Published
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Jun 28, 2024

A Complete Guide To Building Unbreakable Customer Loyalty With Loyalty Programs

Kai Jensen
June 28, 2024

In today's fiercely competitive market, exceptional products and services are insufficient to retain customers. Businesses need an effective loyalty program to survive and thrive. This comprehensive guide delves into the intricacies of loyalty programs, offering insights and strategies to build unbreakable customer loyalty and drive sustainable business growth.

Ecommerce

Many business owners struggle to boost customer retention rates. Keeping customers coming back in today’s fiercely competitive market is hard. Even after curating a fantastic selection of products, designing a welcoming in-store experience or compelling website, and offering exceptional customer service, customers will still come and go. 

So, what else can you do to increase that all-important business metric, customer retention?

Loyalty programs are often touted as the best solution for retaining customers. However, building a loyalty program that fosters unbreakable customer loyalty requires careful planning and execution. It’s not enough to simply launch a loyalty program and hope for the best. 

In this comprehensive loyalty program guide, we'll delve into the why and how of loyalty programs. 

Here's what you can expect to find in this guide. 

  • Learn how to identify potential causes of low customer retention.
  • Understand the types of loyalty programs to find the right fit for your business.
  • Launch a loyalty program that resonates with your target audience.
  • Reveal the secret to maximizing customer engagement and driving repeat business.

These tips can help you build a loyalty program that goes well beyond points and punch cards. Learn how to create a win-win experience that fosters a genuine brand-customer connection, boosts loyalty, and ultimately, fuels sustainable business growth.

What are some common pitfalls of loyalty programs?

pitfalls of loyalty program

Loyalty programs are a proven way to foster customer loyalty and drive repeat business. However, the wrong format, incentives, and structure can impede your program’s success. 

Consider these common pitfalls to avoid spending time and money on a loyalty program that doesn’t net results. 

1. Choosing the wrong program design

In general, loyalty programs can help achieve three main goals: more frequent purchases, increased spend per transaction, or deeper customer insights. The goal you choose should inform the way your loyalty program is set up. 

What customer behavior do you wish to incentivize? Design your loyalty program to reward your customers for taking that specific action. For instance, customers who order above a certain dollar value on your website get free shipping. This deal encourages increased spend, boosting your bottom line. 

  • Fact: According to a report, 75% of consumers say they would be more likely to switch brands if offered a better loyalty program.
millennial and loyalty program
Source: KPMG.

2. Uninspiring or misaligned incentives 

Customers are bombarded with loyalty programs, so generic rewards won't cut it. Offering the same tired discounts or free samples fails to excite or incentivize repeat business. 

Instead, look for incentives aligned with your brand and relevant to the customer. “If you’d really like to treat your best customers, offer a bonus after they hit multiple multiples of however many you’re requiring for redemption – if it’s the 10th free, at 30th offer 2 free, at the 50th, pay their whole ticket (within reason),” wrote one expert

  • Fact: 80% of consumers say they’re more likely to do business with a company that offers personalized experiences.

3. Loyalty programs are used in isolation

A loyalty program isn’t a silver bullet for the rest of your marketing efforts. And, it shouldn't be run in a silo. For optimal impact, seamless integration with your existing marketing tools is crucial.

  • Fact: Accenture research shows that loyalty programs integrated with CRM systems can boost customer retention by up to 20%.

4. Ensuring data privacy 

Customer data is the lifeblood of any loyalty program, but wielding it comes with a responsibility to protect customer privacy. 

In today's data-driven world, consumers are increasingly wary of how their information is collected, used, and shared. A loyalty program that feels intrusive or that violates customer trust can backfire spectacularly.

  • Fact: A Pew Research Center survey found that 72% of Americans are concerned about the amount of data companies collect about them.
Source: Pew Research Center.

With these challenges in mind, let’s dive into ways to offer a loyalty program that excites and delights customers, ultimately strengthening brand affinity and customer retention.

Why do loyalty programs matter for small businesses? 

Repeat customers are the lifeblood of a healthy, growing business. It’s one of the most cited statistics in the business playbook: 80% of your venture’s profit will come from 20% of your existing customers. Loyalty programs are designed to increase your existing customer base, boosting profits in the process. 

