Loyal customers are a business's most valuable asset.
Merchants appreciate loyalty programs because it drives steady income from repeat business.
But it has more benefits:
- Lowers customer acquisition cost through organic customer advocacy
- Improves returns on customer acquisition spending, and
- Boosts customer lifetime value,
Loyalty programs empower companies to scale profitably and level the playing ground.
One report says that existing customers are up to 70% more likely to buy from sellers than new customers.
Also, 46% of customers who join a loyalty program spend more than others.
You can’t ignore these numbers. And savvy brands are launching loyalty programs to capitalize on this growth channel.
We figured you might be eyeing a customer loyalty program launch soon. So, we reviewed many of these eCommerce programs to understand the science, but 14 caught our attention.
Continue reading to discover what we found.
1. Glow Recipe Rewards Customers Based on Spend
Science: Customers are not created equal.
The Pareto Principle posits that 20% of input drives 80% of results. So, invariably four-fifths of your company’s revenue comes from only one-fifth of your customers.
Clearly, offering customers the same loyalty package isn't fair.
A customer that brings in $1,000 annually shouldn't be on the same table as someone that generates over $10,000 in sales.
Rewarding customers equally regardless of their value eats into your profit margin and undermines your retention effort.
However, ranking customers based on spending makes them aim for the higher-tier benefits, boosting their loyalty and leading to more revenue.
How Glow Recipe Segments Customer Rewards Based on Spend
Glow Recipe runs a loyalty program called Glow Rewards that encourages customers to continue their skincare journey with them.
But, the brand doesn't reward indiscriminately. Instead, it incentivizes customers based on the value they bring to the company.
Glow Rewards lets shoppers earn points based on their engagements. They get:
- Up to three points per $1 spent
- $15 coupon when a referral spends at least $50
- 15 points for Facebook or Twitter shares or follows
- 100 points for leaving a review
- 50 points when they celebrate a birthday
The loyalty program has three tiers, Bouncy, Dewy, and Ultimate, each offering a different reward package, increasing as customers move up the ladder.
The first tier holds customers with zero to 299 points, equivalent to 0 to $299 spent within the calendar year. However, customers can move to the second tier when they accumulate 300 to 899 points, which works out as $300 to $599. But getting over 899 points qualifies them for the highest level.
Glow Recipe is a real class act.
Letting customers earn points based on engagement allows the company to segment them effectively. In addition, the move enables Glow Recipe to reward shoppers based on the value they bring to the company, preventing the brand from hurting its profit margin.
Key Takeaways from Glow Recipe Rewards Program
Rewarding customers based on spend helps brands ensure long-term loyalty while maximizing profits.
2. TOMS Brings Value Through CSR So Value Created Exceeds Cost of Value Delivered
Science: Value created must exceed the cost of value delivered.
A loyalty program should build commitment to drive profitable value sharing.
You don’t want to treat it like a charity program. That would be a huge mistake. According to the Harvard Business Review, the profit will be imaginary, but the costs will be real.
Reward programs can only add value to your company if value creation exceeds the cost of the value delivered to the customers. If not, it becomes a cost center.
Companies can extend the value they generate from a reward program by tying it to a social cause.
Customers don't only want personal relationships with brands. They also want the brand to be socially responsible, like undertaking community service programs or supporting the causes customers love.
Giving back to society creates a strong brand perception and rebound effect that can translate into a valuable social asset for the company.
How TOMS Ensures Value Created Exceeds Cost of Value Delivered
TOMS runs a three-tier free-to-join reward program that lets subscribers move up the levels—Good, Gooder, and Goodest—by earning points.
Members access more benefits when they get to the next level, incentivizing them to strive for more points.
The program lets them earn points when they shop or perform other activities like joining the TOMS email list, following the brand on social media, celebrating their birthday, or updating their profiles, enabling the company to generate value through multiple channels.
And here’s how:
- Shopping with TOMS earns the brand money.
