Table of Contents
- What is the definition of loyalty?
- What is a customer loyalty program?
- What are the benefits of loyalty programs?
- What are the types of customer loyalty programs?
- How to measure customer engagement in loyalty programs?
- How do you increase customer engagement in your loyalty program?
- What are great examples of customer loyalty programs?
- How do you start a customer loyalty program?
In our complete guide to customer loyalty programs we will be covering some of the most important features about loyalty marketing. Including how to define loyalty, the best way to create a loyal customer, how we use loyalty marketing as strategic goals, how to build the best loyalty program, the types of loyalty programs and finally a few examples of loyalty programs.
What is the definition of loyalty?
Relatability, Trust and Attachment.
These three elements make up the foundation of a loyal customer. Most would agree that loyalty is a key objective for any growing business. And we can improve conditions to better facilitate loyal customers.
Like any good plan we need a reasonable course of action and sense of what we are trying to accomplish. Cultivating loyalty is a genuine challenge and it starts with the definition of loyalty.
Consider asking yourself if ever you’re in doubt:
- Do you leave a lasting impression?
- Can you provide quality assurance?
- Do you elevate the traditional shopping experience?
- Have you found your dedicated customer base?
- Do you demonstrate sincerity and gratitude?
Emotional connections are the closest we can come to nailing down loyalty. This could mean different steps depending on your circumstance but that’s what ultimately defines customer loyalty.
What is a customer loyalty program?
Right in between loyal customers and your business goals is a pressing issue regarding control. Or rather the lack of control. You might have already realized that starting a loyalty program requires some programming skills and a bit of time. Fortunately, there is a smarter path forward.
Customer loyalty programs have taken up a modern definition as apps or customer loyalty software, that offer pre-made loyalty programs specifically for e-commerce use. They are the tools that we would use to monitor, control and scale our loyalty programs.
They work by creating in-store loyalty points that are rewarded for customer purchases. These loyalty points are coupled with a set of redeemable rewards that offer a variety of different benefits for loyalty members.
It is also possible to create vip tiers using your program that have progressively beneficial perks. Every time a customer reaches a specified spending goal they reach a new tier in your vip program and unlock a new set of benefits like an upgraded loyalty card or loyalty point multipliers.
These customer loyalty programs often come equipped with additional features that further support your business goals. It is common to see loyalty points awarded for leaving reviews, for following on social media or simply registering to your loyalty program.
In order to call a customer loyalty software viable they should have a few basic requirements. They must be customizable to match your brand, they must offer a way to communicate with loyal customers and a way to keep track of your program with in-depth analytics. These basic characteristics make loyalty marketing viable strategic goals.
What are the potential benefits of customer loyalty programs?
1. Higher Customer Retention:
When potential customers see the opportunity to receive loyalty points or discounts for a product they have a natural affinity towards, we call this a win-win scenario. Because that customer is already a fan of your product, has shopped at your store before and has other options. We call this a golden scenario and when rewards are most engaging. These are the sort of situations where you benefit most from loyalty programs.
2. More Active Communication:
Along with the ability to control the value of your points and the sort of rewards you offer. You also have the ability to actively communicate with your loyal customers about these rewards. Loyalty tiers create a purpose for customers to continue shopping at your store, while email notifications keep you in their inbox and relevant.
3. Higher Order Value:
The possibility of earning loyalty points, increases the willingness of shoppers to spend more at your store. This results in a visible change to average order value and engagement with your loyalty program. Remember to establish a benchmark.
4. Insightful Consumer Data:
A major advantage of having a dedicated database of loyal customers is the data that they provide for analysis. You can keep tabs on your loyalty program, identify consumer trends and make necessary adjustments to both your rewards and catalog.
5. Lower Costs of Acquisition:
Motivated by a rise in advertising costs, we’ve seen businesses shift away from generating new customers and towards maintaining their relationships with loyalty program members. Loyalty members are already familiar with your business, having purchased from your store before, making it easier to communicate with them.
Types of Customer Loyalty Programs
Customer loyalty programs can come in a variety of different types. Depending on your needs you may find one of these programs more effective. We find that a combination of multiple types of loyalty programs to be most beneficial.
1. Point Based Program:
When customers complete a purchase at your store, they are awarded reward points. These points can be exchanged in-store for rewards. You can both control the value of each point and how customers can spend them.
2. Tier Based Program:
When customers accumulate enough loyalty points they are upgraded to higher tiers. These vip tiers come with additional benefits like point multipliers, special status and new unlocks.
