All You Should Know For Building An Effective Loyalty Program


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E-commerce stores can use special holidays to show appreciation to loyal customers by offering them incentives and deals. This helps to build and maintain a relationship with valued customers. Additionally, loyalty programs can be a powerful way to drive sales, encourage purchase decisions and increase conversion rates, especially during holiday season. Learn more about loyalty programs and how they can help your business.

Why is customer loyalty so important?

  • These are just a few reasons why customer loyalty is so important.
  • Loyal customers spend more money when they are in constant communication with them and place orders over a longer period.
  • 78% of loyal customers will share the word with their family and friends. Repeat customers who have had positive experiences with a brand will be able to give their friends and family general information about the product and services. Word-To-Mouth is the best marketing strategy. 92% of respondents prefer to hear from others.

It is more expensive to acquire new customers than it is to keep existing customers. According to Forbes, maintaining a relationship with existing customers is seven times cheaper than buying a new one. RetailTouchPoints shows that up to 41% U.S. retail revenue comes from repeat customers, which only 8% of visitors to the site.

Loyalty programs are a key factor in building loyal customer networks. Every e-commerce company should prioritize them and invest their time and financial resources.

What is a customer loyalty programme?

Wikipedia states that loyalty programs are structured marketing strategies used by merchants to encourage customers and other business associates to continue shopping at the program.

Loyalty360 has a remarkable number of loyal program members

  • American consumers are more likely to choose a brand than its competitors if they are part of its loyalty programs.
  • Customers surveyed by 71% said loyalty programs offer important benefits.
  • Around 84% of Americans are members at least once in loyalty programs.

E-commerce businesses need loyalty programs to succeed.

A great contributor to sales growth

Loyalty programs are a great way to retain customers. Consumers also love loyalty programs as they offer additional incentives and rewards. E-commerce businesses can use loyalty programs as part of their marketing strategy to increase sales and motivate customers to buy.

Boost customer loyalty

Loyalty programs have two functions. They target both customers. Loyalty programs encourage new customers to stay loyal after they purchase. Loyalty programs are also beneficial for existing customers. They remind them that they are valued customers.

Customer experience enhancement

A loyalty program sends a subtle message that your business cares about your customers. It is not just about making money, but also about providing benefits for customers in order to keep the relationship strong. Customers will feel more positive about your store and have a better shopping experience.

Market research support

You can launch different loyalty programs to help you conduct research and find out what customers want. You will discover the types of rewards and incentives that are most appealing to customers through the trial and error process. You can attach rewards to products to increase sales or you can create a new product that is based on the rewards.

Contribute towards customer segmentation

One of the most interesting benefits of loyalty programs is their ability to help businesses segment customers and identify profitable and non-profitable customers. Loyalty programs allow stores to identify customers who buy only discounted products. This type of customer almost does not bring any benefits to the store. Store owners can create loyalty programs that target profitable customers.

There are 10 types of customer loyalty programs

Marketing and business owners are concerned about customer retention, especially when there is so much competition online. There are many loyalty programs that can be used to increase repeat customers’ profits. This makes it more competitive. The following 10 types are common and you might come up with your own idea.

Points Program

This program is very popular among both customers and in stores. This program is simple in concept: If you spend more you will get more. Based on the order value, customers will receive a certain number of points for every purchase they make at your store. The earned points can then be converted into cash or gift vouchers.

Spend-based program

This program is based solely on customer spending. Customers will receive loyalty credits based on the amount they spend at the store. For example, $X is worth $Y cashback. This is a great way to increase the number of transactions from customers. This program type works best when customers are engaged.

Tiered Program

Customers can upgrade to higher levels of the tiered program to receive exclusive benefits. Customers who are loyal to the company receive more rewards. This program works well for service providers, luxury webshops, as well as the travel industry. This loyalty program is most popular with “VIP” customers.

Paid Program

When customers pay monthly or annually, they will be able to join the VIP member group. Customers can access exclusive service, discounts, and offers from stores like free shipping and a bigger discount. Paid programs are a way to make customers feel more special. This type of program is best for repeat customers, and not new customers.

