In today’s highly competitive ecommerce landscape, brands need to look beyond what they sell and take a closer look at what they offer. After all, customers don’t just want good products: they want offers, benefits, and experiences that speak to their individual interests. And for many brands, that means building a loyalty program.
Loyalty programs are increasingly becoming the norm, with over 90% of brands having some sort of loyalty initiative while the average customer belongs to 14.8 different reward programs. Furthermore, 79% of customers say that loyalty programs make them more likely to continue buying from a brand and 73% are more likely to recommend a brand if they have a good loyalty program.
In short, it’s not a matter of if a brand should have a loyalty program, but when and how. What do brands need to consider in order to build a successful loyalty program?
Loyalty programs are primarily used to increase retention and customer loyalty, but can also be leveraged to increase engagement, improve customer acquisition, and boost conversion rates and ROI. They typically ask customers to complete actions in exchange for rewards, encouraging them to continuously engage with the brand to earn more rewards over time.
Acquiring new customers can be up to 25 times more expensive than retaining your existing customers, making loyalty programs more cost-effective in the long run. Plus, loyalty programs aren’t just for customer retention - they can also be used to drive new business.
First, even just the existence of a loyalty program can help bring in new customers: 56% of customers are more likely to buy from a brand with a loyalty program than one without. Brands also often include a referral system in their loyalty program, where customers earn discounts or points for every successful referral.
With the right rewards, you can convince customers to spend more and spend more often. For example, give 100 points for every purchase or an additional 250 points for every three purchases. Consider giving customers 300 points for every purchase of $100 or more. This will increase your average order value (AOV) and your customers’ lifetime value (LTV) over time.
As a bonus, customers tend to spend more when they’re part of a loyalty program, even after taking discounts into account: 80% of customers say they purchase more frequently from a brand after joining its loyalty program.
Loyalty programs provide the perfect opportunity for brands to incorporate more personalization into their marketing strategy. Personalization plays a key role in the customer journey: 80% of customers are more likely to purchase from a brand when they offer personalized experiences, while 78% say personalized content makes them more likely to repurchase.
Brands can create activities, perks, and rewards that both work towards their business goals and speak to their customers’ individual interests. For example, they can offer a variety of free gifts as a reward or send program members a survey where they can vote on the next product. Personalization efforts can drive as much as a 25% lift in revenue.
Brands can collect more reviews, survey responses, and user-generated content by incentivizing customers with rewards. Loyalty programs typically offer points in exchange for reviews and ratings, and may also offer bonus points for including a photo or video.
Reviews and user-generated content are important for building trust with future customers so they feel confident in their first purchase: 72% of customers won’t make a purchase unless they’ve read reviews and spend up to 31% more if a brand has positive reviews. While some customers are willing to write a review without getting anything in return, rewards like gifts and discount codes help motivate others to participate.
Naturally, loyalty programs accelerate retention and increase stickiness. They help brands demonstrate their appreciation for their customers beyond the initial purchase by rewarding them in different ways and encouraging them to keep coming back.
As customers accumulate points and rewards, brands should remind customers to use them before they expire to keep them engaged. The more they engage with the program, the more they get out of it, increasing their lifetime value (LTV) and improving their relationship with their favorite brands over time. 83% of customers say being part of a brand’s loyalty program keeps them making purchases from that business.
First, determine whether you have the budget, resources, and capacity to create and manage a loyalty program. Effective loyalty programs require careful planning and continuous monitoring, so brands should take a close look at their current capabilities to decide the initial scale of their loyalty program.
Brands also need to evaluate their customers and goals to make sure the program addresses both their customers’ needs and their business objectives. What does your loyalty program need to offer to keep customers coming back? What does it need to accomplish to meet your KPIs? Brands need to answer these questions in the initial planning phase.
Having a distinctive name or even theme for your loyalty program that ties into the rest of your branding makes it more memorable for customers. This can include both the program itself and its members, points, and VIP tiers. As a bonus, it may make creating assets and marketing campaigns for the loyalty program faster and easier.
For example, Stamped customer Mexicali Blues loves travel and exploration. As a result, their loyalty program, the Smile High Club, allows customers to earn “miles” in exchange for rewards. Their VIP tiers are also named accordingly, where customers are Wanderers, Daytrippers, or Globetrotters based on how much they spend per year.
Design earning and redeeming rules that make sense for you and your customers. Are they more likely to want a $10 discount or a $25 discount? Is it cost-effective to offer your best-selling products as free gifts? Are customers more likely to refer their friends for points or coupons?
