The 7 Pillars for an Effective E-commerce Loyalty Program

If you’re unsure whether your brand should have a loyalty program, or debating whether you should keep the one you have and optimize it further, consider this statistic: a staggering 41% of customers interviewed by Travelport in 2023 said their choice of retailer is influenced by whether their loyalty and time being spent with them is rewarded in some way.

That’s a pretty big chunk of the consumer market and overall ecommerce industry clearly stating what they want to see in your offer. 

It seems that earning points and rewards for being a shopper at your store is no longer a nice to have - it’s a must have and 41% of these shoppers would unanimously agree. To add to that, 54% of consumers choose their retailer to save money and about 29% want personalized offers. 

This data is a clear indicator that consumers are  carefully considering online loyalty schemes before making a purchasing decision, almost to a point where you can easily say it’s a deciding factor.

Why Loyalty Programs are Essential for E-commerce Success

We’re all familiar with the data: just a 5% increase in customer loyalty can increase the average profit per customer by 25% – 100%. 

I would say that’s the most important piece of information you need to keep in mind when thinking about your marketing and retention strategy. And we’re all aware of the rising customer acquisition costs, so focusing on customer retention instead of acquisition is very much vital for success in the ecommerce industry.

Of course, customer retention in ecommerce brands is no easy task and it’s definitely not an initiative to be viewed in a silo. It’s a rather complex initiative which naturally presents a lot of challenges for ecommerce marketers. Some of these are providing excellent customer service, seamless shopping experience, personalized marketing and communications, actively listening and validating feedback and of course, a relevant loyalty program. 

The role of a loyalty program for e-commerce in this large initiative is quite simple: incentivize and reward. However, the key lies in being strategic when choosing what to incentivize and how to manage customer behaviour to ensure the retention strategy operates smoothly and every action drives a result. To further enhance your knowledge on implementing loyalty programs, you can explore e-commerce solutions to find resources tailored to your business needs.

This article will explore the core principles of ecommerce loyalty program effectiveness and offer insights into how to strategically use it to support all other aspects of your retention strategy.

The 7 Pillars of an Effective E-commerce Loyalty Program

Pillar 1: Personalization

Nobody wants to receive nameless, completely irrelevant, generic emails from the brands they love. People today have zero tolerance and time for such emails even if they deliver amazing content. From your program’s POV, if you’re offering rewards which are not  tailored to what your customers want and expect, it’s simple; your offer will be ignored and you’ll see no results. 

So how do you ensure your loyalty program is tailored to your customers expectations?

Surveys and interviews

I can’t stress this enough - you need to talk to your customers often to learn what their wants and needs are and how they change over time. This is a golden source of data not just for tailoring your loyalty program’s offer and communications, but for the overall marketing strategy. 

Use any survey tool to send out a brief questionnaire to your customers and gather data about what type of rewards they’d want to see in your program. How would they want to see it evolve?

Bonus tip: gamify this initiative by giving an incentive for each successfully completed survey. I am sure you’ll see a lot more engagement and receive a lot more information if you offer an incentive. Also, if you’re thinking about what type of incentive to offer, I’d recommend going with points for a few reasons: points are an easy currency to work with. They get added to a point balance essentially motivating the customer to strive for redemption and ultimately for a purchase. As opposed to say a gift card or a direct discount which usually have to be limited in number or tied to an expiration date. 

Analyze your store’s data

This goes without saying: you should always analyze your store’s data and have a very clear picture of what’s the most popular product being sold during each period of the year, the AOV, the average repurchase rate and of course the average LTV of a customer. Although this doesn’t give you direct data in your customers’ words, it gives you a solid understanding of the trends in your business, which are important as a direction when choosing the right type of rewards to offer and how to structure them. 

Pillar 2: Value-Based Rewards

We have established that the rewards you offer in your program need to be strategically chosen and based on customers’ feedback to ensure they’re relevant. However, you might have to cater to a few different types of customers, or groups of customers. 

How do you achieve this?

The key here is to rely on your software tool to provide functionality to segment your customers and target them with a specific reward type. If you’re using Lootly, you can use the conditions functionality to ensure each reward is available to the specific group of customers you wish to target. 

If you’re only looking to offer relevant rewards to the different types of customers based on their spend, then a tiered loyalty program can help you achieve this with ease. 

A great example of this strategy is the Starbucks Loyalty Program Success, which has been widely recognized as a leader in loyalty-driven customer engagement. The program uses a tiered system where customers earn stars for their purchases, unlocking higher rewards as they spend more. This approach not only encourages repeat purchases but also enhances ecommerce customer loyalty by offering meaningful incentives at each tier.

The goal is to motivate your customers to use the rewards and thus increase their average spend at your store. 

