ecommerce loyalty programs

Are Ecommerce Loyalty Programs A Great Investment?

AJ Saunders profile picture

By on 12 Apr 23 | Filed: Digital Strategy

I'm a former ecommerce founder turned growth agency owner. When not helping our clients grow, I enjoy automating my home, dogs, and architecture.

Nothing should make you smile like a returning customer. It means you’ve done something right in the past to earn their loyalty. And if you want to increase the amount of returning customers, you need to consider creating an ecommerce loyalty program.


Loyal schemes have two many benefits. They are highly effective for retaining customers and are a way to encourage them to spend more. They are great if you have a small marketing budget as you can direct your efforts to previous purchasers.


In a recent survey by Gartner, 1 in 3 businesses without a loyalty program today will establish one by 2027. So, there’s never been a better time to establish one or re-imagine your current efforts.


Here’s everything you need to know about ecommerce loyalty programs, including the various programs to consider and what benefits they provide to your ecommerce brand.



History Of Loyalty Programs

Before we jump into the nuts and bolts, I think it’s worth talking about the history of loyalty programs, as it’s fascinating and helps us better understand how and why they work.


Ancient Egyptians practiced a type of reward program similar to modern frequent flyer programs, according to research by Professor Barry Kemp. So we’ve been using a loyal scheme for thousands of years!


Fast forward to 1793 when a merchant in New Hampshire, called Sudbury began rewarding customers with ‘copper tokens’. The tokens could be saved and used for future purchases, and so lead to repeat visits. This idea was quickly copied by other local stores and spread like wildfire.


By the 1850s, B.T. Babbitt included coupons on the packaging of his Soap Power that customers could cut out and use to redeem a free gift. He’s widely regarded as the father of the modern loyalty program.


Within a few decades (around 1890), companies started using physical stamps that were given as part of purchasing an item. These could be saved up and stuck in a collecting book. After filling out this book, the customer could exchange the stamps for a reward.


Some 90 years later, in the 1980s, American Airlines launched the world’s first currency-based frequent flyer program. You could earn points for every mile you flew. Before long, Hertz and British Airways join the scheme and have since launched their own loyalty scheme.


My point is that current loyalty programs aren’t that modern or unique. And that history provides a blueprint for us, meaning we can copy what’s worked and not try to reinvent the wheel.



What Are Ecommerce Loyalty Programs?

Loyalty programs exist to reward frequent purchasers in a way that encourages them to keep buying. As part of the customer experience, they create a way for you to raise the average order size, reduce the days between purchases, and build a positive brand image.


For a loyalty scheme to work, it has to be easy to understand, enjoyable, and offer attractive rewards your customers want!


It’s less about points, tiers, and gamification, and more about creating a space where customers feel valued, listened to, and acknowledged.



customer loyalty program



Who Needs An Customer Loyalty Program?

Not every ecommerce brand needs a loyalty program. However, it’s a good thought exercise to consider what having one can do for your business.


The many benefits of having an ecommerce loyalty program include:


Increasing customer retention rate

Ecommerce loyalty programs are ideal for keeping existing customers engaged and speeding up their purchase frequency.


Sounding board

With a few diehard fans, you create a safe space to test new products, offers, incentives, and more. Being able to quickly validate ideas is highly profitable.


Gather more customer data

Online rewards programs help us to collect a deeper level of customer data enabling us to understand who we serve better, create more targeted personalization, or create irresistible ads.


Personalizing the customer buying process

If you feel that a brand understands you, you’ll likely spend more money. The shopping experience will feel seamless and tailored.


Unique communities

Everyone wants to be a VIP. They get treated better! Having a loyalty scheme allows you to create VIPs of your most frequent clients and make others jealous. It’s also a great way to increase lifetime value and bring your brand to life. 


Free marketing

Having raving fans spreading the word about your brand and products is a cheap way to acquire new customers. Nothing beats word-of-mouth advertising.



How do they work?

When structuring your ecommerce loyalty program, there are plenty of ideas. You don’t need to completely reinvent things. That said, the odd tweak here and there is worth the effort.