Let's explore how these programs can be your secret weapon for success.

Loyalty programs boost sales.

Loyalty programs incentivize repeat business, keeping your customer base (and revenue) steady and consistent. 

Businesses can achieve a 20% increase in sales from loyalty program members.

Sephora's Beauty Insider program is a great example. This beloved program offers tiered rewards, early access to new products, and personalized recommendations. The result? Loyalty program members spend on average three times more than non-members.

The stats are clear: loyalty programs are powerful revenue generators.

Loyalty programs can reduce costs.

Studies show that acquiring a new customer can cost five times more than keeping an existing one. Loyalty programs play a role in both reducing costs and increasing sales — translating into healthier profit margins for you. 

Loyalty programs are a treasure trove of customer insights. 

Loyalty programs are chock full of valuable customer insights. When customers sign up to track their purchases, reward redemptions, and preferences, they’re giving you a deeper understanding of your customer base. This data can be used for:

  • Targeted marketing: Segment your audience based on their loyalty program behavior. This allows you to deliver more personalized and effective marketing campaigns that resonate with your customers.
  • Developing products your customers actually love: Analyze customer purchase patterns and preferences within the loyalty program to identify gaps in your product offering. This data can guide product development and ensure you're catering to your customers' desires.
influence.io analytics
Influence.io provides detailed reports with the industry benchmark so you can evaluate the performance of your program.

Loyalty programs foster brand advocacy. 

Loyalty programs offer more than just incentives. They foster a sense of community and belonging. When customers feel valued and appreciated, they become brand advocates. They'll not only keep coming back themselves, but they'll also recommend your business to their friends and family, generating valuable word-of-mouth marketing.

The referrals tool from Influence.io enhances this process by providing easy ways for customers to refer your business, track their referrals, and earn rewards for bringing in new customers. This not only strengthens customer loyalty but also helps expand your customer base organically through trusted personal recommendations.

book demo influence.io

Loyalty programs that run smoothly stand out. 

It can be difficult to make your loyalty program stand out among all the brands’ points, punch cards, and prizes. Set your business apart by offering unique rewards, personalized experiences, and a smooth program experience. 

This edge can attract new customers and solidify your position in the minds of your existing customer base.

Ready to Build a Thriving Loyalty Program?

Successful loyalty programs aren't about fancy features, it's about understanding your customers and building genuine connections. 

Influence.io empowers small businesses to create data-driven loyalty programs that drive customer engagement, boost sales, and cultivate brand loyalty. 

TRY INFLUENCE.io TODAY!

Types of Loyalty Programs

Loyalty programs come in all shapes and sizes, each with its own set of advantages and limitations.

Points-Based Programs

Points-based programs are the most popular loyalty program structure. Customers earn points for their purchases, which they can redeem for rewards such as discounts, free products, or exclusive experiences.

Many online stores offer points-based loyalty programs to show appreciation for customer purchases. These traditional programs work just like the ones you might see in physical stores but with the added convenience of being entirely digital.

Let's say your eCommerce store sells jewelry. You could implement a points-based program where customers earn 1 point for every dollar spent. Once they accumulate a certain number of points, they can redeem them for various rewards:

  • 50 points: Free shipping on their next order.
  • 100 points: 10% discount on any single item.
  • 200 points: Free gift wrapping on their next purchase.

Perks: Simple to understand and manage. Customers earn points for purchases, which can be redeemed for rewards like discounts or free products.

Limitations: Can feel generic and impersonal. Customers might not be motivated by points alone.

Tiered Programs

Tiered loyalty programs present a powerful alternative for businesses seeking to cultivate a loyal customer base that actively interacts with your brand.

Tiered programs place customers in different categories based on their spending or engagement. Each tier comes with its own benefits; higher tiers within your program can offer exclusive perks that go beyond traditional discounts or free shipping. Imagine offering personalized birthday gifts, priority customer service support, or invitations to members-only events for your top-tier customers.

The tiered structure inherently fosters a sense of progression and accomplishment. Customers are driven to make repeat purchases, participate in promotions, or leave reviews to elevate their tier status and unlock the associated benefits. 

