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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.
LoyaltyLion is a data-driven loyalty and engagement platform. Our platform supports sustainable ecommerce growth by helping stores to build better relationships.
We power loyalty program for stores on Shopify and Shopify Plus. We help you drive more revenue from your existing customers, increasing their lifetime value and driving more cost-effective acquisition through advocacy.
A customer loyalty program is a long-term marketing tool used by many ecommerce merchants. Loyalty programs motivate repeat purchases and customer retention by offering rewards to shoppers who demonstrate loyal buying behaviors. Some stores also offer rewards for behaviors 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.
Today’s turbulent marketplace demonstrates the importance of customer loyalty. 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. Loyalty programs improve a customer’s lifetime value as the often points-based system motivates them to return to your store more frequently. They also increase the average order value as loyal customers tend to spend more. Additionally, if you reward points for reviews and referrals, customers will act as advocates on your behalf and your customer base will expand.
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, an integrated loyalty program shows your customers that you value them as individuals, rather than just another number.
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. Take a look at some of our case studies to see where there are similarities and differences with your own store.
Be sure to think about whether you’re competing with stores very 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.
We believe that there’s no point in delaying the launch of a loyalty program or waiting around for your orders to increase – whether you’re a small growing business or a large global enterprise. You could be losing out on valuable customers who want to join. The sooner you implement your loyalty program, the sooner you’ll get your customers on board and sharing out rewards.
There are many tell-tale signs that it’s the right time to launch an ecommerce loyalty program. Here are just a few indicators that it’s time to pull together a loyalty program implementation plan:
There are many different types of loyalty programs. A tiered loyalty program is a sure way to boost program engagement and gives members the 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 things like hitting a points threshold or carrying out 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 move up through the stages and, therefore, engage with your loyalty program.
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 speak for themselves. Our customer, 100% Pure saw their loyalty program members spend 72% more than non-members.
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 behaviors you can reward points for:
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”. With LoyaltyLion, you can fully customize your loyalty widget panel to match your brand colours or even create a full loyalty program web page.
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).
A loyalty program will generate 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 incentivizing customers with points and free rewards, they’re encouraged to increase their average order value to reach the threshold. And finally, by rewarding specific products in exchange for points, you can easily shift excess stock without slashing prices.
Check out our pricing page to see the different plans and the offered discount on yearly plans.
We believe that GDPR offers an opportunity to improve your loyalty program so that it lives up to your customers’ expectations. When GDPR was introduced, customers became empowered and more selective about 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 help you to 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.
Loyalty programs are a powerful tool for reducing reliance on discounting by incentivizing customers to continue purchasing from your brand without the need for constant price reductions. For example, you can offer exclusive rewards such as free shipping or access to new products which will encourage customers to keep returning.
To understand more about how loyalty can reduce your reliance on discounting, read our discounting playbook.
The best loyalty programs comprise savvy ways to keep 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 enrol a member on a customer loyalty program, utilize email automation to establish a good relationship early on that will drive ongoing engagement. Then, once a member is on board, you can send personalized 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.
Repeat purchase rate is the percentage of customers that have shopped at your store more than once. 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 behavior, you are incentivizing them to come back again to spend these points further down the line on other purchases.
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.
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, as well as 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 personalized points that encourage them to repeat spend with you down the line.
A loyalty program can be a very effective tool for building a profitable customer community. For example, you can use your loyalty program to create a sense of exclusivity for your most loyal customers, offering special rewards or benefits to those who achieve a certain level of loyalty. You can also analyze your customer loyalty data to identify their needs, interests, and preferences, enabling you to build better connections with your community.
If you want to learn more about cracking the ecommerce growth formula, view our Community Matters magazine.
Many strategies can help you better understand your customers so you can serve them a personalized customer experience. A loyalty program is a golden opportunity to send customized loyalty program emails to your shoppers to improve engagement and build long-term relationships. This is mainly because loyalty programs enable the collection of first-party data on your customers. With this information, you can engage your members in a much more personalized way.
Your emails could summarize 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.
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.
A loyalty program can help you identify shoppers who have abandoned their cart and re-engage them with checkout 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.
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 purchases. 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 personalized 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.
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 engaging with your loyalty program, so be sure to measure 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 prioritize 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.