- Joining the email list allows the company to upsell or cross-sell leads and customers.
- Celebrating their birthdays reduces the churn rate by at least a year.
- Following TOMS on social media grows its follower base—social proof enables the brand to engage followers on social media and amplifies its brand messages through social sharing.
Additionally, TOMS create indirect value for the company by tying the program to social giving. It lets subscribers put points towards the causes they care about.
Also, the company commits one-third of its profits to drive sustainable change by supporting organizations creating grassroots good. This effort enables TOMS to show its human side and drive social acceptance.
Key Takeaways from TOMS Loyalty Program
Embedding social giving to a reward program enables brands to create indirect but profitable business value.
3. Jones Soda Co Rewards Customers Based on Engagement
Science: Customer engagement should drive value sharing.
Customers are unique. Different things appeal to them.
Consequently, forcing offers down shoppers’ throats could cause them to switch brands to seek incentives that meet their expectations. So, you want to personalize your offers.
Although personalization is awesome, it doesn’t take care of chronic switchers.
Some buyers are out for the rewards only. Regardless of how personalized your offer is, they will always look out for the next cheap deal.
Unfortunately, no business can make money from this type of customer.
So customer behavior should drive loyalty rewards.
Behavior-based incentives can help stop buyers from defecting. The Harvard Business Review found that linking payout to customers' behaviors makes the loyalty program a profit center instead of a cost center.
How Jones Soda Co Rewards Customers Based on Engagement
Several loyalty programs reward customers only when they buy.
But shoppers are not always ready to buy even if they like the brand.
Savvy brands harness that fan love for their brand in other beneficial ways:
- Social media shares to increase brand awareness and initiate brand engagement
- Word-of-mouth referral to friends, families, and associates
- Bookmark to buy later
- Mentions the brand in other content publications, podcasts, or videos
- Recommends it to their audience
Jones Soda uses this loyalty program tactic. The brand lets customers engage with them and reward customers based on engagement levels. So shoppers can add value to the company without shopping.
For example, customers get 100 points reward when they join the loyalty program. They also earn:
- One point per $1 they spend,
- 25 points when they follow the brand on Instagram,
- 50 points for following the brand on Facebook or Twitter and
- 200 when they celebrate a birthday.
Allowing customers to engage the brand in ways they love makes them keep coming back, creating a loyalty loop that minimizes defection.
The company lets customers redeem the accumulated points with discounts, driving repeat businesses.
Key Takeaways from Jones Soda Co Rewards Program
Rewarding customers based on engagement makes the loyalty program a profit center.
4. Lancome’s Loyalty Program Offers Customers Long-Term Benefits
Science: Long-term perspective is critical.
Successful loyalty programs play the long-term game. They demonstrate to buyers that they get more benefits by sticking around with the brand for years.
So, they tailor their offerings to align with long-term customer interests and behaviors. Long-term behaviors include aiding established customer buying habits, like free shipping, the desire for experiences in the buying process, and personalized offers.
For example, Lancome helps its customers get free shipping regardless of the store they use for their shopping.
How Lancome’s loyalty program offers customers long-term benefits
Like Glow Recipe, Lancome runs a three-tiered loyalty program that lets shoppers earn points when they engage with the brand.
Customers move to the higher tiers when they accumulate specific points, allowing them to enjoy exclusive benefits.
But Lancome knocks it off the park by incentivizing shoppers with long-term benefits:
- Birthday rewards
- Anniversary gifts
- Free shipping on orders from other websites
- Access to parties and artistry events
These offers create a long-term culture of shoppers using Lancome for their shopping needs, social life, and lifestyle choices.
The company probably understands that free shipping encourages more than 90% of online shoppers to buy more. So it offers two-day expedited free shipping with no minimum order value to its most loyal customers—Platinum members.
Meanwhile, their lowest tier membership gets free shipping on orders from $49 and above.
Key Takeaways from Lancome Rewards Program
Customers become sustainably loyal if the reward program ties to benefits that fit their long-term behaviors.
