Why loyalty matters
Loyalty is a versatile marketing strategy that can improve your margins across the board. A strong loyalty program is capable of driving more repeat purchases, improved retention, increased LTV, decreased churn—the list goes on and on. They also build lasting customer relationships, converting one-time buyers into brand ambassadors who advocate for your products. Focusing on customer loyalty increases profitability and in turn, leads to more resources and opportunities for growth.
At Stamped, Loyalty consists of three core features: points and rewards, a VIP program, and a referral program. All of these areas can be customized to suit your brand, and most DTC brands create a loyalty program that is specific to their brand and use incentives that drive behavior from their customers.
We don’t believe in out of the box loyalty programs, and we don’t believe in “set it and forget it” tactics. Instead, we want to partner with brands to ensure they deeply understand their unit economics, margins, lifecycle strategy, retention, and more so they can design a loyalty program that helps them achieve their specific business goals. It could be increasing community sales, increasing brand engagement, or using loyalty to nurture their most valuable customers—whatever the goal is, Stamped has the customization capabilities to make it happen.
Let's review the various components of a loyalty program and show you how to successfully implement them into your own strategy.
The different components of Loyalty
Points and Rewards
In a points-based loyalty program, customers earn points for performing specific actions and redeem them for various rewards. They are an especially effective strategy for driving repeat purchases. To start, they give brands a legitimate reason to continue connecting with customers, reaching out to offer incentives like free products in exchange for another purchase. Post-purchase flows tend to be sales-oriented, so reaching out about loyalty points and reminding customers of ways to spend them is an opportunity to be more educational and informative. It’s an offer instead of an ask, leading to a more authentic and natural experience.
Loyalty programs increase repeat AOV as well. Customers often end up spending more even after applying discounts, whether they’re purchasing larger quantities and/or buying more expensive products. According to a study from the American Marketing Association, when customers spend, they have a mental budget that can increase with discounts, therefore motivating them to buy higher-priced options. Our own research found that percentage-based discounts drove a 47% lift in AOV and a 38% lift in basket size.
However, brands should be careful about how much their points are worth—a successful program requires a delicate balance. If points are too easy to earn, your program’s ROI may end up lower than expected; if points are too difficult to earn, customers might not engage with your program at all.
It’s also important to not overcomplicate things. If there are too many rules, brands may find it too overwhelming to manage, and customers may get confused and stop engaging. If you’re just starting your loyalty program, we recommend starting small with a few highly valuable rules and rewards, then decide whether to add more over time.
💡 Check out this help article to learn how to set up points and rewards.
VIP Program
A VIP program is a component of your loyalty program where brands offer benefits—discounts or access to exclusive goods, content, and other rewards—to a specific group of customers. While they require more effort than referral programs, VIP programs are a great way to nurture your top-tier customers and incentivize further engagement.
Typically, VIP programs are broken into different tiers like bronze, silver, and gold, but you can customize the names and amount of tiers. For example, beauty brand Perfect Locks changed their tiers to Lady, Princess, and Queen to better suit their brand identity. At higher tiers, customers expect better perks like free shipping, increased points accelerators, high discounts, and unique experiences. At lower tiers, it might look similar, but the benefits will be decreased.
VIP tiers drive increased revenue tier to tier and encourage longer-term brand loyalty. 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.
💡 Check out this help article to learn how to set up a VIP program.
Referral Program
Referrals are a word-of-mouth marketing tactic that encourage happy customers to advocate on behalf of your brand in exchange for gifts or other incentives. Brands across the board, from small businesses to household names, can benefit from launching a referral program. Case in point: referred customers have a 16% higher LTV and spend 200% more than non-referred customers. Beyond that, referral programs have a positive impact across your entire customer lifecycle, including:
- Cost: They are relatively inexpensive to launch and affordable to run. If you set your rewards well within your margins, you will always profit off of referrals.
- Efficacy: Research has shown that 77% of consumers are more likely to buy a new product when learning about it from friends or family.
- Precision marketing: Giving your happiest customers referral bonuses incentivizes highly qualified new customers and encourages your existing customers to return.
- Retention: Customers referred by other customers have a 37% higher retention rate.
