicate what your brand stands for and encourage your customers to align their values with you. It will also help you build emotional connections and differentiate yourself from larger brands. By awarding points for product reviews and recommendations, over time you’ll build up a trusted circle of brand advocates who are willing to champion your brand on your behalf. Not only that, but by customising your loyalty emails, you can build upon your specific brand narrative.

As customers are increasingly using social channels to browse products and stores, be sure to use this online community to grow your brand. A loyalty program allows you to give your customers loyalty points when they like or follow you on social media.

Learn how our customers are already building customer communities on our website.

How do I deliver more personalised customer experiences?

Many strategies can help you better understand your customers so you can serve them a personalised customer experience.

A loyalty program is a golden opportunity to send customised loyalty program emails to your shoppers to improve engagement and build long-term relationships. This is mainly because a loyalty program gives you back-end data on your customer’s buying patterns and shows you the impact of loyalty programs on consumer behaviour. With this information, you can engage your members in a much more personalised way.

Your emails could summarise the points they have already acquired or prompt them when there are points to redeem. You could also use the data from your loyalty program to send emails with product suggestions that match their previous buying behaviour.

Learn more ways a loyalty program can help you personalise your customer experience on the LoyaltyLion Academy – our free educational resource.

How do I better personalise my post-purchase emails?

It’s easy to fall into the trap of assuming that personalisation is simply adding a customer’s name to an email. But, your loyalty program allows you to personalise your emails to another level.

You can do this by:

  • Keeping loyal customers updated and informed regarding their points balance, rewards gained and offers available to them
  • Send prompts when there are points for them to redeem
  • Use your loyalty program data to learn the likes, dislikes, commonly viewed and purchased products of your customers. Then, send them offers tailored to the products they would be the most interested in
  • Personalise your emails with bespoke rewards that are specifically tailored to each customer
  • Geographical events – these will make your customers feel like you’re there with them locally and that you understand them

Head on over to the LoyaltyLion Academy to learn more tips and tricks to better personalise your post-purchase emails.

How do I turn customers into subscribers?

Loyalty programs can integrate seamlessly with subscription services. You could invite a customer to join a subscriber-only tier that will motivate them to keep shopping with you beyond the initial offer period. By ensuring that these offers are exclusive to subscribers, you’ll make these customers feel valued and will, therefore, drive longer-term relationships.

LoyaltyLion integrates seamlessly with many subscription-based platforms. Visit our website to learn more.

How do I reduce cart abandonment?

A loyalty program can help you identify shoppers who have abandoned their cart and re-engage them with incentives to complete their purchase. Send them loyalty emails to remind them of the points they could have acquired if they completed their purchase. Or, display rewards in cart so customers are aware of the points and perks they could acquire before they even make their purchase. This way, they are less likely to abandon their cart in the first place.

Want to learn more ways to improve the success of your store? Head over to the LoyaltyLion Academy to learn more ways to optimise your loyalty program.

How do I redeem myself after a negative customer experience?

To react to negative customer experiences, use your loyalty program to demonstrate that you care. A loyalty program gives you the added opportunity to offer bonus points or benefits (such as free delivery or moving them up a tier) so your customers feel that you’re listening and responding to their queries.

How do I generate more product reviews?

You can easily generate more product reviews by encouraging your customers with loyalty points. A loyalty program allows you to reward customers points for leaving reviews or creating referrals.

We recommend capturing customer feedback as soon as possible after purchase. It’s also worthwhile to remind customers that they can earn points via reviews each time they log into their loyalty program portal. You could even add a review component to your post-purchase pages so that customers can instantaneously feedback on their experience.

We have more tips and insights on generating product reviews over on our LoyaltyLion Academy – the free, self-learning educational program that will make you the go-to loyalty expert in your business.

How do I compete with Amazon?

There are many ways a store can compete with Amazon. The tides are changing and increasingly large, faceless brands are finding it hard to communicate their brand story. This weakness is something smaller, independent stores can use to their advantage.

For a small business, a loyalty program is a great way to communicate your brand, secure your existing customers’ loyalty and drive repeat purchase. It will allow you to reward shoppers for purchases and on-site activities – such as signups, social shares and reviews. It will also keep customers engaged so they don’t get distracted by larger brands who can make more noise.

For many brands it’s near impossible to compete with the likes of Amazon on price or logistics. Instead, focus on elevating your customer experience to differentiate yourself. A loyalty program makes your customers feel valued – rather than just another number. So use it to offer up personalised experiences that your customers will value.

Retention strategies, whether in the form of a small business or an enterprise loyalty program, also provide valuable data that helps you identify your most profitable customers and thank them for their loyalty. And, while you’re there, you can identify the customers that are at risk of turning to larger players and retarget them with the right strategies.

Want to learn some more ways you can make your store stand out in the age of Amazon? Visit the LoyaltyLion Academy.

How do I run a customer loyalty program?

When is it the right time to launch a loyalty program?

There are many tell-tale signs that it’s the right time to launch an ecommerce loyalty program. Here are just a few things to consider when building a loyalty program implementation plan:

  • If your repeat purchase rates are declining and revenue from your existing customers is not covering the cost of acquiring new customers
  • If you’re finding that a majority of your customers are “at-risk”. In other words, if they haven’t returned to your store to make a second purchase in a specific timeframe
  • If you’re struggling to keep your prices in line with your competitors or if you’re getting stuck in a race to the bottom
  • Finally, if you’re finding that you have more customers browsing than buying, meaning you’re missing out on high-quality traffic

Our ebook, Knowing when it’s time to invest in customer loyalty, covers more giveaway signs that it’s time to invest and explores customer loyalty program benefits in more detail.

