The 3 Best Types of Loyalty Programs For Ecommerce Brands (+ Examples)
January 26, 2023
Ecommerce evolves every year and adapts to consumer spending habits and the economy.
Through all the changes, one thing remains true, a strong brand community will sustain a business through the good and bad times.
Building a brand community starts with a customer loyalty program, which is essential for scaling and growing your ecommerce business.
The sole purpose of a loyalty program is to turn one-time customers into repeat happy customers and build a loyal following.
This marketing strategy creates opportunities for retention and loyalty.
It’s estimated that more than 90% of companies across ecommerce industries have some type of loyalty program offered to their customers.
Creating a loyalty program that is well-branded, caters to your customers, and offers meaningful rewards will set you up for success.
New and established brands like Lucy and Co. and Jimmy Joy have had significant success with their loyalty program, not only bringing customers back but growing their community, online channels, and overall business with their programs.
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The 3 best types of loyalty programs for ecommerce brands
There are many types of loyalty programs, but three stand out for us—points programs, referral programs, and VIP programs.
1. A points program
A points-based program is a loyalty program where customers continuously earn some form of currency, known as points.
These points are built up in their reward balance and over time through different earning actions such as social media follows or leaving a review.
A customer can continue to earn more points to eventually be redeemed for various rewards.
For merchants, a points program is the easiest way to get started with a loyalty program because it can be customized to fit your size, business, and customer needs.
The merchant defines which rewards they want to give out and what those rewards are worth.
According to Shopify, “it’s estimated that as many as 84% of consumers say they’re more apt to stick with a brand that offers a loyalty program.”
Enabling customers to earn points on their purchases causes an increase in average order values and customer retention rates. By building up points, you incentivize customers to return for a repeat purchase since customers need to redeem the points they earn.
Why a points program works well
A point program works well for every type of ecommerce business, whether you are a new and emerging brand or an established brand.
It allows you to have complete control over how much your points are worth and which reward perks to offer members.
The reason points programs work so well is that it allows you to control how much your points are worth and set up which reward perks you can give out.
Whether it’s a 10% discount or an actual number worth ($5, $10, or $15 off). As your business grows, your loyalty program can grow as well with increases in the types of rewards and how many points can be earned.
Tips for a successful points program
- Determine an optimal point valuation and find points that are a fair trade-off between you and your customers. As a rule of thumb, we recommend giving 3-10% back in points for every dollar spent, depending on your profit margins.
- Set up a sign-up bonus so that customers can earn points for joining your loyalty program. We recommend offering a generous amount of points, but about half of the amount of points needed for your first reward. So if you offer $5 off for 500 points, then a 250 sign-up bonus is great!
- Offer rewards for celebrating birthdays, which allows program members to add in their birthday and receive points on their day. This also allows you to have an added data point, as well as a way to make customers feel special and shop with you on their birthdays.
Loyalty program examples: Wild Hand & Lucy and Co.
Wild Hand is a local yarn shop located on the east coast of the US that offers a loyalty program to its customers.
Their program is branded toward its audience and rewards customers with three points for every dollar spent. Customers can earn rewards for purchases, celebrating their birthdays, first-time sign-ups, and following them on Instagram.
Another example is the pet brand Lucy and Co.
They named their loyalty program Pup Perks, where customers can earn five points for every dollar spent. They earn points for following the brand on social media, leaving a review, or celebrating their dog’s birthday!
It caters perfectly to its specific audience, and members love to come back and shower their dogs with love from Lucy and Co’s product line.
2. Referral programs
It’s estimated that 10% of loyal customers, on average, spend 3x more per order, increasing the average order value.
But how do you acquire loyal customers?
A customer referral program is designed to encourage customers to refer their friends, family, and network, while also earning a reward.
Through a referral program, you gain the added bonus of acquiring new customers when shoppers refer their friends to your brand.
This provides you with an opportunity to turn those first-time shoppers into repeat customers.
With a referral program, you can build a community and grow your brand. It’s also word-of-mouth marketing happening in real-time that any ecommerce business can measure.
Why you should start a referral program
Referral programs are perfect for new brands that have just launched their site.
You can easily acquire customers and incentivize others to share your brand by rewarding both the person being referred and the person doing the referral.
It builds trust and easily rewards customers for sharing something new with their friends, family, and extended network.
Referral programs work well because it is one of the easiest entry points for starting to establish a loyalty program and rolling it out to your customers.
Tips for running a successful referral program
- Provide desirable rewards to both the sender and receiver so both can be incentivized to continue to share your brand.
- Create a compelling message that is displayed when a referral is shared through text, email, and social media. It’s what everyone will see when you send a referral message. Focus on branding, imagery, wording, and tone, which all have an impact on your referral messaging success and conversions.
- Landing pages! Ensure your referrals are taken to a landing page or a referral page that lets them know their reward has been attributed to them.
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Loyalty program example: Jibby Coffee’s referrals
A great example is the new coffee brand, Jibby Coffee.
Jibby Coffee grew its business through its referral program. Jibby Coffee heavily relies on its referral program to leverage trust and advocacy from its brand community.
Referring customers get $10 off their next purchase, and new customers get $10 off their first purchase.
3. VIP programs
VIP Programs take your loyalty program to the next level by offering exclusive perks to your most loyal members.
In VIP programs, you create different tiers that reward your top customers with better rewards and exclusivity.
This is a great way to motivate your customers to engage with you even more. You can create a post-purchase customer experience that allows you to give off a status that customers can reach and get rewarded for more.
Why you should start a VIP loyalty program
VIP Programs are for those brands that want to take an existing loyalty program that has been working successfully to the next level.
If you want to offer more benefits and rewards to customers without having to offer endless amounts of discounts, VIP Programs are worth your time.
VIP Programs are also perfect for those ecommerce brands that have high SKU products.
This will encourage customers to increase their average order value (AOV) and come back for a repeat purchase to move on to the next VIP tier.
Tips for running a successful VIP program
- Ensure omnichannel commerce is part of your strategy. If you have a physical retail location, ensure customers can earn and redeem rewards in-store.
- Encourage social shares as a way to unlock levels to the next VIP tier. This offers your brand user-generated content and organic reach from customers.
- A VIP landing page is vital! Have a landing page to show customers visually what they need to do to unlock the next level in your loyalty program and what they can earn.
Loyalty program example: Jimmy Joy VIP
Jimmy Joy offers rewards at every level, but it is their VIP program that offers even more rewards and deals for their top customers to unlock.
The more you move up in status, the more rewards you can get.
- Earthling Tier: Earn 1 Point for every $1 spent.
- Astronaut Tier: Earn 2 Points for every $1 spent and a 5% off coupon.
- Time Traveler Tier: Earns 3 Points for every $1 spent and a 10% off coupon.
All these status tiers give customers more incentives and perks to continue to shop at Jimmy Joy.
With their brand, meaningful rewards, and easy ways to earn, customers are set up to come back for a repeat purchase while allowing Jimmy Joy to grow its community of loyal customers.
Loyalty accelerates ecommerce growth
The foundation of a loyalty program begins with offering the best experience to your customer base, no matter where they are in your funnel.
Implementing a loyalty program is a great way for customers to interact with your business even more and truly build a community that loves and supports your products.
An ecommerce business is only as strong as the experience it gives to customers.
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Jonathan Roque is the Content Marketing Manager at Smile.io. Jonathan is passionate about ecommerce and helping small and medium-sized businesses grow and maximize their potential.