How to Build an Ecommerce Loyalty Program that Drives Sales

Retaining customers is more efficient than acquiring new ones. Learn how to design the perfect ecommerce loyalty program to keep your customers coming back.

When it comes to fostering brand loyalty, online retailers face a challenge. For one thing, online shoppers abandon their carts 70% of the time on average. Getting them to complete a single successful purchase is tricky—let alone the multiple purchases needed to establish consumer brand loyalty.

While product quality and value remain essential for retaining customers, loyalty programs offer the ecommerce industry an extra tool to attract customers. Many US consumers consider loyalty programs a leading factor in securing their allegiance, and most are members of at least one loyalty program. 

Let’s take a closer look at the benefits of loyalty programs, the various types, and tips for developing the best customer loyalty program for your business.

What are ecommerce loyalty programs?

At their core, loyalty programs reward customers for repeat business. The idea is to provide customers with incentives and rewards—discounts, free products, or other exclusive perks—that make them more likely to choose your brand over your competitors. 

Ecommerce loyalty programs work toward these primary goals amidst online retail’s distinctive challenges and opportunities. Aside from incentivizing and rewarding customers, well-executed ecommerce loyalty programs motivate frequent interactions with your brand, increase engagement, and enhance the overall customer experience—all of which can cultivate enduring brand loyalty.

Your business might benefit from an ecommerce loyalty program if you:

• Sell high-margin products or services
• Have a large customer base
• Have a high customer churn rate
• Offer products or services purchased on a regular cadence
• Want to increase customer engagement
• Want to build stronger customer relationships
• Want to increase customer lifetime value

Benefits of an ecommerce loyalty program

Designing and implementing a successful loyalty program can connect your brand with customers outside the purchase cycle and drive engagement through a fun and interactive experience. More specifically, an ecommerce customer loyalty program can help you: 

• Increase customer lifetime value
• Drive sales
• Collect valuable data

Let’s take a closer look at each point.

Increase customer lifetime value

Loyalty programs can encourage customers to purchase more frequently, spend more on each order, and extend the duration of their engagement with your brand. All of this increases the customer lifetime value, or total profit generated by a customer over time.

Drive sales

According to a 2022 survey conducted in the US, 79% of consumers say they purchased more frequently from a brand because they participated in a loyalty program. Loyalty programs also tend to increase average basket size (the number of items in a customer’s online purchase). A rise in purchase frequency and average basket size can help drive sales.

Collect valuable data

Loyalty programs provide ecommerce businesses an extra avenue for collecting first-party customer data, such as purchase history, demographics, preferences, and interests. You can use this valuable data to tailor marketing campaigns, improve product and service offerings, and develop stronger customer relationships.

Types of ecommerce loyalty programs

Initially standalone, customer loyalty programs have evolved into more comprehensive schemes, including personalization, experiential rewards, and non-transactional engagement. Here are a few different types of ecommerce loyalty programs:

• Cash-back
• Points-based
• Referral-based
• Tiered
• Paid
• Subscription
• Hybrid

Cash-back

Making money as you spend—that’s the allure of cash-back reward programs, where participants earn a percentage of their purchases back in cash or credit. 

Points-based

With a points-based program, customers typically earn points with every purchase. You may also extend reward points for other interactions, such as sharing their purchases on social media, completing customer profiles, or subscribing to text communications. 

Customers can then use the reward points for discounts, free shipping and products, or other exclusive benefits. Point systems are easy to implement and manage, making them an attractive option for small businesses or those seeking swift program implementation.

Referral-based 

Referral-based loyalty programs incentivize existing customers to refer new customers to your business in exchange for rewards or benefits. Nielsen reports 92% of customers trust recommendations from family and friends over marketing communications, so referral programs are an effective way to introduce your brand to new consumers. 

According to a survey by customer loyalty platform LoyaltyLion, referred customers are more profitable in the long run, spending double the amount compared to customers acquired through other means and boasting a 16% higher lifetime value.

Tiered

Tiered loyalty programs offer a variety of tiers tied to progressively better rewards or brand experiences. As customers ascend through tiers, they gain access to higher benefits. Tiered programs are an excellent example of the psychology of loyalty programs at work. According to LoyaltyLion, nearly three-quarters of consumers say working toward a goal or reward fosters a sense of loyalty to a brand.

Paid

Paid loyalty programs are much like traditional ones, but customers pay a participation fee for access. According to McKinsey & Company, these paid programs drive higher purchase frequency, basket size, and brand affinity than free loyalty programs. Purchasing a membership often creates an emotional connection—you’re signing up for the program because it has value. When thoughtfully crafted, these programs offer tangible value that customers are willing to invest in.