Pillar 3: Ease of Use and Accessibility

Your program needs to be easy to find and easy to use. If you’re hiding your program behind too many clicks on your site you can be assured that reward redemption will be low. People are easily distracted, especially online, so think about the few seconds you have to capture the customer’s attention and put the program in front of them. 

A program widget which is available on the homepage and on every page allows for easy access to rewards. You can also add a path to a rewards page which will be accessible from the site’s header.

You can also think about implementing your customer loyalty program in your mobile app as well. If you have a mobile app it’s likely because a large percentage of your customers shop on a mobile device. So ensure they can redeem their rewards when shopping in the app too.  

Pillar 4: Multi-Channel Integration

Today’s customer expects a unified experience across all channels you offer. If you have an e-store, a physical store and a mobile app you need to ensure your customer sees the same data and has the same experience across all channels. It will be a major downside if your loyal customers can redeem points only on your website but not in store or in the mobile app. 

This significantly lowers the chances of redemption and are essentially gaps in the potential of your loyalty program.

Pillar 5: Engagement through Gamification

Gamification ensures your customers are engaged with your brand in more than one way which is shopping. This is important because as a marketer, you want to get more from your customers in the form of feedback, referrals, connection to them via social media channels and simply being top of mind when they browse the web. Of course, nothing comes for free, which is where your program comes  into play. 

You can use your program and offer points for all behaviors you wish your customers to do: give reviews in different forms, follow your social media channels, read specific pieces of content, start a product subscription, take a quiz, fill out a survey and more. 

Pillar 6: Social Sharing and Referrals

The best marketing is the one your loyalty customers make, which is why allowing an easy way to share your brand and share rewards with friends and family can do wonders for your customer acquisition strategy. A referral program is a great way to ensure your customer is rewarded for a successful new sale, and the new customer is welcomed with a great incentive to start shopping at your store. 

Additionally, you can incentivize your customers to simply rave about your store and your products by giving them points each time they share your page.

Pillar 7: Consistent Communication

A great program setup will not yield you the best results it can if you’re not properly and consistently communicating with your customers about it. This is because if you leave out notifications about the results of actions your customers took, they simply won’t know and will not keep your program and thus your brand, top of mind.

Furthermore, ensuring you communicate program details in all your marketing communications is also important. It adds a personal touch and it ensures the customer is reminded about what they hold in your program.  For this, leverage an integration between your loyalty program software and your email marketing tool - you can check out some cool ideas on how to use email marketing to drive more engagement in your loyalty program.

Implementing Your E-commerce Loyalty Program: Best Practices

Implementation of your program comes after you’ve done research of what your customers want, and mapped out everything your program should achieve. 

Next steps are to find the best loyalty program software on the market that meets your needs in terms of functionality, integrations, customization, support and price. It’s important to think long-term when choosing a software provider for the loyalty program initiative and take into consideration how you plan to evolve your program offer over time. Of course this will depend largely on customer feedback, but from a larger business perspective, you need to know what else you’d want to offer in your program down the line and make sure your tool can provide support for it. 

There’re also different pricing models you want to think about. Some vendors charge per number of orders your business makes and some are a flat monthly fee, like Lootly. Take into account your order volume as well as your predictions on how the program will increase that number over time to estimate your costs for the software. 

Finally, measurement and program tweaking. If you’re using a loyalty program tool, then reporting should be an integral part of the platform and give you a clear picture of how your program is performing. 

You’d want to track overall revenue, revenue from redeemers versus non-redeemers as well as the average order value and the repeat purchase rate. If you have data about these metrics before you launched your program then use your historical info for comparison. If not, track how these numbers change over time to determine whether you need to make changes or not. 

Wrap Up

Whether you have a loyalty program for your ecommerce brand or are looking to launch one soon, consider the above discussed 7 pillars of a successful ecommerce loyalty program. The goal is to ensure high redemption rates of the rewards you offer which essentially translates into more purchases and higher spend.

Tailoring the rewards and making sure they’re easy to access is the crucial first step.

Ensuring a unified redemption experience across multiple channels is important for brands that do have a multi-channel shopping experience. 

Gamification allows you to get more out of your customers in the form of more information and more connection to them. 

Referrals from customers are the best way to control your CAC and motivate your customers to tell people about your products and your offer. These new customers are the best customers. 

And finally, ensuring you’re consistently communicating to your customers about the program is the final essential pillar. Communication is what keeps your brand and your program top of mind with your customers at all times. 

Are you ready to launch a loyalty program for your brand? 

If you already have one, are you motivated to re-evaluate what you have set up and see where you have opportunities?

I am looking forward to talking to you and seeing how Lootly can help your program shine.