Loyalty and Retention

What Makes a Loyalty Program Successful? [Includes 11 Tips]

October 5, 2022
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Loyalty programs are gaining popularity once again. With benefits such as personalization and special and instant rewards, loyalty programs are a win-win for customers and brands alike. But what makes a loyalty program successful?

In the not-so-distant past, traditional loyalty programs became obsolete and prompted customers to switch brands! (Yikes!)

The problem was these so-called ‘loyalty’ programs had not only become boring but also didn’t offer that many benefits to customers. There was no win-win.

But fast forward to the rise in e-commerce and the advent of customization and personalization, and customer loyalty programs have regained their position as a tool for customer engagement, retention, and brand loyalty.

For years now, loyalty and rewards apps have helped brands retain customers. Global brands from Sephora to GAP to Starbucks to even luxury brands like Lancôme are creating and constantly improving their rewards programs to entice and retain customers.

Still: What makes a loyalty program successful? And what makes it lose its luster?

In this article, we’ll help you create a successful customer loyalty program that entices and retains customers. Some of the tips included are optional and you can use more of these tips or tweak them to suit your business as you grow bigger.

If you already have a loyalty program, these tips can help you tweak your program for success.

Why customer loyalty is important

Before we get into the deets of what makes a loyalty program successful, let’s clarify some basics about customer loyalty.

Still wondering if loyalty programs work?

Well, the obvious answer is YES! Brands like Sephora have over 25 million customers in their rewards program. Competitor Ulta has several million customers as well in their program.

Further reading: Discover How to Retain Customers with 5 Ideas from the Ulta Rewards Program

So, obviously loyalty programs are working for them. And they can work for you too.

The tips mentioned in this article follow loyalty program best practices by top, successful brands in various industries.

But don’t take my word for it, here’s what loyalty marketing statistics have to say about rewards programs and customer retention:

  • Acquiring a new customer is “5x to 25x more expensive than retaining” a current one. (Harvard Business Review)
  • Increasing customer retention by 5% can boost your profits by 25% to as much as 125%. (Gartner)
  • 70% of consumers say they’re more likely to recommend a brand to others if it has a good loyalty program. (Bond)
  • Nearly 60% of internet users view earning rewards and points as “one of the most valued aspects of the shopping experience.” (eMarketer)
  • Rewards programs that “establish positive emotional connections” with customers see members increasing spending by 27%. (Bond)

What makes a loyalty program successful: 11 tips to follow

Now it’s time to make sure your customer loyalty program is an absolute success!

1. Create a clear points system

The first and most important step in creating a winning customer loyalty program is creating a points system. And sticking to it. This includes defining

  • How customers earn points
  • The value of points
  • Your points redemption system (How many points can be exchanged for which rewards)

When customers know how your program works and what’s in it for them, they’ll be more eager to join and use it.

Not informing customers of the value of points can literally break your program. In fact, bad loyalty programs are those that miss out or ignore this important point.

Points are a kind of currency in rewards programs.

If customers don’t know how much they’re getting every time they make a purchase, it’s likely they’re going to get frustrated and confused. And it’s therefore unlikely they’re going to keep buying.

So, if you want to have a winning program, avoid this common loyalty program mistake at all costs!

2. Clarify how your program works

The second most important step is to explain how your rewards program works. The best way to do so is to create a loyalty program explanatory page.

Successful loyalty programs all have a clear and detailed page explaining:

  • How the program works
  • What rewards are included
  • How to earn points and rewards
  • If and when points expire

Along with other criteria.

Further reading: 6 Creative Ideas to Boost Your Customer Retention Rate

3. Personalization is your friend

Creating personalized experiences for your e-commerce customers is a surefire way to get eyes on your store, products, and loyalty program.

Personalization is about offering content and showing products based on customer data and preferences and engagement with your brand. These preferences can vary from demographics to buyer behavior to previous purchases to location and so on.