Subscription

These loyalty programs typically offer customers a discounted price when signing up for periodic and repeat purchases. Subscription-based loyalty programs have grown steadily over recent years, and many consumers are part of them.

Hybrid

Depending on your market, business, and customers, you can combine these program types to create a loyalty program tailored to your needs.

How to start an ecommerce loyalty program

Simplicity and value are the two most crucial loyalty program features across age groups, but there are many different ways you can build a program that delivers a rewarding and frictionless experience. 

Here are seven tips to get you started:

1. Define your goals
2. Understand customer preferences
3. Keep it simple and seamless
4. Personalize it
5. Encourage engagement
6. Consider gamification
7. Measure, analyze, and adjust

1. Define your goals

Clearly defined objectives provide a solid foundation for your program’s design, implementation, and measurement. You can ask yourself, are you looking to boost the average order value, encourage more referrals, or decrease churn? The answer can guide program development and the rewards you offer and help pinpoint key performance indicators (KPIs). 

For example, through a tiered reward program, you aim to increase repeat purchases by 20% within the next six months. In this case, you might design a program with escalating benefits and seamless integration into the checkout process and track customer retention and purchase frequency metrics.

2. Understand customer preferences

Tailor your loyalty program to what your customers value most. Different demographics may respond to varying types of rewards and incentives, and there are many options to choose from, such as discounts, cash back, free products, exclusive access, early access to product releases, and personalized offers. 

For example, if you serve a younger demographic, you might offer exclusive early access to product releases as a critical incentive in your ecommerce loyalty program, aligning with their desire for the latest trends and exclusivity.

3. Keep it simple and seamless

Enrolling, participating in, and redeeming rewards from your loyalty program must be simple and seamless. Dedicated hubs for your loyalty program should integrate into your app and ecommerce store and customers should be able to easily apply points or redeem rewards during the checkout process.

4. Personalize it

To build brand loyalty, it pays to acknowledge your customers: 78% say they become loyal to a brand if rewarded and recognized for their loyalty, according to a LoyaltyLion survey. Today, personalization is a general expectation among consumers, and loyalty programs can be valuable tools for collecting customer data to drive personalization and delivering tailored experiences. For instance, you might offer a frequent shopper exclusive discounts on their favorite products based on their past purchase history and preferences.

5. Encourage engagement

There are so many ways you can drive engagement with your loyalty program, but one of the easiest is to periodically remind customers of their enrollment and let them know how many points they have. By some estimates, active loyalty program members spend 10% more than inactive members, while redeeming members spend 25% more than inactive members. 

You can also incentivize noncommercial actions, such as frequent logins, user reviews, completing a personal profile, or making referrals, to encourage engagement. Consider offering a variety of rewards, including partnerships with other brands or the ability to donate loyalty points to a charitable cause, for example.

6. Consider gamification

You can find gamification—using game elements to enhance the shopping experience—in many loyalty rewards programs as an additional way of connecting with customers to drive engagement. Challenges, badges, prize wheels, voting, point milestones, games, and other bonuses can all make the program more fun and engaging.

7. Measure, analyze, and adjust

Measure and analyze your loyalty program's performance regularly. Commonly used KPIs for loyalty programs include customer retention, customer lifetime value, purchase frequency, average order value, redemption rate, and breakage rate—but no matter the KPIs you track, be sure to do so often to tailor strategy and execution.

Build your ecommerce loyalty program with Shopify

With all this context, it’s time to get started with your own loyalty program. Luckily, we make that part easy. 

Although we don’t yet have our own platform for loyalty programs, our extensive app ecosystem has you covered. You can browse our library of over 8,000 apps and weigh all your options. That way, you can choose the exact right loyalty program app for your business. One that will keep your customers coming back all the time. 

Browse our app store to your loyalty program today. Check out the apps

Ecommerce loyalty programs FAQ

How do I create an ecommerce loyalty program?

To establish an effective ecommerce loyalty program, define goals, tailor rewards to buyer personas, and employee engagement strategies such as gamification while consistently measuring and adjusting based on key performance indicators (KPIs).

What are the benefits of an ecommerce loyalty program?

Ecommerce loyalty programs can encourage members to shop more frequently, purchase more, extend the duration of your relationship, and engage with your brand outside the purchase cycle. As a result, you may see higher ecommerce sales and an increased customer lifetime value while collecting valuable data and fostering brand loyalty.

Does Shopify have a built-in loyalty program?

If you have a Shopify store, starting your own loyalty program is easy with LoyaltyLion, Smile, Yotpo, or other loyalty apps available in the Shopify App Store. It's as simple as comparing the different loyalty apps available, choosing the one that best supports your goals and customers, and installing the app in your store.