How to Create & Design a Loyalty Program for Your Online Store
October 20, 2020
In ecommerce, it isn’t good enough to convince a new visitor to just purchase an item on your site. To truly succeed, you’ll need to convince them to come back and keep purchasing from you — again and again and again.
The financial benefits of repeat customers simply can’t be ignored. Returning visitors are five times more likely to make a purchase on your store than new visitors, and their orders are 31% larger on average as well.
But convincing customers to remain loyal to your brand can be quite difficult. According to Bain & Company, 60% to 80% of customerswho say they’re satisfied with a purchase will never return to make another purchase from the same business in the future. Even when your customers are satisfied, most of the time they still won’t stick with you.
So, it’s clear that you must go beyond simple satisfaction. You’ll need to give customers a better reason to return for more purchases. And that’s exactly what a loyalty program provides.
What is a Loyalty Program?
At its core, a loyalty program is designed to reward and incentivize consumers to make a purchase from your store.
Countless case studies have shown (more on that below) that rewarding visitors who remain active on your store with discounts, gifts and other incentives is an extremely effective way to persuade people to keep coming back for more.
But it’s not enough to just have any loyalty program — only 50% of loyalty program accounts are actually active. Your program will need to be well-designed for it to have its intended effect.
In this guide, we’ll review tips for designing your loyalty program, real-world examples for inspiration and the best loyalty program plugins for popular ecommerce platforms.
10 Tips for Designing an Effective Loyalty Program
The most common structure for loyalty programs is the points system: Every time the customer performs a certain action, they receive points.
Eventually, the customer will accumulate enough points to redeem them for rewards. Small rewards such as free shipping or a $5 off coupon won’t require much points, while larger rewards will require more points.
There are many variations of this system, though, as well as entirely different systems that you could use for your program. And in addition to the design, there are other aspects of your loyalty program that you’ll need to address.
With the help of the tips listed below, you’ll be able to make your program as successful as possible.
1. Promote Your Program: Of course, people will need to know about your loyalty program for it to be effective. It’s important enough to deserve placement in prominent areas of your site, such as your homepage banner and checkout page. It should also be promoted in off-site materials, such as marketing emails and social media posts.
2. Brand Your Program: The key goal of a loyalty program is to get customers to remember to use your service rather than any of their other options, so it only makes sense to customize your loyalty program with design elements associated with your brand. For example, The North Face doesn’t just generically call its points “points” — the company calls them Peak Points to reflect the mountain referenced in its name and logo.
3. Make Your Program Easy to Use: The easier your program is to use, the more people will use it. Your points system should make sense on an intuitive level (awarding one point for each dollar spent is always easy to follow). And to make the math easy, it’s best to stick to multiples of five or ten when deciding how many points each reward is worth.
4. Don’t Be Stingy with Rewards: While it is important to make sure you don’t give away more in rewards than you’re getting back in loyalty program-generated revenue, stop yourself from making your rewards too difficult to obtain. Think back to the benefits of loyalty programs mentioned above. This isn’t a giveaway — it’s an investment.
5. Make Rewards Easy to Redeem: When a customer earns enough points to get a reward they want, it should be easy for them to do so. If you surprise them with excessive restrictions and other complications, they might get so frustrated that they stop using your business altogether.
6. Use Multiplier Tiers: Some of the most effective loyalty programs combine a points system with a tiers system, offering a faster way to get points for customers who spend more money. For example, Best Choice Products offers one point for every dollar spent to users with one to 499 points, but 1.5 points for every dollar spent to users with 500 to 1,499 points and 2 points for every dollar spent to users with more than 1,500 points. This will encourage customers to use your program more.
7. Keep Messages to Your Members Relevant: Once someone has signed up for your loyalty program, you should remind them to use it by notifying them of your latest deals and other perks (again, only 50% of loyalty accounts are active). Make sure these notifications are truly helpful and relevant, though — 69% of consumers will close their loyalty program account if it sends them communication they don’t like to receive.
8. Consider Charging a Fee for Your Program: An alternative to the points system is the subscription system, which involves charging members a fee in exchange for joining your loyalty program. This allows you to offer more valuable rewards without losing money. The most popular version of this system is charging a regular fee for unlimited free shipping, and this can work out to a good deal on both ends for your most frequent customers.
9. Consider Rewarding More Actions than Just Orders: You don’t have to only award points for purchases, either. Other valuable actions that you can incentivize with a loyalty program include downloading your app, leaving reviews for your products and following your accounts on social media. This will also make your program feel less transactional, which your customers are sure to appreciate.
10. Measure Your Performance: Even with the help of all the insightful advice included in this guide, it’s unlikely that you’ll design the perfect loyalty program on your first try. After all, what works for one online store won’t necessarily work for another. So, over time you should tweak different aspects of your program and measure how each variation performs in order to discover what works best for you.
3 Loyalty Program Examples
Now, let’s take a look at what some of the tips described above look like when they’re implemented on a live store:
1. Amazon Prime
Given how powerful an effect loyalty programs can have on an online store’s bottom line, it should be no surprise that the most successful ecommerce company in the U.S. also has the country’s most effective loyalty program.
