Ecommerce Loyalty Programs: Ultimate Guide and Examples

Regardless of what business you’re running, getting people to try out your products or services is easy. While converting customers is slightly harder, the most difficult part is retaining the relationship between your brand and customers in the long run.

In Ecommerce, a critical component of an effective e-commerce strategy is the implementation of an e-commerce loyalty program. Stick with us to learn how businesses are utilizing this, and what the guidelines are if you want to follow through.

What is an Ecommerce Loyalty Program?

As mentioned earlier, the Ecommerce loyalty program is meant to keep your regular customers close. And the way to do that is through membership registration. Whether you’re charging a registration fee or not, it’s important to show that you appreciate their support. Therefore, you should reward your regular customers with something valuable, for instance, special deals, discounts, cashback, free shipping, and to name a few. These are only a few examples of an e-commerce loyalty program.

Types of Ecommerce Loyalty Programs

Ecommerce loyalty programs can be categorized into four main types as follows: 

1. Points Programs
2. Paid Programs
3. Tiered Loyalty Programs
4. Universal Loyalty Programs

Let’s start with the first one – the points program. For instance, when customers return and make purchases that reach a certain level, they can redeem free products or discounts. Think of Starbucks which rewards its customers each time they order using the application, and also offers gifts to members on their birthdays. The study has shown that 78% of customers will become loyal customers if they are rewarded.

This is in contrast to the second one, paid programs, which is when customers have to pay for membership to gain some privileges. An example is Barnes & Noble, where a $39.99 annual membership grants benefits like a 10% discount, free shipping, free drink size upgrades, exclusive early access to special events and new books, and more.

The third one is tiered loyalty programs. This is when brands have set up some levels to encourage the customer to step up the ladder to higher levels for better and better benefits and privileges. One of the greatest examples is Uber which has a 4-tier membership: blue, gold, platinum, and diamond, relatively each level has better benefits.

Ultimately, the last one is universal loyalty programs. Universal loyalty programs typically offer benefits like free shipping, member-only discounts, and discounts on every order, but the key is that members can redeem these benefits at multiple vendors, often seen in companies that manage several brands under one umbrella.

Benefits of Implementing an Ecommerce Loyalty Program

Now we have a vague idea of what an ecommerce loyalty program is and what it looks like. However, you might still not know how powerful this marketing tool can be for driving business growth. So, let’s look at the benefits that you will gain when you implement this program in your business.

First of all, it’s about easier customer acquisition. When customers are hesitant, incentivizing them can make it much easier to seal the deal. They’ll also be more likely to consider your brand and products again in the future.

Second, implementing an ecommerce loyalty program can actually improve overall customer satisfaction. When customers are rewarded, especially with personalized perks, it creates a positive impression. This can eventually lead to more word-of-mouth recommendations from satisfied customers.

Third, you can expect higher repeat purchase rates. By awarding points for desired customer actions, you incentivize them to return. People are motivated by rewards, discounts, and free perks, making them more likely to visit your shop again. Did you know that 65% of a company’s revenue comes from repeat business of existing customers?

In addition to the benefits mentioned above, there’s more to explore: increased customer engagement, better data for personalization, increased average order value, enhanced brand advocacy, and most importantly, higher profits.

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How to Create a Customer Loyalty Program

Thinking about launching a customer loyalty program for your e-commerce store? Let’s guide you through some key frameworks that are good to know… along the way of launching this kind of program.

1. Plan Your Goals: 

Like any other strategy, it’s important to clarify what you want from implementing this work. Define your goals upfront, and that can be many things, for instance, increasing repeat customers, increasing profits, and expanding the target consumer. Once you have a clear goal, you will design your program to be more directed to your goals.

2. Design the Program: 

Once you have your goals in mind, the next process takes quite a lot of effort. You will have to figure out what kind of incentives you are going to utilize in your program that will align with your goals. Is it redeemable points, exclusive merchandise, or other kinds of rewards? Furthermore, like what is mentioned before, you will have to choose what category of loyalty program you want; is it point programs, paid programs, tiered loyalty programs, or universal loyalty programs? Bear in mind the design shouldn’t be too complicated so that the audience finds it too much effort to participate.

3. Implement your Program: 

This step is simple. You just have to launch what you have planned in advance. But what’s also important is that don’t forget to use different sorts of marketing strategies to promote to your audience. This can be email marketing, social media, or even on-site banners to inform your customers that there is an opportunity for them to earn the benefits.

4. Manage and Listen to the Feedback: 

After you have launched the program for quite some time, you will realize what the audience is thinking and responding to your marketing plan. This feedback can come directly from your customers or through social media analytics. For instance, the simplest is to analyze the participation rates and the benefit-receiving rates. After your monitoring, you should adjust your strategies and make it aligned with your customers so that this program will be as effective as possible.

Remember that Ecommerce customer loyalty program is not a one-size-fits-all. It won’t be able to solve all your problems or drive every aspect of business growth, which goes back to why setting goals is important. The most effective customer loyalty program is the one that serves your business goal the most.