Plus, tiered programs allow you to segment customers based on loyalty. This enables you to deliver targeted communications and promotions that resonate with each customer's unique preferences and purchase behavior. 

Perks: Offer different reward levels based on customer engagement. Higher tiers can unlock exclusive benefits like early access to sales or personalized offers.

Limitations: Can be complex to manage and might discourage new customers from joining.

Paid Membership Programs (VIP Programs)

VIP programs require customers to invest upfront in a monthly or annual membership fee. In exchange, members gain access to a curated selection of premium benefits and exclusive experiences that elevate their brand relationship.

By requiring a membership fee, you attract customers who are demonstrably interested in your brand and willing to invest in a deeper connection. This fosters a core group of highly engaged brand advocates.

Perks: Offer premium rewards and exclusive benefits for a monthly or annual fee. This can create a sense of community and exclusivity.

Limitations: Requires upfront investment from customers, which might deter some.

Punch Card Programs

A punch card on an eCommerce website is a virtual card with designated spaces for "punches." Your customers earn a punch with each purchase or action you define (for example, leaving a review). Once the card is filled, customers redeem it for a predetermined reward.

Punch cards are incredibly easy to understand and manage for you and your customers. This makes them ideal for businesses of all sizes, especially those new to loyalty programs.

Perks: Simple and easy to implement. Ideal for driving repeat purchases within a short timeframe.

Limitations: Rewards are often limited and might not incentivize long-term loyalty.

Want the power of punch cards but with better performance?

Try Influence.io's StampCard: A modern take on the punch card!

While traditional punch cards offer a basic loyalty solution, Influence.io's StampCard takes the concept to the next level. Our digital StampCard program retains the simplicity and ease of use of punch cards but incorporates valuable features that enhance customer engagement and program effectiveness:

  • Branding customization: Design your StampCard to seamlessly match your brand aesthetic and personalize the reward offered upon completion.
  • Flexible redemption: Offer multiple redemption options to cater to customer preferences.
  • Boosted engagement: Pre-filled cards create a sense of accomplishment from the get-go, encouraging customers to participate actively in your loyalty program.

TRY STAMPCARD NOW

Gamified Programs

For many customers, the reward process can start to feel repetitive. Click, browse, add to cart, checkout, new points earned—rinse and repeat. 

Gamification is a way to make rewarding purchases or other online engagements more fun and even more rewarding. Gamified loyalty programs incorporate game-like elements into the traditional loyalty program structure. The aim is to make earning rewards and interacting with the program fun and engaging for customers.

Perks: Incorporate game mechanics like points and VIP tiers to boost engagement and make earning rewards more exciting.

Limitations: Requires careful planning and execution to ensure the game aspect complements your brand and resonates with your audience.

Read more: 9 Innovative Ecommerce Loyalty Program Ideas

How to Choose The Right Loyalty Program for Your eCommerce Store

So, how do you decide which program is best for your business? 

The program structure is simply one element to consider. Any structure you choose must be tailored to your customer base and business goals. Consider factors like your industry, average purchase value, and desired customer behavior. 

You may also consider exploring hybrid models that combine elements from different loyalty programs. Experiment with gamification to make earning rewards more fun and engaging.

'Creating a Loyalty Programme should be as unique as your business. Using a solution like Influence.io allows for your brand voice to shine through, and offers the flexibility needed to increase engagement with your customers.' - Kai Jensen, Product Manager at Influence.io

Step 1: Assess your business and customers

Start by clarifying your business goals. A loyalty program can serve many purposes, including

  • Boosting customer acquisition by attracting new customers and incentivizing them to make their first purchase.
  • Increasing repeat purchases by encouraging existing customers to keep coming back to earn more points, rewards, and discounts. 
  • Driving customer engagement by motivating customers to interact with your brand by leaving reviews or following you on social media. 

Analyze your customers in the process of determining your goals. Consider their demographics, purchasing habits, and motivations. What type of rewards would resonate with them most?

Step 2: Explore loyalty program types

Now that you know your goals and customer profile, let's explore the different program types.