5. Moosejaw Targets High-Value Customers With their Reward Program
Science: Offers must target attractive customers.
Every customer matters. However, focusing on wealthier customers lets you drive higher revenue per customer, enabling you to scale your business confidently.
But it's not as easy as it sounds—identifying and retaining this customer segment is tough.
However, a well-designed reward program takes care of this effortlessly, letting you retain high-value customers while dissociating less-valuable shoppers from your funnel.
In addition, this self-selecting and self-correcting reward system ensures you don’t spend on those that won't improve your bottom line.
How Moosejaw targets high-value customers with the reward program
The Moosejaw rewards program targets customers spending between $500 to $2,000.
The company segments its value proposition into four tiers and allows shoppers to access more exclusive benefits as they increase their spending to $500 and above.
The mouth-watering deals make the offers appealing, but high spend-threshold limits who can join, making it attractive to only high-value customers.
The reward strategy lets Moosejaw focus squarely on its affluent customers, enabling it to drive a high retention rate from that customer segment.
Also, it saves the company from spending resources on less-rewarding customers, allowing the brand to maintain a healthy profit margin.
Key Takeaways from Moosejaw Rewards Program
A self-selecting reward program helps companies attract and delight their ideal prospects, enabling them to drive a higher profit margin per customer.
Hey, have you seen this? 18 Slightly Fresh Customer Retention Ideas for eCommerce
6. Nike Aligns Reward Program to Company’s Capabilities
Science: Reward programs do not exist in a vacuum; they must align strategy with capabilities.
Promising rewards beyond your capacity will hurt your brand’s name and profits.
A Microsoft study found that 95% of consumers admit that customer service influences brand loyalty.
Also, Zendesk reports that 81% of buyers say a positive experience increases their chances of purchasing again.
So, you must align value sharing with the company's capabilities and competitive advantage. This principle lets you consistently meet reward obligations without straining your resources.
How Nike aligns its reward program to its capabilities
Nike's reward program, NikePlus Membership, promises shoppers enticing benefits, but the company ensures they are all within their capacity.
NikePlus offers members-only exclusive shops that let them personalize their shopping experience.
For example, buyers can customize their Nike Kyrie 4 ID shoes with the buyer’s initials on the tongue top, number on the heel, and anything to inspire inside the tongue. Nike offers this service through Nike by You, formerly, NikeiD, an online service that lets customers personalize their Nike merchandise.
They can also get unique shoe colors and a gum rubber sole.
In addition to these branding benefits, NikePlus members can enjoy these exclusive add-ons:
- Chat with real athletes for expert guidance, training, and product recommendation,
- Access to over 100 workouts,
- Weekly challenges,
- Personalized training plans and priority access to Nike events
By aligning the reward program to the company’s capacity, Nike delivers value sharing without straining its resources.
Key Takeaways from Nike Rewards Program
Dovetailing the reward program and the company's capacity lets the brand share value with loyal customers without breaking their business.
7. North Face Builds the Reward Program On Customers’ Expectations
Science: Customers prefer rewards programs with cash value, relevance, choice, aspirational value, and convenience.
Amazon wanted a smartphone market share to compete with rivals like Google and Apple. So it launched the Fire phone to streamline product discovery on Amazon and to create a compelling shopping experience for its mobile shoppers.
Sadly, the product failed because Amazon refused to build the device for the customers. Instead, it designed the phone based on what Jeff Bezos, the company's CEO, wanted.
A pathetic 2.6 out of 5-star rating within two months and a $170 million write-down due to unsold inventory despite cutting the price from $199 to 99 cents to stimulate demand.
Like in a product launch, building a reward program around customers' needs and desires makes it tick. Customers value eCommerce loyalty programs that combine five of these elements:
- Cash value
- Redemption choices
- Aspirational value
A reward program without a cash value might not fly.
Most customers would love to know the cash value of joining the program and the gains. Getting their buy-in might hit the rock if they can't attach a monetary value to the value proposition.