Amazon Prime is an ecommerce subscription service, yes, but it offers members serious rewards and discounts for joining. It’s so successful that, considering 82% of U.S households have a subscription, there’s a very good chance you’re a member yourself.
For a fee of $12.99 per month, members get access to free two-day shipping on Prime-eligible products, as well as 10% off selected items at Whole Foods and access to a huge library of original TV shows and movies.
The lesson here is to not skimp on your perks — it’s estimated that Amazon will generate around $18 billion in revenue from this program in 2020.
2. Evy’s Tree
Retailer Evy’s Tree offers shoppers affordable luxury items. After using Smile.io to add a loyalty program to its site, the fashion store was able to increase its repeat customer rate by 58%. Its “Insider Perks’ page also clearly lists what shoppers must spend and which actions they need to take to activate certain points and rewards.
It certainly helped that Evy’s Tree made information about its rewards easy to find by including a link to it on the main menu bar, too.
3. Dr. Axe
Dr. Axe is a great example of making your loyalty program especially easy to use.
With the help of the LoyaltyLion app, Dr. Axe integrated its loyalty program with its checkout experience. Customers are able to redeem rewards with a single click — there’s no need to enter a coupon code or anything like that. The company also added an instant points feature, which allows customers to use the points they earn in a purchase toward the same purchase instead of having to wait until their next order.
In just three months, this loyalty program produced the following results for Dr. Axe:
- Over 50% of customers enrolled in its loyalty program.
- Loyalty program customers spent 2.7 times more than non-loyalty program customers.
- Average order value grew by 36%.
3 Loyalty Program Plugin Options for Your Store
Instead of hiring developers to custom-build a loyalty program for you, you’ll be able to save a lot of time and money by simply installing a readymade loyalty program plugin.
The following apps stand out as some of your best options:
The results that Evy’s Tree was able to achieve with Smile.io may have you considering this app for your own store.
If so, here’s some more information about Smile.io’s features and prices that you should know (note that there are no max order limits to any of these plans, which makes Smile.io an excellent choice for high volume stores):
- Free: At no cost, you can access Smile.io’s basic points program, referrals program and default reward emails. For support, you’ll only be able to consult the Smile.io knowledge base.
- Starter: $49 per month. Extra features include program branding, custom reward emails and email support.
- Growth: $199 per month. Extra features include nudges (customers will be reminded to use their points on your cart page), points expiry, analytics dashboard and chat support.
- Pro: $599 per month. Extra features include a VIP program and access to a Success Manager for support.
- Enterprise: Starts at $1,000 per month (you’ll need to contact Smile.io for a quote). Extra features include API access, custom HTML reward program emails and custom analytics reports.
As with Smile.io and Evy’s Tree, the proven track record that LoyaltyLion established with Dr. Axe may have piqued your interest as well. Here’s what the company has to offer:
- Free: At no cost, you’ll have access to points for basic on-site activities (site visits, account creation, purchases, etc.), money off vouchers as a reward, analytics dashboards and email/chat support. 800 max monthly orders.
- Small Business: $159 per month. Extra features include points for additional on-site activities (newsletter signups, social follows, likes, shares, etc.), bonus points for buying certain items, free products/free shipping vouchers as a reward and a referrals program. 800 max monthly orders.
- Classic: $399 per month. Extra features include points for custom activities, points expiry and loyalty tiers. 2,000 max monthly orders.
- Advanced: $699 per month. Extra features include in-cart rewards, instant points, A/B testing and priority email support. 4,000 max monthly orders.
- Enterprise: For more than 4,000 monthly orders, you’ll need to contact LoyaltyLion for a custom quote. Extra features include program design support and access to an onboarding Slack channel.
3. S Loyalty
Finally, smaller stores looking for something a little more affordable than Smile.io or LoyaltyLion should check out S Loyalty:
- Free: At no cost, you can set up to three rewards of a fixed amount, and you also get color theming customization and shopper notifications. 100 max monthly orders.
- Basic: $19.99 per month. Allows you to set up to five rewards with conditional settings. Extra features include welcome bonus and points expiry. 50 max monthly orders.
- Standard: $39.99 per month. Allows you to set up to 10 rewards with conditional settings. Extra features include a signature theme (add your logo and customize the background image) and an embedded widget. 200 max monthly orders.
- Pro: $69.99 per month. Allows you to set up to 15 rewards with conditional settings. Extra features include points for past orders and the ability to exclude customers from your loyalty program (for example, wholesale customers). 350 max monthly orders.
- Premium: $119.99 per month. Allows you to set up to 20 rewards with conditional settings. Extra features include no S Loyalty branding and priority email support. 600 max monthly orders.
- Higher Volume: For more rewards or orders, you’ll need the Higher Volume plan. Prices start at $199.99 per month — contact S Loyalty for a quote.
Reward Customer Loyalty
Shoppers have a lot of options when it comes to choosing a store and making a purchase. And a solid customer loyalty program can help you stand out from the pack.
Once you’ve outlined your rewards and program levels, select a plugin. From there, pair that tool with the tips covered in the top half of this guide to create the perfect loyalty program for your online store.
Adam Ritchie is a writer based in Silver Spring, Maryland. He writes about ecommerce trends and best practices for Shogun. His previous clients include Groupon, Clutch and New Theory.