Let’s start with the classic, a points program. Customers earn points for every purchase they make. These can be redeemed as discounts or free shipping.


Points programs are one of the most popular ecommerce loyalty programs as they’re relatively simple to set up and manage. That said, you want to ensure that the points customers earn are valuable enough to encourage them to keep coming back.


If a customer has to wait several years to collect enough points for something of value, the appeal of your loyalty program will decrease.



Similar to points programs, in these schemes, customers move up to different tiers based on their spending. The higher the level, the better the rewards.


Ensuring you clearly define the tiers and that the rewards are valuable is key to the success of this program.


Volume discounts and Coupons

If you offer high-ticket items, volume discounts and coupons could be a more effective way to encourage customer loyalty. They can be a great way to add value and speed up the purchasing cycle.


Exclusive Access

Another option if you’re selling high-ticket items is exclusive access. If a customer spends a certain amount, they can access particular products, services, or events that other customers can’t.



Offering cashback on purchases is nothing new. It’s a great way to encourage customers to make larger purchases. You can offer cash or vouchers of the same value. Most customers will opt for vouchers that they don’t end up using.


These schemes are slightly trickier to set up and manage but can be highly profitable.


Personalized service

You could offer a personal shopper service or product personalization. Both create a sense of exclusivity and make customers feel appreciated.



In a world where we’re offered endless options, having our favorite brands publicly recognize our loyalty can create a greater sense of belonging. You could announce the names of your top customers on its website or social media pages.



value of loyal customers



Can We Easily Determine The Value Of Loyal Customers?

Determining the value of loyal customers is tricky as there’s an emotional element to it. CleverTap has a superb article on How To Measure Customer Loyalty that’s a great starting point.



It covers some of the usual metrics, such as Net Promoter Score, Customer Lifetime Value, and Repeat Purchase Rate. Also, it covers some unique ideas of how to measure ecommerce loyalty programs, including Upsell Ratios, Redemption Rate, and Participation Rate.


As with ecommerce marketing KPIs, it’s more important to pick one or two data points to track and define when you’ll measure them rather than try and analyze everything.



Best Loyalty Programs For Ecommerce Brands

You don’t need to design your loyalty program from the ground up as there are plenty of existing options, and many plug effortlessly into your ecommerce platform.


Here are a few of the options available to you:

  1. Jumper.Ai
  2. Open Loyalty
  3. Smile.Io
  4. Yotpo Loyalty and Referrals
  5. Talon.One


All offer something unique, so it is worth researching and trialing a few options before settling on one.



Tips For Maximizing Your Ecommerce Loyalty Program

Now you have a better idea about ecommerce loyalty programs, here are a few tips to help you get the most out of yours:


Ensure your program is easy to understand and use

If it’s complex, no customers will want to use it. So make it easy to join and earn rewards quickly.


Be clear about the benefits customers will receive

Customers should know exactly what they’ll get for being loyal to your company.


Offer both short- and long-term rewards

Immediate rewards (discounts or free shipping) help keep customers engaged. Also, use long-term rewards (exclusive products) to increase retention.


Listen to your customer

They have the answers! Use their insights to tweak and improve your program over time. If they have a hand in shaping it, they are more likely to use it.


Test constantly

Your program should evolve with your customers. So, you’ll want to keep testing and tweaking your loyalty program for the best results.



starting ecommerce brand loyalty scheme



Starting Your Ecommerce Brand’s Loyalty Program

Loyalty programs are a powerful marketing tactic to increase the average order value and create a more positive brand experience. According to research by Bolt, 83% of online shoppers are a part of at least one loyalty or rewards program. 


There are many ways that ecommerce loyalty programs create wins for you, including easier customer acquisition, stronger brand allegiance, and higher profits.


If you’re not using an ecommerce loyalty program with your brand, consider how you can as the benefits far outweigh the costs.

Want an actionable plan to grow your online sales and reach your business goals? Let's build one together. Book Your Get To Know You Call

Want To Drive A Ton Of New Ecommerce Sales?

Join our weekly email for the latest ecommerce digital marketing strategies, tips, and information.