However, it must also create genuine value for your customers. To foster loyalty isn’t something that can be bought with money only, but it must also come from the relationship between the brand and the customers as a solid foundation; this will definitely turn into benefits in the long run.

You might also be interested in: 85 Customer Loyalty Statistics Businesses Need to Know

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KPIs for an E-commerce Loyalty Program

While it’s important to set your own business goals, there are some specific Key Performance Indicators (KPIs) that are often used to measure the effectiveness of the ecommerce loyalty program. So, how about we explore some of the common KPIs?

Customer Retention Rate

This is likely the first KPI you will want to measure, as it shows the percentage of customers who continue to engage with the brand and make purchases over a specific period. Therefore, this will show how effective the loyalty program is in maintaining long-term relationships.

Repeat Purchase Rate

Just like its name, this refers to the frequency of members making repeat purchases, indicating their sustained interest and loyalty to the brand.

Average Order Value (AOV)

This metric indicates the average amount a customer spends. That is to say, a higher AOV means customers spend more money or add more products to their cart. Most of the time, this can be influenced by rewards or incentives offered by the brand in the loyalty program.

Customer Lifetime Value (LTV)

This metric predicts the total revenue a business can expect from a single customer over the course of their lifetime. Most of the time, if you can increase customer retention and repeat purchase rates, the LTV will also increase accordingly. Generally, implementing a loyalty reward program is meant to increase LTV after all.

Customer Acquisition Cost (CAC)

This is the cost the company made when acquiring a new customer. So, if the loyalty program is effective, it should reduce the need for other expensive marketing campaigns, hence also reducing the CAC.

There are other KPIs you might want to look into further, such as one-and-done rate, enrollment rate, active rate, member growth, and tier distribution (in tiered loyalty programs), to name a few. Monitoring these data and insights will help you see the loopholes and flaws, and understand your audience even more, so you aim for a better program!

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3 Ecommerce Loyalty Program Examples

Many brands around the world have implemented loyalty programs, and the results have been quite impressive. Here, we have gathered 3 case studies that you might want to see before running one in your own business.

1. Sephora

Sephora offers a tiered loyalty program called ‘Beauty Insider,’ with three levels: Insider, VIB, and Rouge. The first level membership is free, but to reach the VIB level, a customer must spend at least $350 in a year, and for the Rouge level, at least $1,000.

The most standard benefits received by all tiers of customers include free standard shipping, an end-of-the-year discount, the ability to redeem a $10 discount by using 500 points, and participation in Seasonal Savings Events with exclusive discounts – the higher tier you are in, the higher discount you will receive. For instance, during Seasonal Savings Events, Insider customers receive a 10% discount, VIB customers receive 15%, and Rouge customers receive 20%.

In addition to these standard benefits, all tiers receive free gifts from Sephora, with a wider selection available at higher tiers.

2. Walmart

Big brands like Walmart, an American multinational retail corporation that runs a chain of hypermarkets, discount department stores, and grocery stores, also offer a loyalty program to their customers. The membership program is called ‘Walmart+’.

Walmart provides a pay-to-go mobile application where customers can find plenty of promotions and special deals. However, to join a membership, one has to pay a subscription fee of $12.95 per month or $98 per year to receive benefits like free same-day delivery, mobile scan-and-go checkout, matching prices on online and offline stores, the ability to schedule preferred delivery times, saving 5 cents per gallon on gas at more than 2,000 convenient locations, and early access to exclusive promotion, deals, and new products. 

If one is interested, they can also try out a free 30-day trial period first to see if it suits their lifestyle, and cancel anytime if they don’t want to continue. Guess what, Walmart has claimed that this membership can save you around $1,300 each year!

3. FARFETCH Limited

FARFETCH Limited, an ecommerce platform that specializes in luxury fashion products from various brands, has an application that operates in over ten different languages, and ships to nearly 190 countries. With its global consumers, this platform also runs its own reward loyalty program.

Customers can join the Access loyalty program in three simple steps: create an account, purchase the first item, and get assigned to each tier according to the amount they spend. Upon joining, you gain access to membership-only benefits and rewards.

The program renews every year, and the tier will be re-assigned according to the purchases the customer has made during that year. There are five tiers in the Access loyalty program: Bronze (one purchase), Silver ($1,200), Gold ($2,400), Platinum ($6,000), and Private Client ($12,000). The benefits range from the simplest things like a birthday reward and early sale access to something super premium like a 28-day return period and 24/7, 1:1 personal styling and advice service.

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Rewarding Success

As you can see, the ecommerce loyalty program is a popular marketing tool among many brands offering plenty of benefits you will gain from implementing this plan like increased customer retention and valuable customer insights. 

At the end of the day, before you experiment with this plan on your own, make sure to maintain a customer-centric approach. Focus on providing genuine rewards to your customers. Also, don’t forget to listen to and analyze your customers’ feedback. That’s the most essential step on the road to a company’s success!