3. Punch Card Program:
Punch cards track the number of purchases a customer made at your store. Once a specified number of purchases are made, they receive some sort of reward. You can control the product they must purchase, the number of purchases and the reward they receive.
4. Partnership Program:
In a partnership program when customers complete a purchase they receive benefits from a partner. For every purchase you complete at company X, you will receive a benefit from company Y. Common rewards include free movie tickets, discounts and access to special events.
5. Subscription Program:
Subscription programs offer benefits based on duration of customer registration. The longer a customer stays loyal to your brand, the higher the potential reward. These programs can base their reward on advanced bulk payment or customer history. The rewards can vary depending on the business.
6. Gamification Program:
These programs offer some sort of game or luck draw in exchange for rewards. They can be something fun like spinning a wheel, random prize draws or surprises for interactions. They make the customer experience more engaging and enjoyable.
7. Exclusivity Program:
Exclusivity programs offer customer limited editions, early release or special access for loyalty. Examples would be a private catalog, early access to seasonal items or tickets to an exclusive fashion show or event.
How do you measure customer engagement in loyalty programs?
Every lead we generate is a potential loyalty card member. At each stage of the customer’s journey we have unique goals that lead the customer deeper into the marketing funnel. The process represents the customer’s lifetime value and the challenge is retaining the customer long-term.
Measuring performance of your loyalty program:
Customer Engagement Rate
The first metric to consider is the customer engagement rate. These figures measure customer engagement with your loyalty program by observing the percentage of customers that you successfully retain for a given period. This could include any and all interactions before and after the implementation of your customer loyalty program.
% change in interactions with your loyalty program over a comparable period.
You can see all interactions that your loyalty program generates through your analytics section. You should see a change whenever you change the rewards or value of points you offer.
Net Promoter Score and Review Responses
Net Promoter Score reveals what sort of impression our loyalty program creates. Once our program starts to accumulate users, these metrics will become more and more relevant. This coupled with review information can give us some critical information on what we should be focusing on and how to improve our loyalty program. The objective is to identify issues that may be affecting your score.
from total reviews received (% Promoters — % Detractors)
Customer loyalty programs will have the ability to send email requests for reviews and reward reviews with loyalty points. This will increase the quality of your sample.
Points Generated vs Points Redeemed
These figures can give an accurate look into the perceived value of your rewards and the structure of our points. Application of rewards can also reveal customer preferences towards your catalog, while the rewards redeemed could help reveal which rewards they enjoy most of all.
from loyalty members (points awarded / points redeemed) as a percentage
Point values have a direct effect on redemption rates, making them easily manageable.
Membership Growth and Enrollment Rate
Another important indicator to look out for is how your membership list grows over time. This coupled with enrollment rates could paint a vivid picture on your loyalty programs performance. It’s possible to reward registration with points but the overall value of your loyalty program is also highly relevant.
(loyalty members / total customers) in period one vs period two
Customer Lifetime Value and Average Order Value
Keep a close eye to your CLV and average order value. These have direct links to the profitability of your business and the performance of your customer loyalty program. Making them very important metrics. It’s vital that you establish a baseline for comparison, so take an initial reading before you implement your loyalty program.
Customer Value ( average purchase value * average purchase number)
Customer Lifetime Value (customer value * average customer activity)
AOV ( total revenue / number of orders)
Repeat Purchases and Referrals Rates
A great indication of customer sentiment is their willingness to shop again and their willingness to share referrals. These two metrics can help you paint a general idea of the future of your loyalty program. While these metrics indicate the potential for a loyalty program major issues may indicate causes other than your loyalty program
Repeat Purchases as % change over time(total purchases / total customers)
Referral Rates(total referrals issues / total referrals redeemed)
How do you increase customer engagement in your loyalty program?
Set Clear Goals:
Do you have a clear idea of what you want to accomplish with your customer loyalty program? Having a clear set objective can help you design the value of your rewards and how you want to award loyalty points. Taking a versatile approach is wise because it allows you to test and make changes along the way. Based on the outcomes you want to create, you may want to change the value of your points and the type of rewards you issue.
Value of your Rewards:
A key component to a strong loyalty strategy is the value of your rewards, striking the perfect balance between benefit and cost is critical. Remember that each loyalty point you award has a financial value. It is possible to control the activity of your loyalty program by making adjustments to values.
