Our Year in Review 2024 has been a whirlwind of a year for the Stamped team. While we're already...
The importance of personalization
Let's be honest. When it comes to customer retention, most brands don't dedicate the necessary resources to personalization. They believe that out-of-the-box loyalty programs alone can do the heavy lifting, but if that’s the focal point of your retention strategy, you’re putting yourself at a major disadvantage. If you want to see real improvements in your retention, it's all about reaching your customers on a hyper-personal level.
And customers are expecting that personalized experience at every step of the process—they want to feel like their favorite brands really know them. According to data from McKinsey, over 76% of consumers said that receiving personalized communications was a key factor in prompting their consideration of a brand, and 78% said such content made them more likely to repurchase. This belief in personalization is why we recently merged with Repeat. It takes the complication out of building hyper-personalized messaging, making the process simple, automated, and even more effective than before.
Let’s take a look at the critical areas in your loyalty program where personalization can be the difference between one-time buyers and unwavering brand loyalists.
1. Treat loyalty like a merchandising lever
It’s obvious that something can’t impact a customer’s behavior if the customer doesn't know about it.
Take, for example, this viral post from Ridge CEO Sean Frank about a trip to Kiehl's. He went to buy the stuff he usually buys—$200 worth—and walked out without paying for it, thanks to loyalty points he didn't know he had. His experience was, in his words, a core problem with loyalty programs.
And he's right. If a customer doesn't even know that they have points to redeem, how can you expect it to influence their behavior in any positive way? You can't, and that's why brands need to start integrating their program offers and rewards into the channels they use to reach their customers. In other words, they need to treat loyalty like it's a merchandising lever.
Brands should already be familiar with merchandising offers to their customers. After all, they do it all the time in the form of sales and discount promotions. It's an especially easy way to measure when it comes to transaction-based metrics like conversion rates, AOV, and basket size. By treating loyalty as a merchandising lever, we hold it to the same standards as other merchandising levers: it is successful when it impacts a customer's buying decision.
While the concept of merchandising loyalty is straightforward, the execution isn't always so easy. Your messaging should give relevant product recommendations, reach customers when they're ready to shop, and demonstrate that you know them on a personal level. All of that sounds great in theory, of course, but how do you manage to make it happen?
Start by considering Repeat, the newest part of Stamped’s arsenal. It's a highly effective customer retention tool that can create the kind of hyper-personalized messaging that normally requires complicated if/else logic, rigid timing, and burdensome setup. Repeat allows brands to better personalize communications with customers so that the merchandising that can have an impact stands a better chance of doing so. The product cuts through the messiness of personalization to surface the right products, at the right time, in a user-specific way, automated across email, SMS, and cart.
2. Look beyond breakage to measure your program
Points breakage is one of the main results indicators that customers new to Stamped care about, but it’s actually only one part of the puzzle.
Every loyalty program has members who don't redeem their points, leading to eventual expiration—this is known as breakage. Breakage can occur for several reasons, such as difficulties in redeeming points, members forgetting about their enrollment, rewards that are unappealing or less relevant, or redemption thresholds that feel too high or costly. Regardless of the reason, breakage signals missed business opportunities, with inactive customers often at the core of the issue.
With that in mind, it's only natural that most brands look at breakage to measure the success of their loyalty program. The issue, though, is that this measurement creates tension between finance and marketing. Finance wants higher breakage because less redemptions means lower costs to fund the program; marketing wants lower breakage because that means the loyalty program is actually working.
But what if there's a better way to measure impact? A way that reveals more about how your loyalty program is affecting customer retention?
Instead, you can look at the percentage of loyalty program purchases that included a points redemption versus the percentage that didn't. This view eliminates the finance-marketing tension and puts more of an emphasis on participation at the purchase event level, as opposed to the points level.
To get this view, we normalized points to their dollar value, then looked at how many dollars a loyalty program customer needs to redeem. We then used that dollar value as a way to rank a program by “ease of redemption” (or, put plainly, how much money a customer needs to spend to redeem points), and bucketed by quartiles. The 25th percentile represents the “easy to redeem” programs, the 50th percentile represents the “medium effort to redeem programs,” and the 75th percentile represents the “hard to redeem programs” in the dataset.
You might expect participation rates and ease of redemption to be inversely proportional. But that's not what our research shows.
Instead, what we see is that participation isn't tied so tightly to ease of redemption. Though percentage-based discounts have the lowest participation and redemption rates of any program type we analyzed, their impact on AOV so far outpaces the other core reward types that it's still a clear winner. Since higher AOV often indicates satisfied customers who consistently come back for more, it’s also one of the best strategies for retention.
