How to Create a Loyalty Program That Actually Works

How to create a loyalty program that actually works

Did your elementary school have any secret clubs?

We’re talking secret societies dedicated to Dungeons and Dragons, Lord of the Rings, or even the boyband of your decade. Even if you weren’t a diehard *NSYNC fan, there was something about those clubs that was intriguing and made you desperately want to be a part of the inner circle. 

At any age, there’s something powerful about being part of the club, and we’ve seen this to be true in e-commerce, too. Customers like to feel like they’re part of something exclusive. 

One way to build brand loyalty and make your current (and future) customers feel like they’re in the “in crowd” is through loyalty programs. Keep reading to find out how to create a loyalty program that actually works for your e-commerce brand — and a few brands who are doing loyalty programs right. 

Do people actually join these things?

First, let’s define what a loyalty program is. These structured marketing strategies are designed to incentivize customers to make repeat purchases and remain loyal to a brand. They use various means to reward customers for continued business, including discounts, exclusive offers, points-based systems, and/or access to special events or products.

The goal of loyalty programs is to foster long-term relationships with customers, increase customer retention, and ultimately drive more sales for the e-commerce business.

Here are three top benefits of implementing a customer loyalty program for your brand:

  1. Increased sales and revenue — McKinsey research found that 64% of customers are more willing to buy from a brand if they are part of its loyalty program. These programs can also lead to increased Average Order Value (AOV), which contributes to your overall bottom line over time. 
  2. Strong brand connection/customer retention — When done right, loyalty programs are a great way to strengthen the relationship between your brand and your customers. This is also a great way to boost profits and sales — Forbes found that increasing customer retention rates by just 5% could increase your profits anywhere between 25% and 95%. 
  3. Collect first-party data and mailing lists — Today’s consumers are more privacy-conscious than ever before, which makes the opportunity to gain first-party data about them more valuable than ever. Plus, having your customers on an exclusive mailing list creates more opportunities to promote your products with low marketing costs. 

What makes a good loyalty program?

As you think about creating the right customer loyalty program for your brand, there are a few different routes you can take to create a program that will resonate with your customers.

According to a 2021 YouGov study, the two most desired benefits of loyalty and rewards programs are reward points and cash back. That being said, there are endless possibilities for what a program could look like, and thinking outside the box is encouraged. Here are a few ideas to get you started:

  • Points-based loyalty programs
  • Value-based loyalty programs
  • Subscription-based loyalty programs (i.e. Amazon Prime)
  • Referral program

A good customer loyalty program for e-commerce businesses typically includes the following elements:

  • Clear Value Proposition – Gone are the days of the simple punch card. In the current economy, it’s more important than ever that your loyalty program offers something your customer actually wants, not just something they’ll put in their glove compartment and forget about for months at time.
  • Ease of Use – Keep the barriers for using your rewards program as low as possible. The sign-up process should be simple, and there should be clear rules for how to earn and redeem points, as well as an intuitive way to track progress and rewards.
  • Accessibility across channels – Customers should be able to work toward rewards no matter where they’re shopping, including your site, your physical store (if applicable), and your app. When the reward experience is seamless, it increases their engagement and satisfaction with your business, potentially leading to more future sales. 
  • Data Collection and Analysis – This is the final piece of the puzzle of what makes your reward program worth it. Your loyalty program provides valuable insights about your customers, from their demographic information to their email address to their usage of social media and purchase history. It’s crucial to harness and store this data in a way that will enhance your brand and contribute to even more personalization in the future. 

Three companies who are doing it right

Hopefully your wheels are already spinning with ideas for what your ecommerce brand’s loyalty program could look like. Looking for even more inspiration? Here are a few brands who are doing loyalty programs right:

  • Sephora

Sephora’s Beauty Insider Program stands out as one of the most successful and long-running loyalty programs. There are multiple tiers (Insider, VIB and Rouge), each with different buy-in levels and perks. Members across all tiers enjoy free shipping, points-to-discount savings, and access to savings events with discounts that vary by tier. 

Sephora dominates in the beauty world in terms of the products it carries and customer loyalty. Their loyalty program indicates they deeply understand their customer base, which is why they continue to beat out competitors. 

  • Hurley

Hurley, a Nogin success story, also uses a tiered system to reward loyal customers of their brand.

Different levels of buy-in (an email sign-up or certain number of earned points) get customers varying levels of annual birthday gifts, as well as other exclusive discounts and even early access to new product launches. 

Customers can rack up points by interacting with Hurley on social media, making a purchase, or leaving a review, which drives even more organic marketing for the brand as customers are rewarded. That’s what we call a win-win! 

  • The North Face

People who love the outdoors are particular about the gear they use. The North Face taps into a strong value-based loyalty program with their XPLR Pass, which offers standard rewards like discounts and special offers, while also offering special events and excursions and appealing to their customer base’s love of mother nature. 

Build a loyal customer base with Nogin

A strong relationship with your customers is key to having a sustainable business for years to come. There are no one-size-fits-all solutions in e-commerce. When we work together, we’ll personalize everything to work so you can build programs that drive customer loyalty and business growth.

We’re big fans of helping you create big brand fans. Contact us to discuss how we can help you build a brag-worthy loyalty program.

Free Guide: 6 Strategies for Effective Personalization

Learn how to craft an ideal experience for your customers by using AI-powered customer segmentation, algorithmic merchandising, smart promotions, and more.