5 Reasons to Launch a Customer Loyalty Program

Loyalty programs afford retailers an opportunity to entice, reward, and nurture customers so they keep coming back time and time again. They offer an incentive to shop more, spend more, and engage more with your brand, delivering positive experiences that keep your business top of mind.

Why launch a customer loyalty program?

Building out a loyalty program can increase your overall CLTV (Customer Lifetime Value), an important metric that signifies the overall business impact of your customer retention efforts. CLTV predicts the total potential revenue from a single customer over a lifetime of engagements and purchases.*

A quick look at some key stats relating to loyalty programs can help us better understand their impact on the consumer mindset, especially when it comes to e-commerce:

• 83% of online shoppers are a part of at least one loyalty program.
• 47% of consumers are more likely to join a loyalty program when shopping online.
• 58% are more likely to make an additional purchase with an online retailer once they join that retailer’s loyalty program.
• Members of loyalty programs view reward points and cash back (66%), discounts (64%), and free shipping (55%) as the top three values of loyalty programs.

The benefits of implementing a loyalty program are threefold: attract more customers, keep more customers, and enjoy more sales. While there are dozens of reasons to consider launching your own customer loyalty program, depending on your specific business goals, there are five that stand out as prospective growth drivers for merchants in any e-commerce category:

1. Inspire more customer loyalty and brand advocacy: It just makes business sense to surprise and delight, as it can cost anywhere from 5-25 times as much to acquire a new customer as retain an existing one. Loyal customers are also often your biggest fans and advocates, sharing their own positive experiences with others and inspiring them to join your loyalty program and repeatedly shop with you as well.
2. Drive more repeat purchases to grow your bottom line: As stated above, 58% of consumers are more likely to make additional purchases with a retailer once they join a loyalty program. By offering perks such as points, gifts with purchase, or exclusive discounts through a loyalty program, you’ll incentivize customers to continue shopping with you, which means more revenue and profits as loyalty to your brand grows.
3. Boost AOV (Average Order Value): By offering rewards such as points per dollar spent or discounted shipping after a certain spend threshold or program tier is met, you’ll encourage higher order values so that your customers can capitalize on those perks and rewards.
4. Set yourself apart from the competition: Benefits offered through a loyalty program can act as a powerful differentiator. Look at what others in the space may be offering – or not – and determine the unique perks you can provide that aren’t currently available elsewhere.
5. Your customers deserve the love! Your customers are your raise d’etre – or reason to exist – and it’s important to let them know you genuinely care about their experiences with your brand. Offering exclusive discounts or other benefits such as free or discounted shipping are excellent ways to show your appreciation for a customer’s continued loyalty.

What to include in a customer loyalty program

There are several benefits you can offer as part of a loyalty program, including exclusive sales and discounts, unique gifts with purchase, and free or faster shipping. As stated above, two of the most popular incentives are rewards points that can be earned per dollar spent and redeemed for products, as well as discounts only available to members signed up for your program.

Also in the top three is free shipping, which comes as no surprise when considering 38% of consumers prefer free shipping, and 33% will only purchase online if they don’t have to pay for shipping. While this offering isn’t always realistic for e-commerce merchants on a broader level, loyalty programs provide an excellent opportunity to drive more business with free shipping in exchange for high levels of engagement, repeat purchases, and brand or product advocacy.

What you ultimately decide to include with your customer loyalty program should depend on your target customers, the competitive landscape, and your business needs. While the above are undoubtedly tried-and-true customer favorites, there’s plenty of room to get creative — for example, you may decide to offer access to unique virtual events, special birthday gifts, or entries to exclusive giveaways. The sky’s the limit when it comes to delivering that customer love!

Key considerations when launching a loyalty program

There are a few factors to consider as you plan, build, and grow your customer loyalty program:

• Deliver value at every touchpoint: It’s important to strike a balance between under and over communicating across your channel mix, and communicate messages that resonate with your audiences. When you promote your loyalty program or alert existing members to a new perk or added bonus, make sure you do so in a way that delivers real value, being careful not to push too hard from the sales side.
• Track KPIs (key performance indicators) and ask for feedback: How many signups has your loyalty program seen month over month? How many of those signups have become repeat customers? What are your NPS (Net Promoter Score) and CSAT (Customer Satisfaction) ratings? What specific feedback do your customers have about the perks your loyalty program provides? The right questions will be unique to your business, but we suggest collecting as much quantitative and quantitative data as possible to measure your program’s success.
• Do more of what works – and nix what doesn’t: Once you’ve set and measured your KPIs, you can better understand which aspects of your customer loyalty program are delivering positive returns, and which aren’t performing as well as you’d hoped. Continuously review the data, iterate as needed, and communicate changes to members so they know your loyalty program is designed to put them first.

If implemented strategically, loyalty programs can be an excellent customer retention tool. With careful consideration and planning, you can use your own program to win over new customers, inspire brand loyalty from existing ones, and continue to surprise and delight your biggest fans and advocates to save on acquisition costs and grow your bottom line.

Connect with our e-commerce experts to learn more about how a customer loyalty program can accelerate sales and benefit your business.

*You can calculate CLTV by multiplying average purchase value times the average number of purchases per customer, then multiplying the result by your average customer lifespan.