Program that is not monetary

The Non-Monetary Program is one that is aligned with customers’ values and focuses on charities. It is focused on creating strong, ethical relationships with customers and ensuring that they have a deeper level of value. It is important to identify the target value and then convert customers’ purchases into charitable donations. If you own a pet shop and know that customers care about animal welfare, you could create a loyalty program where each 100$ purchased will result in a donation of 10$ to an animal welfare organization.

Ambassador program

Invite your loyal customers to become brand ambassadors and reward them. Your customers have the opportunity to access VIP services through ambassadors in return for their support on social media and websites.

Program Partnered

Both you and your customers benefit from partnerships with other brands. This is a way to market your brand to the partner’s customers, which can be a lot of them. Customers can get more benefits from this loyalty program than they initially receive. Discounts in partner stores are another option. Customers who spend over 500 dollars in a clothing store can get a 10% discount at a jewelry shop.

Game program

Join a store game to entertain customers and give them rewards. Customer loyalty programs are based on a game that gives prizes to winners such as discounts, deals, and other goodies. This program type is commonly called “Spin the Wheel”. Event-based program

Customers can be rewarded for special occasions, such as marriage day, birthdays, 100th customers, etc. Customers will be surprised to learn how much this shows that the store cares about them. You can also offer customers gifts to encourage them to sign up and subscribe.

Tip: To set up different discount/ reward programs easily, you can add a support module such as Loyalty Programme to the store website.

Hybrid Program

It is a mixture of several loyalty programs. When you combine different types of loyalty programs, make sure it is clear and simple for customers to join. It should be easy to work together. Point and tiered systems are the most popular combination. Customers who spend more than 1000$ will receive 50 points. They also get to join the Gold customer group and enjoy special benefits.

Five Essential Components of a Successful Loyalty Program

Keep it simple

  • Customers can join loyalty programs easily and without any confusion by using simple language. Its success is due to the ease customers have in participating in the program. These are some tips to help you make it easy to join the program.
  • Reduce complexity in the program structure and avoid complicated calculation formulas
  • It should not be difficult to grasp the steps to earn points or other rewards.
  • The steps to use the collected points are easy and straightforward to follow
  • Status updates for programs should be easy to understand
  • A section on the store website that is easy to follow so customers can update and check their benefits whenever they want
  • Apps can be used to connect to loyalty programs to enhance physical experiences. A survey by Bond brand Loyalty found that 57% of US consumers want to engage loyalty programs via their mobile devices.

Make it unique

It is a fact that, if something is not available to everyone it is often meaningless to them all. People are more interested in unique or special things. You should make the program seem selectively sensible, even if it is universally applicable. The idea that there is no one loyalty program for all customers is a key principle to successful loyalty programs. Merchants must identify loyal customers and then satisfy them.

Once the loyalty program proves to be successful in increasing customer value and business benefits, it can gradually be extended to a wider audience.

It should be rewarding

Customers should feel valued and rewarded for joining the loyalty program. Customers should receive tangible and meaningful rewards such as discounts vouchers or exclusive offers. Stores can conduct a survey to find out what customers are looking for in loyalty programs to help them plan and deliver on their customers’ expectations.

Make it compelling

A loyalty program that is appealing to customers should take some effort on their part but should not be difficult or complicated. Customers must share the program with at least three friends to receive discounts.

Personalization is key to loyalty programs being more effective. Customers should receive the rewards they deserve. 

Limit it

Customers are more likely to make a purchase if they fear losing their money. Loyalty programs need to be limited in terms of both time and/or quantity. Customers will feel anxious and urgent if they fear that their rewards opportunities may be lost or stolen by others. Let’s remind customers about the expiration dates and maximum offers. Also, they should be reminded about what they could lose if they don’t grab their valuable opportunities.

7 steps to create a loyalty programme

These are the main steps that will help you create the right loyalty programs to support your business.