3. Influence customer behavior with unique reward types
We already broke down the impact of fixed dollar off, fixed percentage off, and variable dollar off programs. You know that percentage-based discounts drive the highest lift in AOV, and that higher AOV means satisfied customers who are more likely to return, but it's far from your only option to boost retention.
Despite driving much lower AOV, offering a free item as a loyalty reward can still have a massive impact on customer retention. It's another form of merchandising: Most brands understand which of their products drive the most frequent repeat behavior, and they attempt to acquire customers through those products. Additionally, brands often incentivize customers to make a second purchase immediately after their first, because making more than one purchase in a short period of time greatly increases the likelihood of longer term retention.
Data from Repeat shows that the likelihood of making another purchase increases each time a customer makes an additional purchase. Does that hold for free products, too?
We found that it does. Returning customers who made a “free” purchase of the giveaway product returned within 90 days to make another purchase roughly more than 65% of the time. Comparatively, returning customers who weren’t making that same “free” purchase returned within 90 days only 54% of the time.
The free product for them, then, is a lever to improving 90-day repurchase rates. And at a 20% lift in 90-day repeat purchase rate, that can have a material impact on extending customer lifetime value.
4. Customize every aspect of your loyalty program
There are numerous areas to make your loyalty program stand out, but how many are you really taking advantage of? You should start, of course, with making sure that your landing page is strong; after all, it's the first thing that potential loyalty users are going to see. Generic, out-of-the-box programs might not be captivating enough to entice new members, so think about how you can differentiate by incorporating your brand identity.
Part of that can be renaming different aspects of your program to better suit your brand. The name of your points, the name of your VIP tiers, the tasks that customers need to complete in order to earn rewards—these areas can all benefit from customization. Let's take beauty brand Lilac St. as an example: instead of the generic "silver," "gold," "platinum" VIP tiers, they created their own naming convention. By doing this, Lilac St. effectively distances themselves from other run of the mill programs, creating a sense that customers are members of a meaningful community.
And that's far from the only way to customize your VIP tiers. In fact, you don't even need to have three tiers—many brands go up to five, giving customers more perks to pursue. Just make sure that you're keeping things simple and effective. Too few tiers might not offer enough differentiation to motivate customers, while too many of them can make the program overly complicated and difficult to manage.
You can also consider whether customers should have to earn their way into the first tier, or if they are automatically added upon signing up. By making customers work for their spot, you can boost their LTV before giving up any margin through discounts or rewards.
Finally, you can deepen your brand identity using Shopify’s Checkout Extensibility widget. With it, you’re able to customize the checkout experience for customers, giving them an option to see their points balance, redeem for specific rewards, apply cash discounts, and more. Another feature capable of bolstering your brand experience is the ability to rename points to any term you prefer.
💡 For a guide on how to set up Checkout Extensibility on Shopify, click here.
5. Rework your Klaviyo loyalty flows
With our Klaviyo integration, you can automate emails to target specific customer groups based on the data in their profiles. Whether you're sending birthday wishes or including reward points balances in any email, there are numerous ways to offer customers the personalized experience they're looking for.
There are two main areas of customization: Loyalty Customer Properties and Loyalty Events.
Loyalty Customer Properties store information about the contacts in your account. You can collect almost any type of data about a contact using custom properties, which can later be used to tailor content, create segments, filter flows, or generate dynamic email content.
Klaviyo logs Loyalty Events whenever a customer takes an action. For instance, when a customer begins checkout, Klaviyo tracks it as a Started Checkout event. Stamped regularly sends data to Klaviyo, which is stored as event variables containing all the details associated with the customer’s action. With event data, you can set up abandoned cart flows that show customers the product they left behind, including an image of the item, creating a more personalized experience and boosting conversion potential.
Loyalty Events can also be used to create segments. For example, you could have one segment for customers who left a positive review and another for those who left a negative review. You can then design tailored flows that speak more directly to each group.
By using these strategies, you can avoid sending the same generic emails to your entire customer base. Segment your audience to customize messaging for specific groups, and use properties and events to make each email feel as though it was personally crafted for them. Customers are far less likely to engage with emails that don’t reach them on a personal level.
💡 For a guide on how to set up Klaviyo flows using Stamped’s Loyalty Customer Properties and Loyalty Events, click here.
Boost your customer retention with Stamped Loyalty
Personalization isn’t just “nice to have”—it’s the driving force behind an effective retention strategy. By integrating personalized messaging, adjusting your loyalty program to suit your brand, and customizing your program at every level, you can significantly improve customer retention, boosting AOV and overall LTV in the process.
Ready to transform your loyalty program into a customer retention powerhouse? Start leveraging Stamped’s personalized solutions today. Our AI-powered tools make it easy to create tailored loyalty programs that engage customers and drive long-term loyalty. Book a demo with one of our sales reps to get started.