Here's a quick breakdown of the most common loyalty program types to help you navigate the options and choose the one that best aligns with your business goals and customer base.

comparison of loyalty programs

Step 3: Choose the right program

Armed with your goals and program knowledge, it's time to find the perfect match! Choose a program that aligns with your budget and the resources you can dedicate to management.

Pro tips:

  • Focus on value, not points: Points are easy but can feel generic. Instead, design a program that you yourself want to have when shopping online, like early access to sales, exclusive product bundles, or personalized recommendations.
  • Start small, scale smart: Don't launch a loyalty program with a million bells and whistles. Begin with a core structure and a few key rewards.
    You can later track customer behavior and program performance, then use that data to refine your offerings and personalize the experience over time.
  • Listen and learn: Your customers are the heart of your program. Actively solicit feedback through surveys, social media interactions, or even good old-fashioned email.

Step 4: Refine and reward

As you implement your program, follow a few best practices to optimize your program for success.

First, offer a variety of rewards to cater to different preferences. Align these rewards with your business goals (e.g., free shipping for repeat purchases).

Additionally, keep your structure simple. Don't initially overwhelm customers with too many options. Monitor program performance and adjust your reward structure based on customer behavior.

Step 5: Spread the word!

Once your program is polished, it's time to shout it from the rooftops (or at least your website and social media channels). 

Promote your program through blog posts, email marketing campaigns, and social media announcements.

Beyond the basics: boost engagement with gamification

Here are some additional ideas to keep your loyalty program thriving:

  • Personalize rewards: Offer rewards based on customer preferences and purchase history.
  • Provide early access to new products or sales: This creates a sense of exclusivity for loyal customers.
  • Host member-only events or webinars: Build a sense of community and deepen customer relationships.
  • Integrate gamification elements: Consider badges, points multipliers, or leaderboards to make earning rewards more interactive and exciting.

Design A Highly Engaging Loyalty Program: Best Practices

Loyalty programs can be your secret weapon for customer retention. Whether you're creating one from scratch or looking to revamp your existing program, these do’s and don’ts can help you ensure it succeeds.

For beginners: Kickstarting your loyalty program 

Don't wait for a massive customer base to start.

Loyalty programs are all about building relationships with your customers. Launching your program early in your business lifecycle establishes a system for rewarding customers from the first purchase, fostering a sense of value and laying the foundation for long-term loyalty.

So, don’t wait. 

Research your target audience and understand their needs and desires. Build a customer persona to guide you in crafting a program that speaks directly to their interests.

analytics market research

Here are some ways to gain valuable customer insights even with a limited audience:

  • Do market research: Utilize publicly available market research reports or conduct surveys with potential customers in your target demographic. These resources can reveal trends, preferences, and pain points of your potential customers.
  • Watch what’s happening on social media: Pay attention to online conversations taking place social media platforms, especially related to your product or service. What are people saying about your competitors' loyalty programs? What features do they love or hate? Social listening can offer valuable insights into customer expectations. 
  • Perform competitor analysis: Research your competitors' loyalty programs. 

What types of rewards do they offer? What are their program structures?

This analysis can give you a sense of what works in your industry and what you can improve upon.

Read more: The 8Cs to follow when building a loyalty program

Don’t try to reinvent the wheel.

Many eCommerce platforms like Shopify or BigCommerce offer built-in loyalty program functionality or integrate with third-party loyalty management tools. 

These tools can streamline program management, automate reward distribution, and track customer behavior, giving you valuable insights to optimize your program over time.

Did you know?

Influence.io offers effortless integration with popular e-commerce platforms like Shopify and BigCommerce. This means no complex setup or coding is required. Simply connect your store, and you'll be ready to launch your loyalty program.

Do be patient and focus on collecting customer data.

Building a thriving loyalty program takes time.

Track your program's performance, analyze customer behavior, and be prepared to adapt your program based on the data you collect. 

Remember, a successful loyalty program is a dynamic entity that evolves alongside your business.

For mature merchants: Revamping your existing program

Over time, loyalty incentives can start to feel stale. Even the most seasoned merchants can let their loyalty program fall by the wayside. 