Step 1: Examine your customers

You should evaluate your customers’ expectations before you start a loyalty program. This can be done through interviews, surveys, and other methods. You need to find out what customers want and if they are willing to join. This is an essential step in determining if your program will be accepted by large numbers of customers or not.

Customer attributes case studies are available to help you learn more about your customers.

Step 2: Decide what you want to accomplish

First, you need to define the purpose and expected outcomes of the program. Do you look forward to a rise in sales? You want to increase traffic to your website? You want your brand to be more widely known. No matter what your expectation is, it is important to clarify it before you create a plan that will lead to a successful program. You will be able to create a plan that is specific and focused on your goal depending on what you are trying to achieve.

Step 3: Select program rewards

Customers should be able to value your loyalty reward program. You should conduct research on your customers to determine the best rewards that will benefit them and make your business more profitable. To attract more members, properly-name your loyalty program.

Step 4: Choose your loyalty program type

Next, choose the right program type to help you achieve your goal. If you want to increase traffic to your store, the program type that requires check-in, sharing might be a good choice. You can also consider the spend-based type that includes cashback if you want to increase order value.

Step 5: Establish a budget

The budget should be considered for the entire loyalty program. The budget can be divided into two parts: one for existing customers and one for new customers.

Step 6: Offer incentives to help people start

To get the loyalty program going, offer early start incentives. To motivate customers to want to do it, the incentives should be easy and simple. You could get 50 points instantly when customers register an account at the store. Or, welcome your first visit to the store with a 10% discount. To engage customers quickly and effectively, starting incentives are a supportive step.

Step 7: Measure your success

Store owners should collect feedback from customers and review the data report after the loyalty program. This will help them determine if the program has been a success or failure. You can then improve your next scheme based on this feedback.

8 Success stories of customer loyalty programs

Many businesses around the globe are eligible for loyalty programs. Let’s look at some famous businesses.


Designer Shoe Warehouse (or DSW), rewards customers with points and tiers that allow customers to unlock additional benefits. Points are automatically managed by customer name, payment information, and phone number. Personalization in emails reminding customers about their chances and benefits is what makes DSW’s campaign a success.

Sephora Beauty Insider

Sephora’s Beauty Insider loyalty programme is also point-based. The best part about the program is the flexibility with which members can use their reward points. The points can be used to purchase gift cards, discounts or other products in the store.

Tarte 3 Reward

Tarte, a cosmetic and skincare retailer, used their loyalty program to increase social media engagement as well as user-generated material. Customers can get reward points for doing things such as taking a photo with Tarte products or writing reviews online.

Amazon Prime

Amazon Prime membership is a well-known program. Prime members pay an annual fee and get unlimited two-day shipping on millions. Prime is Amazon’s way to differentiate itself and keep customers loyal. Prime loyal customers spend 4x more on Amazon than normal customers, which is proof that it works.

The North Face

The North Face, an apparel and outdoor gear retailer, encourages loyal customers through its VIPeak program. Every purchase and participation in The North Face events will earn customers points. These points can then be used to redeem for travel experiences such as mountain climbing. This not only encourages customers to spend more, but also builds a stronger relationship between brand and customer.

TOMS One for One

TOMS does not offer customers points or a reward card for every purchase. Instead, customers are encouraged to donate to charities. For example, every One For One purchase includes a donation to charity.

Plenti Rewards

American Express introduced Plenti Rewards, which provides more value for customers. Customers can earn points and then spend in the same store with this program. You can use one loyalty card at multiple Plenti’s partners, such as Macy’s and AT&T.

CVS Extra Care

Customers can get 2% back on all their purchases through the CVS Extra Care program. Rewards are awarded four times per year.

Last words

Loyalty programs are a way to reward customers by offering discounts, gifts, and other special offers. Loyalty programs have been proven to be very effective in retaining customers, increasing customer purchases, and creating huge value for businesses around the globe. E-commerce stores will be successful if they use the holiday season to create a loyalty program that is effective.

About the author

Kobe Digital is a unified team of performance marketing, design, and video production experts. Our mastery of these disciplines is what makes us effective. Our ability to integrate them seamlessly is what makes us unique.