Research by Epsilon found that 80% of 1,000-person survey were “more likely to do business” with a brand if it offered personalized experiences. Meanwhile, 90% said they found personalization as “appealing.”

what makes a loyalty program successful - personalization ideas

In 2021, 60% of consumers said they were likely to “become repeat customers” if they get a personalized shopping experience at a retailer. That’s an increase from the 44% who said the same thing in 2017, surveys by Twilio Segment have found.

Personalized experiences can range from how people buy to the emails they receive to the benefits and rewards they get via your loyalty program.

Learn more in this Quick Guide to Personalized Experiences in Your Loyalty Program

4. Remember your customers’ birthdays

Who doesn’t like getting a gift on their birthday? (Hint: No one!)

Make customers feel special on their big day with a birthday gift. It doesn’t have to be expensive. It certainly shouldn’t break your bank.

Many of the world’s best loyalty programs offer a birthday gift to their loyal customers.

Need inspiration? Here are a few ways you can offer a birthday reward:

  • Give customers free points during the birthday week or month
  • Offer double points during their birthday week or month
  • Offer a limited-time cashback reward during the customer’s birthday week. (If you’re using a tiered loyalty program, you can offer a higher cashback reward for higher tiers)
  • Offer a one-time annual gift voucher
  • Give customers a small gift on their birthday (beauty brands Ulta, Sally Beauty, and Aveda all give customers a birthday reward)

Want more birthday rewards ideas? Discover more ideas along with personalization and retention tips by the top 14 beauty loyalty programs.

5. Diversify your rewards

The problem with many loyalty programs today is that customers don’t get enough surprises or benefits.

If you’re thinking customers are becoming picky – or too picky even – you’re right! The thing is, customers see tons of brands every single day. So, the options are endless.

And while there are different types of customers out there, like discount and wandering customers, your target is creating a stream of loyal and repeat customers. These are customers who are brand loyal and who keep coming back to your store.

One way of winning at this equation of picky customers + building loyalty is by offering various types of rewards.

Diversifying your rewards can include:

  • Adding multiple ways for customers to earn points (such as sharing posts on social media, reviewing products, etc.)
  • Creating special events like happy hour or double-point Tuesdays
  • Free shipping on minimum-purchase limits
  • Offering free shipping if a customer completes a certain number of purchases within a month or a 3-month period (for example)
  • Varying the ways customers can benefit from the points they earned like allowing them to choose between getting a cashback reward, using their points for free shipping, donating the value of their points to charity, etc.

It’s also good to surprise customers from time to time with new ways to earn points and rewards.

For this we recommend you explore Gameball’s challenges and badges feature, a unique customer engagement tool that can get eyes on your products and drive revenues.

diversifying your rewards is a great way to make your loyalty program successful

6. Tiered programs are great for exclusivity

This is an absolutely optional tip. We recommend tiered rewards programs for larger-sized businesses.

In fact, many of the world’s most successful loyalty programs use tiered rewards. Sephora, Ulta, Uber, and Marriott are among the most popular examples of tiered loyalty programs.

If you’re wondering what makes tiered rewards programs successful, the answer is 'exclusivity.' The exclusivity these programs create along with allowing customers to spend and engage at their own pace is one of the main reasons for their success.

Tiered rewards programs usually encompass three main tiers including a free tier.

7. Offer early access to products

This is another optional success tip, one that varies from one e-commerce business to another.

A great way to offer special perks to loyal customers is to give them early access to new products.

This perk is quite common with beauty and fashion loyalty programs, some of which offer special in-store events like getting your make-up done.

You can offer customers early access to products via email and push messages on your website.

We recommend using both to give customers a heads-up about their special benefit.

8. Special discounts for loyal customers

Part of being an e-commerce business is getting to know who your loyal customers are and rewarding them.

One way to do so is to reward loyal customers with exclusive discounts. These aren’t store-wide or the general discounts you run on your website.

These are discounts for specific customers. But how would you know who these customers are? Are you going to pick them out one by one? Certainly not!

Customer segmentation, email segmentation, push notifications, and personalized in-app messages are the best ways to go about this.