Oftentimes, a strong referral program will incentivize customers to participate every step of the way, starting with a sign up offer. Then, you can create additional incentives for social media posts or direct referrals to family and friends. Georgiemane, a personal care brand, offers a 10% discount for customers who sign up with email alongside their referral reward offer. Considering just how valuable referrals are, make sure that your customers stay incentivized from their first purchase to the point of making a referral.
💡 Check out this help article to learn how to set up a referral program.
Comparing standard and custom loyalty programs
There are numerous ways to enhance your loyalty program through customization. At Stamped, we believe that your loyalty program should look different based on your brand. You can use standard templates to get started, but your unit economics and brand strategy are your own, and we’ve got the customization options to give you that freedom. Certain adjustments you might want to make to suit your brand include:
- Earning rules: you can select from default options like "Celebrate Your Birthday," "Make a Purchase," etc., or you can create your own. For example, an eco-friendly brand might add "Choose Eco Packaging."
- Point-to-dollar value: choose how much your points are worth, whether it's $1 for every point or $1 for every 1,000 points.
- Rewards: common reward types include free shipping, online gift cards, free items, and discounts, but don't hesitate to get creative. Clothing brand Mexicali Blues offers a "Smile High Club" where you can earn travel miles with every purchase.
If you’re debating between percentage or dollar-based discounts, here’s something to consider: collecting data from 350 of our largest loyalty programs, Stamped found that percentage-based discounts drove a 47% lift in AOV and a 38% lift in basket size. In comparison, dollar-based discounts only drove a 4% lift in AOV and a 12.2% lift in basket size. Our research suggests that percentage-based discount rewards will have a stronger impact on your margins.
Another reward option worth considering is offering a free item. While it doesn't have a great impact on AOV or basket size, that's not where the value lies. When looking at Lilac St., a beauty brand that offers free items as loyalty rewards, Stamped found that 65% of customers returned to make another purchase within 90 days of claiming their free item. Compared to 54% of customers who returned after making a regular purchase, that is a 20% lift in 90-day repeat purchase rate, creating a massive impact on customer lifetime value.
Examples of strong loyalty programs
Points and Rewards: Mexicali Blues
Mexicali Blues, a fashion and home decor brand, got creative by offering travel miles instead of traditional points. As a brand that celebrates cultures across the globe, miles are a unique incentive that perfectly suit their brand identity. While points-based systems are effective, this is an opportunity to think outside of the box as a vast majority of loyalty programs already use points. Similar to Mexicali Blues, perhaps you could consider partnerships. Are there any brands you could partner with to give your customers a truly unique reward earning experience?
VIP Program: Every Man Jack
Men’s grooming and personal care brand Every Man Jack has their VIP program laid out in a clean, concise format. With this chart-style explanation of VIP perks, they effectively demonstrate what customers might be missing out on if they don’t earn enough points, creating a sense of FOMO capable of driving sales. Additionally, incentivizing their most loyal customers with boosted points earning and early access to new products is a great way to encourage customers to buy more. If your customers have a compelling reason to climb the VIP tiers, they will be more likely to spend.
Referral Program: Lilac St.
Beauty brand Lilac St. demonstrates that when it comes to generating referrals, incentives are key. Not only can customers earn points by referring the brand on social media, but they can also earn $10 off an order for themselves and a friend. Considering that customers are far more likely to buy a product if they learn about it through friends or family, you need to guarantee that your offer is strong enough to encourage customers to make a referral. The customers that you gain through referrals are also more valuable than most: studies have shown that referred customers have a 16% higher lifetime value than non-referred customers.
Upgrade your loyalty program with Stamped Loyalty
Investing in a loyalty program is one of the most effective ways to improve profit margins and find customers with long-term value. By implementing these concepts into your own loyalty strategy, you can expect to see more purchases, better retention, improved LTV, and much more.
Ready to turn one-time buyers into loyal brand advocates? Start building your own loyalty program with Stamped today. You can acquire new customers and maximize customer lifetime value with powerful programs that perfectly fit your needs using our customizable AI-powered solutions. Book a demo with one of our sales reps to get started.