If you’re seeking to refresh your loyalty program, here are some specific do’s and don’ts to consider. 

Do revisit your loyalty program goals. 

As your business evolves, so should your loyalty program. 

Revisit your initial program objectives. Are they still relevant? Has your focus shifted from customer acquisition to retention or driving deeper engagement? 

Re-aligning your program goals with your current business needs is the first step to continuing the long-term success of your loyalty program.

Do make sure rewards are meaningful. 

There’s a good chance that your customers are drowning in points from a dozen different programs. Make yours stand out by offering valuable rewards instead of generic discounts.

Conduct customer surveys or social media polls to understand what rewards will mean the most to your customers. In addition to traditional discounts, offer exclusive products, early access to sales, or personalized recommendations.

Don’t treat all customers the same. 

Unfortunately, the truth is that not all customers are created equal. Some customers will become brand advocates and stay loyal to your business for a lifetime. A one-size-fits-all program doesn’t recognize their contribution to your brand. 

Consider implementing a tiered program or offering different reward options based on customer engagement levels. This structure personalizes the experience and incentivizes customers to climb the loyalty ladder.

Do try to connect on a deeper level.

The worst-case scenario is when a loyalty program becomes a tool for bribing customers to take a certain action. Studies show that, as a rule, one-time promotions can be expensive and don’t generate loyalty. For instance, a free coffee once a quarter may encourage someone to come a few extra times, but won’t encourage an emotional connection. 

Building an emotional connection with your customers goes beyond transactions. Loyalty programs that tap into emotions create a sense of value and belonging, fostering deeper customer engagement.

Here are some ways to add emotional connection to your program:

  • Offer meaningful rewards: Give rewards that go beyond discounts or free products. Think exclusive experiences like personalized consultations, early access to product development stages, or behind-the-scenes content that makes them feel special and valued.
  • Track and celebrate milestones: Acknowledge birthdays, anniversaries, or significant purchase milestones with personalized messages and exclusive rewards for your customers. This small gesture shows you care about them as individuals, not just as customers.
  • Show heartfelt appreciation: Don't wait for a special occasion to express gratitude. Implement a "thank you" reward system for leaving reviews, following you on social media, or referring friends. This simple act of recognition fosters loyalty and encourages continued engagement.
loyalty program powered by influence.io
Loyalty program of New Forest Clothing (powered by Influence.io).

Do reward customer behaviors that drive “value-sharing.” 

Loyalty programs are a double-edged sword. While they can foster customer engagement, they can also become a financial drain if not designed strategically. Many merchants fall into the trap of blindly launching programs without considering the "value-sharing" equation.

What does value sharing mean?

Essentially, value created must exceed the cost of value delivered.

Many businesses launch programs without understanding the economics of reward-giving. They focus solely on rewarding "talk" (simple actions) instead of the "walk" (valuable customer behaviors).

The bad result? Your customers accumulate points but don't necessarily translate their loyalty into actions that benefit the company.

Therefore, your program must reward behaviors that drive your business value

Your rewards must be tied to specific, desired customer behaviors. Consider rewarding actions that drive value-sharing, such as:

  • Leaving positive reviews and feedback: Reviews can increase brand trust and attract new customers.
  • Sharing product recommendations on social media: Leverage the power of social proof and expand your brand reach.
  • Referring friends and family: Bring in new customers at a lower cost.
  • Signing up for email subscriptions: Foster ongoing communication and create more targeted marketing. 

The full potential of loyalty programs is unlocked when customers change their habits in support of your brand. This happens when the program offers a clear proposition: rewarding actions that benefit both the customer and the company.

Ready to take your loyalty programs to the next level?

Loyalty programs are a powerful tool in any eCommerce entrepreneur's arsenal. But simply throwing points and discounts at your customers isn't enough. Your program must be strategic, personalized, and emotionally engaging to succeed.

Influence.io offers a seamless solution for eCommerce businesses on platforms like Shopify and BigCommerce. Move beyond points with our comprehensive suite of tools to manage your program effectively, automate tasks, and gain valuable customer insights.

Try Influence.io today.