Creating VIP Tiers:
The benefits of your tiers and the outcome you want to accomplish are closely tied together. Tiers are about giving shoppers a sense of status and while also giving them goals to pursue. When customers are attracted to VIP rewards they are also motivated to chase higher tiers. We’ve seen businesses work magic, sometimes choosing to send handwritten letters of appreciation or even exclusive gifts to create authentic experiences.
Freedom of Choice:
Options, options and more options. One dimensional loyalty programs limit the shopping experience. Instead give your customers a breadth of options and the freedom to explore your store with multiple rewards. Consider how you will generate referrals, how you want to encourage retention and what sort of messages you want to send. These things can help you improve the shopping experience.
Make Registration Quick and Rewarding:
The first hurdle we need to cross with new members is registration. Pain points are something that cause us needless headaches. Modern methods allow for one click registration through social media or email. Features like Social Login can improve the customer experience. Ask yourself how important more loyalty members are to you and if you would like to reward registrations with points?
Leverage Double Reward Referrals:
A very popular method of lead generation includes referrals through double rewards. Referrals can be beneficial for both the sender and receiver and are very popular amongst shop owners. We encourage double referral rewards as a way of cultivating new leads in a simple and interactive way.
Promote User Generated Content and Reviews:
Word of Mouth is detrimental in eCommerce. Independent reviews cultivate trust and work miracles for your loyalty cards. Sometimes all it takes is knowing that you’re getting what you signed up for and there is no better source of information than independent reviews. Rewarding reviews with loyalty points is a very common strategy in eCommerce with a major upside. Average businesses can accumulate hundreds of reviews to showcase anywhere they want.
Keep in Touch:
Emails are known throughout all of the eCommerce industry as great communication tools. Leveraging automated email campaigns helps you stay in your customers feed, while staying active with offers. There is so much versatility to emails and they are very affordable to operate. Emails are a top tier tool for marketing outreach.
Identify Shopping Patterns and Refine your Catalog:
There is so much to learn about customers through their interaction with your loyalty program. Use the abundant information available to improve the customers experience and deliver a more refined shopping experience. You can make personalization a strength with data insights.
Optimize for Mobile:
Mobile is a major part of eCommerce. Making your loyalty program mobile friendly is a staple requirement nowadays. Make sure to look for a loyalty program software that is compatible with mobile for the best experience.
Suggest Reading: Why do Most Shopify Stores Fail?
Loyalty Program Examples
What are some of the most creative examples of loyalty programs out there? Some of the names on this list are popular enough for most to know. But the spotlight is on their customer loyalty programs. What we really want to emphasize are the unique characteristics that truly define their loyalty cards. In short, these examples are how to market your loyalty program like a pro.
1. Box Raw
One of the cleanest, sweetest deals around is the Black Card by Box Raw.
It’s stylish, desirable, and really well-built. This loyalty program combines multiple elements into what can only be described as a complete loyalty program. Using this example as guidance is a wise choice. Consider drawing a few of their elements for your own program.
Why we love it:
- Their visuals are stunning
- Their widget is flawless
- Their program is loaded with perks
- The program is simple to use and well explained
Elevated Experience with Loyalty Card:
They have a widget that falls seamlessly onto your page. Shoppers have a quick easy way to access their benefits without having to leave the page. This improves the page’s overall functionality and user experience. Widgets are a great idea and could prove to be a key component.
Meaningful VIP Tiers:
Just like in most competitions, we use precious metals to define classes, and this fitness brand successfully relates to the culture. Box Raw recognizes its loyal customer base and these small things really add up. And the sound of “Black Card” is low-key awesome. Besides the clever design elements, their tiers are loaded with perks and the rewards are desirable. Just another reason why the Black Card is one of our top picks.
Clear and Instructive:
The way that Box Raw explains the process and demonstrates the benefits is outstanding. They make their program clear and simple. They managed to explain it well and were stylish in their design and layout. Style is an important element that can help cultivate a positive impression. Remember that the clearer your message, the less of a burden on your customer service team.
Progress Bar and Free Points:
Box Raw offers hundreds of points before you even make your first purchase and tracks your milestone until your next upgrade. You can easily tell where your progress meter rests and the sort of perk you will receive at each stage. Another reason why the Black Card is winning on customer appeal.
Complete FAQ Section:
Box Raw features a complete FAQ section for its customer loyalty program, making it easier to find the answers you’re looking for. Apart from the benefit it has for the customer, a faq section can alleviate some of the stress from customer service; squashing the issue before it buds. A FAQ section can help us unravel the needs and wants of the average shopper. Planning the details is easier with guidance.