How much does it cost to run a loyalty program?

When first setting up a loyalty program there are four main costs you need to consider: the cost of the software, design budget, promotion of the program through marketing efforts and the value of your rewards (how many points are assigned to each dollar spent).

Once you’re set up, a loyalty program runs itself with little effort and quickly you’ll be able to see a ROI. A loyalty program will generate you more revenue through three main streams. First, a loyalty program increases your customer’s lifetime value. With points in their account, they’re more likely to return to your store further down the line and spend them. Secondly, by incentivising customers with points and free rewards, they’re encouraged to increase their basket size to reach the threshold. And finally, by rewarding specific products in exchange for points, you can easily shift excess stock without slashing prices.

The online underwear store CheapUndies saw their profits soar after rolling out their loyalty program. Within the first 12 months this loyalty program example generated $148,000 and an additional revenue of $825,000.

You can read more about the ROI of a loyalty program in this free ebook, or get your fill of customer loyalty program statistics here.

What activities should I reward within an ecommerce loyalty program?

We suggest rewarding both transactional and non-transactional activities within an ecommerce loyalty program. Transactional activities are those that involve a purchase. Non-transactional activities relate to broader customer engagement.

Here are a few examples of non-transactional behaviour you can reward points for:

  • Points for purchase – offer points for each product bought and bonus points for specific products or collections
  • Site visits – for either individual visits or when a customer returns a certain number of times
  • Account creation – when a customer registers, instantly give them points they can use in their next transaction
  • Referrals – this could be if the customer simply makes a referral or when the referred customer joins the program
  • Reviews – encouraging reviews can help you gather the social proof that will validate your brand over the competition
  • Social shares and follows – this shows customers that you are paying attention to them, encouraging them to continue acting as advocates on your behalf
  • Newsletter signups – this keeps the lines of communication open and make sure that customers are receiving your content, special offers and news

If you want to learn more about the activities you can reward customers for, head over to our free, educational resource, the LoyaltyLion Academy.

Who owns a loyalty program?

The best loyalty programs are a combined responsibility between marketing, customer service, stock control and dispatch, operations and the board. It should become part of your DNA and your company-wide culture. Below is a breakdown of how each team can use and manage different loyalty program types.

  • The marketing team can use data collected from a loyalty program to deliver personalised communications and marketing strategies
  • Your customer service employees can be empowered to offer points or other benefits to resolve customer issues
  • Inventory and dispatch teams should stay close to the loyalty program to shift excess stock
  • Operations and the board should always be informed about loyalty program benefits and support it from the top

How do I encourage more participation in my loyalty program?

There are many different types of loyalty programs. A tiered loyalty program is a sure way to boost program engagement and gives members motivation to keep interacting with your program. Each tier should offer exclusive rewards that are not accessible at other levels. You could even use loyalty program gamification to create “hidden tiers” that will surprise and delight your customers when they unlock them.

Criteria for progressing to the next tier could include; reaching a points threshold, total spend during the customer’s lifetime or certain on-site activities. If customers know there is more to your loyalty program that’s attainable, they’re more likely to take the actions to reach it and, therefore, engage with your loyalty program.

The LoyaltyLion Academy shows more ways you can encourage participation with your loyalty program. Join now and become the go-to loyalty expert in your business.

How can a loyalty program help me acquire new customers?

Your existing customers are an incredibly powerful and cost-effective acquisition tool. If you pay attention to them and nurture them, they’re more likely to become advocates of your brand and recommend your store to friends and family.

Incentivise your existing customers to make referrals with loyalty points and rewards. You could even give each customer a unique referral link so you can identify your biggest advocates and reward them down the line.

Visit the LoyaltyLion Academy to learn more ways your loyalty program could be the perfect acquisition strategy for your store.

How do I make my loyalty program on brand?

The first loyalty program best practices are around branding. Start by giving your loyalty program an identity that links to your brand. One way to do this is by thinking carefully about what you call it. Pick a name that’s exclusive and resonates with your branding and audience. For example, 100% Pure has named its program “Purist Perks”. Also, with LoyaltyLion, you can fully customise your loyalty widget panel to match your brand colours or even create a full loyalty program web page.

How do I measure the ROI of a loyalty program?

The first key indicator of successful loyalty programs is how many of your customers are signing up to your program. By understanding your conversion rate you can understand whether or not your loyalty program is attractive to your new and existing customers. It’s also important to observe if your customers are even engaging your loyalty strategy. So take note of the percentage of customers who use or redeem rewards.

You need to also take note of your repeat purchase rate and average order value. This clarifies if your customers are coming back to shop with you and if they’re spending more. Most importantly, measuring your customer lifetime value is a sure way to map out the long-term success of your loyalty strategy. It helps you calculate how much a customer is worth to your business and it’s a great indicator of your most valuable shoppers, allowing you to prioritise where to make an investment.

To keep the ROI of your loyalty program on track, it’s important to stay on top of your Net Promoter Score (NPS). This is a measure of how likely customers are to recommend your store to their friends and family. If you keep this up, the ROI of your loyalty program will be more significant. Learn more about customer loyalty and NPS here.

Learn how to calculate the ROI of your loyalty program at the LoyaltyLion Academy – our free, educational resource.

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