Jessica Hulett
Content Manager, Brand @ Yotpo
November 3rd, 2023

A well-defined loyalty strategy is one that provides value to both you and your customers.

Table Of Contents

In today’s fiercely competitive eCommerce landscape, customer retention is a key driver of long-term success.

Implementing a dynamic loyalty program that consistently excites and delights your customers serves as a powerful tool to foster engagement, boost repeat purchases, and increase CLTV.

But before you launch your program, it’s important to build a strategy that will motivate your customer base.  A well-defined loyalty strategy is one that provides value to both you and your customers. Whether you’re launching a new program or looking to optimize an existing one, there are some important factors to consider if you want to create a strategy that drives not just retention, but advocacy as well.

Start with well-defined goals

Before diving into the design and execution of a loyalty program it’s important to set clear and measurable goals. Here are a few to consider:

  • Customer retention: The primary goal of any loyalty program is to retain existing customers. You should be retaining 50% of your customers — determine what your retention rate currently is, and how much you need to improve it.
  • Customer engagement: Do you want customers to spend more time on your website? Follow you on social media? Sign up for SMS and email? Highlight all of the channels you use to promote engagement, and then determine actions to incentivize them to participate.
  • Data collection: Collecting zero- and first-party data has never been more important. Use your loyalty program to gather insights about your customers, and then leverage that data to build a personalized customer experience.
  • Brand advocacy: Word-of-mouth marketing is powerful, and a great way to offset ever-rising acquisition costs. Combining loyalty with a referral program incentivizes your best customers to spread the word about your brand and products.
  • Revenue growth: At the end of the day, your loyalty program should ultimately contribute to increased revenue. Set revenue targets that your loyalty program should help achieve.

How to level up your loyalty strategy

Once your goals are set, it’s time to design a strategy that aligns with them. Here are some tactics to consider:

Think bigger than points

Move beyond a traditional points for purchase model and explore various reward types. Consider offering category specific and time sensitive rewards or even exclusive access to events, early product releases, personalized experiences that match the interests of your customer segments.

Create a tier-based structure

Program tiers can really gamify a loyalty program, providing members with additional incentives to spend more and level up for more rewards. Ensure that  the rewards at the highest levels will not only excite your members but also motivate them, whether it’s free shipping, samples, or VIP experiences.

Make it simple and convenient

Ensure that your loyalty program is visible and accessible at every part of your customer journey. It should be easy to sign up for, and displayed prominently on your site and communication channels. If it’s too difficult to find your members might miss it, and in turn, you’ll miss out on their engagement. . Ensure that redemption is frictionless at checkout, and if you offer subscriptions, make it simple for customers to redeem points on subscription orders.

Keep the lines of communication open

Set up SMS and email flows to keep customers engaged and informed. Here are the essentials:

  • Welcome flow: Thank them for signing up and give them an idea of what they can expect from the program.
  • Redemption reminder: Send a reminder to customers when they have enough points to redeem for a reward.
  • Points reminder: Send reminders to customers letting them know how many points they need to accumulate for the next tier or reward, or when their points are set to expire soon.
  • Loyalty VIP tier: Congratulate customers when they reach a new level or tier, and remind them of the new perks they’ve unlocked.

Offer value from day one

Ensure that members get value from your program right away by offering them rewards for signing up. Make it a reward they can use right away, like 100 points for a $10 reward on their next purchase.

Leverage shopping holidays to boost program adoption and participation

Offer your loyalty members early — or exclusive — access to sales in advance of peak shopping times, like Black Friday or the holiday shopping season. Tease upcoming offers to incentivize customers to sign up.

Showcase your social commitments through your program

Align your loyalty program with a social cause. Instead of applying banked points for purchases, allow members to donate points to a specific charity or cause. This allows customers to feel like they’re making a positive impact when they shop with you, boosting emotional loyalty.

Your loyalty strategy should be an integral part of your overall customer retention strategy

Loyalty programs are the MVPs of customer retention, but they don’t exist in a vacuum. Ensuring that your loyalty program goals and strategies are aligned with your overall retention strategy will make it easier to build, measure, and iterate on a program that brings value to both your brand and your customers.

Your loyalty solution is more powerful when it’s integrated with your other retention and marketing tools, like reviews, SMS, email, and subscriptions. This enables you to collect better data on your customers, create better segments for personalization, and deliver seamless experiences.

Remember: loyalty programs are not “set it and forget it”

Building a loyalty program is not a one-time task. It requires ongoing evaluation, enhancement, and iteration to remain effective. Analyze your data to identify trends, preferences, and pain points, and use the information you collect to adjust your loyalty strategy and offer a more relevant, engaging experience.

Want to know what your customers want from a loyalty program? Ask them! Soliciting direct customer feedback is an often overlooked part of strategy. You can even offer them points for their feedback, to let them know how much you value their opinions.

Experiment with different loyalty program elements to see what resonates best with your customers, like different rewards, communication channels, or engagement techniques.

At its core, a successful loyalty program strategy focuses on building lasting relationships with your customers. By defining clear program goals, designing a thoughtful strategy, exploring innovative loyalty use cases, and continually enhancing the program, businesses can drive customer retention, long-term engagement, and revenue.