The 5 Steps to a Powerful Ecommerce Loyalty Program

Olaf-Sebastian Krysik
Olaf-Sebastian Krysik
HK Digital Co-Founder
30th November 2022

Loyalty programs are a great way to encourage customers to return to your store or shop online again and again. By offering incentives like discounts, free shipping, or even exclusive deals, you can drive up to 84% more traffic and increase sales that you would otherwise miss out on.

In this article, I will walk you through the five most important steps for creating a successful ecommerce loyalty program.

What is an Ecommerce Loyalty Program?

An ecommerce loyalty program is a program that rewards customers for shopping with a particular retailer or store. These programs can be an incredibly powerful tool for retailers and come in many different forms, from a point-based to a tier-based system. You can create a customer loyalty program using an App on Shopify or with a plugin like WooRewards for WooCommerce

There are a few things that you need in order to build an effective ecommerce loyalty program. First, you will need to set up a system that tracks customer activity. This includes not only what products they buy but also how often they visit the website and how long they stay on the site.

To make the most of your loyalty program, it is essential that you design it carefully. You need to consider how you will market it and what kinds of incentives you will offer your customers.

If done correctly, an ecommerce loyalty program can be one of the most powerful tools in your retail arsenal.

Step 1: Set out Your KPIs and Align Them with Your Target Audience

There is no doubt that loyalty programs are powerful tools when it comes to driving customer engagement and retention. However, building a successful ecommerce loyalty program can be difficult – especially if you don’t have a clear understanding of your target audience.

First, you need to set out your key performance indicators (KPIs). This will help you track the progress of your program and ensure that it is achieving the goals that you have set for it. You want to use KPIs that are easily measurable and realistic so you should make statements like: 

"I want to increase the percentage of return customers to 5% by the end of the year", instead of vague statements like "I want to increase the percentage of return customers". 

When you are done defining the KPIs for your ecommerce loyalty program you will need to think about your target audience. Start by aligning your KPIs with the interests and needs of your target audience. This will ensure that your loyalty program is relevant and engaging for your customers.

Finally, make sure that you communicate your loyalty program goals consistently to your customers. This will help them to understand how their actions – such as shopping at your store or signing up for your mailing list – will have an impact on the rewards they are getting.

All this will contribute to the overall success of your program.

Step 2: Decide on the Type of Ecommerce Loyalty Program you Will Run

There are a variety of different types of ecommerce loyalty programs, and it can be hard to decide which one is right for your business. I have prepared a breakdown of the most popular ones, including examples so that you can pick one that is right for your business, starting with the most complicated one.

Partner Based Program

The complexity of such an ecommerce loyalty program involves partnering with similar brands and offering discounts, free shipping, and bundled product incentives.

For instance, as a fashion brand selling clothes, you could partner with a purse brand and offer a bundled incentives program, that way your shoppers can benefit from buying multiple products that work well together!

Point-based Program

These types of programs are well known if you are for instance a frequent flyer. The idea is that the platform will allow your customers to collect loyalty points when they make a purchase.

But you can provide them with other incentives as well like when they share their experience with your brand on social media (great for User Generated Content).

This type of ecommerce loyalty program is one with virtually no barrier of entry, but it does often mean that it takes a long time for your shoppers to reap the rewards, often defeating the purpose of the program. 

Tier-based Program

Personally, this is my favorite type of ecommerce loyalty program as it also adds an element of gamification to the mix. The most important aspect here is that you actually add meaningful rewards behind every tier.

If you for instance create three tiers, you could reduce the threshold for free shipping so people will want to move up to the higher tiers.

Other options include providing a bigger discount or exclusive access to new product lines. Get creative, brainstorm with your team, and ask your customers what they would like. 

Subscription-based Program

These programs were made more popular due to the success of subscription programs like Amazon Prime. But these types of ecommerce loyalty programs are incredibly hard to pull off successfully, here it is even more crucial to create a meaningful reward for the customer's loyalty.

Amazon does it incredibly well by giving faster shipping (and no shipping costs), displaying that they have an understanding of their target audience and this is what makes the program so effective.  

If you are unsure if an ecommerce loyalty program is right for your business, you can talk to us. We can help you decide what type of ecommerce loyalty program would be best for your business, and work with you on a successful implementation for your business. 

Step 3: Determine the Loyalty Rewards

It’s best to use a simple reward ecommerce loyalty program with simple performance criteria in the beginning, and then as your program grows you can offer more points or provide more complex rewards.

In, Step 2 I tried to hammer home the point of meaningful rewards as much as I could, as probably the worst thing you can do is simply attach a higher percentage discount and call it a day. 

Start with the simple concept, by making a purchase you can grant them a reward. But combine it with other interesting actions that you want to reward like:

  • Product reviews,
  • Posting about the product,
  • Providing you with User Generated Content,

And when it comes to the actual rewards keep in mind that the most powerful incentive is a free complimentary gift. But feel free to experiment with other ideas, at the end of the day, your customers are unique to your business and they deserve that treatment. 

For instance, you could give your loyal customers the option to get a unique personalized product from your brand, i.e. with their initials. This will really help you set apart your ecommerce loyalty program from other generic competitors in your space.

Step 4: Utilize the Right Tool to Manage Your Ecommerce Loyalty Program

Managing an ecommerce loyalty program across countries, currencies, and devices is exceedingly difficult. This is why you need to have the right tools to manage your ecommerce loyalty program.

Yotpo is a great tool for gathering reviews, but it also comes with its own Loyalty and Referral program management that can help you keep track of the status of your loyal customers.

Learn more about why reviews matter in ecommerce in our article on The Importance of Reviews in Ecommerce. All of the points are very relevant when it comes to collecting reviews for your ecommerce loyalty program.

But, there are other alternatives available, like this list of 12 loyalty integrations. And if you want to do this correctly, and make your ecommerce loyalty program matter I suggest you take your time to find a tool that works for you.

I am a fan of comprehensive solutions that make the process as simple as possible, but these often come with a steeper price. With the importance of ecommerce loyalty programs I do suggest, you put the right resources forward to maximize results.

Step 5: Experiment and Adapt

When you have built out your ecommerce loyalty program it is time to test out the strengths and weaknesses of your program and adapt it to perform even better. This should be part of your strategy regardless, even if you do not have a loyalty program, so it should feel familiar. 

Make sure that you monitor important metrics like:

  1. The number of sign-ups for your loyalty program.
  2. Your customer lifetime value.
  3. The Net promoter score (this should be higher for more loyal customers).

Closing Thoughts

Building a powerful ecommerce loyalty program can be a valuable tool for ecommerce businesses of all sizes. But there is not a single ecommerce loyalty program that is best suited for everyone.

In fact, this kind of approach can be a detriment to your success. You hopefully understand your customers better than anyone else, and if not you can use customer surveys to help bridge this knowledge gap.

To summarize when you are setting up your ecommerce loyalty program be sure to:

1. Establish your KPIs

2. Pick the type of ecommerce loyalty program (Point-based, Tier-based, Partner-based or Subscription based). 

3. Determine your rewards and make them meaningful,

4. Utilize the right tool, like Yotpo,

5. Adapt your program.

If you are looking for inspiring ideas for your ecommerce loyalty program, keep an eye out for our upcoming, in-depth article on innovative ideas for ecommerce loyalty programs.

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