2. H & M
H&M is a major global brand with a huge loyal customer base, but it’s not so simple. There is a lot of competition in apparel and one of the keys to success is customer loyalty. It’s obvious why H&M puts so much effort into its loyalty program. They’re a prime example of a well built program, so let’s probe the reasons why. There are numerous special touches that H&M uses that elevate their loyalty program to another level.
Why we Love it:
- They did very well to build a sense of exclusivity, offering features only available to a specific group of members.
- They made it rewarding to enroll with a first purchase reward.
- They have a mobile app, a major factor.
- They used their loyalty program to push their strategic goals.
Focus on Customer Satisfaction:
H&M is already a household brand and this loyalty program is low impact and all benefits. They used a few clever tricks to push the needle in their favor, making the online shopping experience as good if not better than the in-person experience. Not only are the perks of membership worthwhile, it isn’t very difficult to acquire “Plus Membership”. Is the H&M loyalty program worth it? Yes! 10/10.
Shoppers in general love exclusivity, limited editions and special offers. Programs that offer these sort of elevated experiences, go above and beyond your average customer loyalty program. There is a meaningful treat for dedicated shoppers and this makes it worthwhile pursuing the “plus” membership. This goes down as one of those programs that are really about the loyal customers.
Mobile App and Clear Instructions:
Another major factor about the H&M loyalty program is the Mobile App. Customers adore an easy shopping experience. There is no better improvement to the shopper’s online experience than mobile apps. Overall, this is a program worth checking out for inspiration.
Mango successfully takes a unique spin on the classical loyalty program. Nothing is ordinary about this program. It gives off a humane and caring impression, true to the meaning of real loyalty.
Why we Love it:
- They have the most unique and encouraging rewards; donations to NGO’s, free music, and cinema tickets. Outside of the typical theme entirely.
- The first brand we’ve found that puts sustainability first. You can collect points by recycling old clothing, something no one else is doing on this list.
- They successfully made a warm and outstanding customer loyalty program with their “likes” and additional features.
Sephora is an ideal example of how to structure loyalty programs. Amongst all the examples that we have shared, Sephora stands out for how strongly motivating their loyalty rewards are. They have taken a truly loyal customer and made them both more engaged and increased their expenditure. This is a great example of how to use loyalty points.
Why we Love it:
- They offer a major first purchase discount
- Their VIP tiers are highly desirable
- Their loyalty rewards successfully create exclusivity
- They understand what their customers want and leverage them as progressive tiers
Massimo Dutti is the most creative program on this list. FEEL provides a one of a kind experience; a memorable and deeply sensational customer loyalty program. You can almost smell the leather through the computer screen. There is a sense of excellence and a strong connection between loyal shoppers and the product. They focus on sensation and exclusivity as the foundation of their customer loyalty program.
Why we love it:
- They succeeding in making a sensual experience
- They provides a first class experience
- They built a unique program
- They identified their customer “want”
This particular loyalty program is definitely non-traditional, but it serves as an amazing example of creativity at play. A promise of exclusivity and first class service. They also provide all their members with early access to discounts and limited edition items. Along that you also get personalized appointments and special access to events. They have managed to draw customers in with a “sense” instead of a traditional discount.
Special Treatment and Exclusivity:
For a luxury brand, customers have different expectations. They have the money, what they want is exclusivity and special treatment. Massimo Dutti successfully identified the particular preferences of their clientele. Although their program is not as interactive as other loyalty programs in this list, they have taken a less traveled road which is something their loyal customers prefer.
Suggested Reading: Increasing Traffic to your Shopify Store
How do you start a customer loyalty program?
In recent years it’s become significantly easier to implement your own custom loyalty program. You can start your own in a matter of minutes with loyalty program software.
Shopify has a blooming app-store with several great options for loyalty marketing. They come as ready made and highly developed solutions. It is very common to expedite the process by installing customer loyalty software into your e-commerce store. These apps are how some of the best customer loyalty programs are built. They center around loyalty points and vip tiers, providing the most affordable solutions in one complete package.
Growave is among the best performing customer loyalty programs in the official Shopify app-store. Growave comes with multiple apps combined into one integrated platform. You get everything you need to scale your loyalty program and more. For the most extensive solution choose Growave. Book a Demo or start your Free Trial.
This article originally appeared on Growave’s Blog.