Brands also need to be careful about how much their points are worth. If points are too easy to earn, your program’s ROI may end up lower than expected. On the other hand, if points are too difficult to earn, customers might not engage with your program in the first place. Lastly, if there are too many rules, brands may find it too overwhelming to manage. Brands should start small with a few highly valuable rules and rewards, then decide whether to add more over time.
Create a referral program to leverage existing customers to drive new business while keeping acquisition costs low. Referrals help consistently bring in new and valuable customers: referred customers have a 16% higher LTV, 37% higher retention rate, and spend 200% more than non-referred customers.
While VIP tiers require more effort than a referral program, they’re a great way to recognize high-value customers and give customers something to aspire to. Rather than redeeming the same rewards over and over again, customers work toward a specific goal to get access to exclusive perks and benefits. Loyalty programs with tiers are reported to result in a 1.8x higher ROI and a 2.1x higher average spend compared to loyalty programs without.
Once your loyalty program is ready to launch, let customers know. Post about it on social media, send an email invite, run a paid ad campaign, and partner with influencers and brand advocates to spread the word.
When announcing your loyalty program, it’s important to explain how it works. Tell customers how to earn points and what rewards to look forward to so they’re more likely to join. Make sure to consistently advertise your loyalty program by including it in your newsletter, mentioning it on social media, and reminding customers to spend their points.
Loyalty programs aren’t a “set it and forget it” tactic - they need to be continuously monitored and analyzed to be effective. Customers will eventually get bored with the same activities and rewards, or may not even engage with them in the first place if they aren’t interesting enough.
Brands should evaluate their loyalty program regularly to see if customers are completing activities, redeeming points, and using their rewards. They should specifically take a close look at their points breakage rate, which is the number of points earned divided by the number of points spent. The higher the breakage rate, the less engaged customers are with your program.
Lastly, after seeing how your loyalty program is doing, make adjustments as needed. For example, if customers aren’t redeeming one of your rewards, it might not be interesting enough or its points value may be too high. If customers aren’t leaving reviews, it may not be worth enough points. Brands should also examine whether customers are moving through their VIP tiers or if they seem too difficult to achieve.
Brands should also experiment with new ideas once their loyalty program is established. This might mean offering early access to sales as a tier perk or asking customers to follow them on social media to earn points. You might add another VIP tier or change the referral reward to see how it compares. Brands need to keep the loyalty program fresh to keep its members engaged.
Georgiemane is a hair care brand whose aim is to “deliver the highest quality and most effective hair care products that every hair type can benefit from”. Their rewards program allows customers to earn points. for purchases, reviews, and social engagement, where they can then redeem points for discounts.
In addition to their variety of earning and redeeming rules, they also have referral bonuses and VIP tiers, where customers get extra benefits for referring their friends and spending a specific amount within 12 months. Each program tier offers special perks like points multipliers, early access to sales and product launches, and the chance to test upcoming products. Customers receive 300 points while their friend receives $10 off their first order with every successful referral.
Sunrise Flour Mill is a CPG brand specializing in single-source, organic heritage flours and other baking products like sourdough starters, pancake mixes, and cornmeal. Their Sunrise Rewards program allows customers to earn points for purchases, reviews, and social engagement, redeeming their points for free products in return.
Their dedicated loyalty landing page includes a tutorial video on how to earn and redeem points, simplifying the process for customers new to loyalty programs. Lastly, customers receive $10 off with every successful referral, incentivizing their friends and family with 10% off their first purchase in return.
Lilac St. is a beauty brand specializing in vegan, cruelty-free DIY lash extensions, promising salon quality at affordable prices. Their Brand Ambassador Program emphasizes referrals and social sharing to increase brand awareness and reach. Both customers and their friends receive a 20% off coupon with every successful referral.
Customers can earn points by making purchases, leaving reviews, and engaging on social media, then redeem their points for store credit or free lash accessories. As they earn more points, they move through the program’s Friends, Besties, and Soul Mates tiers, gaining access to points multipliers, gifts, and early access to new products and promotions.
⭐ Bonus: All of these loyalty programs (and more) were winners in our first-ever Stamped Customer Awards, ranging from the best loyalty landing page to the best referral program and beyond. You can check out the complete list of winners here.
While loyalty programs may seem like a complicated marketing tactic to design, build, and run, they offer many indispensable benefits for brands of all sizes across all industries. With careful planning and the right rewards, brands can look forward to increasing retention, acquisition, engagement, and revenue via their loyalty program.
To learn more about how to build an effective loyalty program that drives sales and builds better relationships with your customers, book a demo with one of our sales reps.