"In today’s world, brands that cannot deliver true personalization will lose customers and revenue to those that can.” –Peter Reinhardt, CEO of Twilio Segment

Imagine this:

Let’s say you have an email newsletter. Looking at your analytics, you’ve noticed that certain customers regularly click-through your email links and often complete purchases after getting an email from you.

Add these people to a list and offer them a limited-time special discount so they can get their hands on something they’ve wanted but may have not been able to afford it or weren’t ready to buy it now.

If you’re using Gameball’s loyalty and referral program, you can do this using your analytics dashboard.

You can segment customers based on top-spenders, most-engaged, among other criteria. Be sure to add their name in your email or push notification for an added personal and cozy feel.

You can also segment customers based on how loyal they are.

Some tiered and luxury loyalty programs offer this perk.

9. Create a mobile app

Today, mobile apps and e-commerce go hand-in-hand. If you want to grow your online store, then adding a mobile app is the way to go.

In fact, some brands launch their entire product offering via a mobile app and skip having an e-commerce website. Although the standard is getting the website done first.

It’s also easier and cheaper to launch an e-commerce store than to launch a mobile app.

Mobile apps offer many benefits to e-commerce businesses. They’re more accessible to consumers, especially Gen Z, and can increase your customer base.

As a store owner or marketing manager, you can offer mobile app-specific rewards to get customers to download and use your mobile app and later on to grow your sales.

customer paying with a credit card via a mobile app

According to Adjust, e-commerce mobile app sessions in the first six months of 2022 were 6% higher than the same period in 2021. Sessions witnessed a 31% rise compared to the first half of 2020, the early days of the pandemic.

“This shows that the shift to shopping on mobile is not a temporary trend but a mainstay for the vertical,” notes Adjust.

And because they’re more accessible, mobile apps can help you increase customer lifetime value and grow your conversions.

If you have a website and a mobile app, the next step would be to create an omnichannel customer experience.

10. Create an email list

Creating an email list, along with an email marketing strategy, is another way to ensure the success of your loyalty program.

Combining personalization, customer segmentation, and email marketing can boost open rates and revenue “by as much as 760%.” (Campaign Monitor)

The reason personalized email marketing works so well is because it helps marketers and businesses offer subscribers and customers “relevant, individualized content.”

11. Create a community

Last but certainly not least, creating a community for your business increases brand loyalty and customer engagement.

Many brands that use tiered rewards programs do so to create this sense of community and exclusivity. The tiers help the different customers maintain their spending habits, while offering super loyal and high-spending customer special benefits and exclusivity.

Generally speaking, growing your audience can boost your sales. But building a community fosters the sense of loyalty and helps turn loyal customers into brand ambassadors.

Communities are also great for promoting your brand.

If you’re planning a customer engagement strategy, building a community can become an important pillar in that strategy.

What makes a loyalty program successful: Gameball

As a loyalty program builder, Gameball helps you create successful rewards programs. We’re constantly adding new features, tweaking old ones, and making sure you’re offering a unique and fun loyalty experience to your customers.

Want to add more ways to make your loyalty program successful? Here are a few more ideas to excite and engage customers:

Wrapping it up

As you can see, there are several essential tips to follow to ensure the success of your rewards program. These tips work regardless of the type of loyalty program you’re using.

One last tip about what makes a loyalty program successful is getting customer feedback and using that feedback to improve your program.

Starbucks revamped its rewards program after customers said they found it too confusing.

Similarly, Gap overhauled its program in 2021 and combined its rewards program with that of its other brands. In the 10 months following the revamp, Gap added nearly 19 million customers to its loyalty program.

Now it’s your turn! Want to start building your successful loyalty program and retain customers? Then check out Gameball’s customer retention and engagement platform.

Easily integrated with all e-commerce platforms and websites, you can add Gameball to Magento, WooCommerce, Wordpress, and others.

If you're on Shopify, we have an always FREE plan for Shopify store owners. Explore Gameball by visiting the Shopify app store.

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