For instance, offering loyal customers a 5% rebate on all orders would make more sense than promising them lunch in an exotic restaurant.
The latter won’t sit right with customers because they’d have to assume a value for the lunch offer or estimate their loyalty's worth to the company.
Besides this, a reward program must provide multiple redemption options, express who the customers hope to become—aspirational value—and be relevant and convenient.
An eCommerce customer loyalty program lacking these five elements is bound to fail.
How North Face Builds the Reward Program On Customers’ Expectations
North Face’s reward program combines those five elements to deliver value to its loyal customers.
It lets shoppers earn one point when they spend $1 shopping online or in-store. Accumulating 100 points qualifies them for a $10 reward, bringing the cash value dimension into their reward program.
The brand doesn't constrain customers on where to use their rewards.
Instead, they are at liberty to shop any gear they love either online or in-store, giving them multiple redemption choices.
Also, the reward program offers customers
- Exclusive gear,
- Birthday shoutouts,
- Member-only field testing to vet product performance and return them if necessary,
- The chance to test unreleased products, and
- Dedicated customer service that provides them with expert assistance
These perks don’t only satisfy their aspirational values to succeed as athletes; they're also relevant to that journey.
Additionally, North Face makes its reward program convenient for shoppers. Members can shop on their preferred channel to earn points. They can also use the members-only customer service line anytime they need expert assistance.
Key Takeaways from North Face Rewards Program
A reward program works great when the value sharing is competitive in all the five dimensions—cash value, choice, aspiration, relevance, and convenience.
8. Rothy’s eCommerce Loyalty Program Incentivizes Customer Advocacy
Science: Customers trust product recommendations from friends or family members.
Loyal customers could save you huge acquisition and closing costs.
Put that loyalty to good use.
Leverage your users’ goodwill and audience to reach more people and explore new markets by encouraging them to spread the word about your business.
A study found that word-of-mouth generates five times more sales than paid ads. Also, 64% of marketers admitted that it’s their most effective marketing channel, while 43% said they use it to increase sales.
Furthermore, on average, the channel drives $6 trillion in annual global spending, accounting for 13% of all sales.
How Rothy’s loyalty program incentivizes customer advocacy
Rothy’s drives customer advocacy with its reward program.
The program rewards customers with a $20 discount when they refer their friends, incentivizing them to advocate for the company and effectively turning them into brand ambassadors and spokespeople.
Also, their friends get $20 off their orders, making it easier to convince them.
Joining the program is free, so there’s no barrier to entry.
But, customers must sign up to access a dedicated portal to manage their rewards. Additionally, members get a referral link they can share online to attract new buyers and track their referrals.
However, customers can only use the discounts in their next purchase, enabling a high customer retention rate.
But that’s not all. Rothy’s takes customer advocacy further.
The company has a Facebook community of over 22,000 members. The platform, Rothy’s Addicts, allows loyal customers to interact and share their brand experiences, reinforcing customer loyalty.
In 2018, Rothy’s sold more than one million pairs, bringing in over $140 million; two years after launch.
Elie Donahue, the company’s marketing VP, admitted that word-of-mouth is behind the brand’s successes and continues to blow away other channels regarding how people discover the brand.
Key Takeaways from Rothy’s Rewards Program
Rewarding customer advocacy helps brands drive customer acquisition and retention at near-zero costs.
9. Amazon Prime Drives Higher Purchase Frequency Through Paid Loyalty Program
Science: Paid loyalty programs generate value by changing customer behavior.
Traditional eCommerce loyalty models or points-only programs might no longer be enough to sustain customer loyalty. As a result, brands are shifting to paid programs to shore up and drive long-term customer value.
This model works despite requiring customers to pay a recurring or one-time fee to join, which creates an entry barrier. Nonetheless, a premium value-sharing program typically drives higher customer value from members than free loyalty programs.
According to a survey, paid loyalty program subscribers are over 60% more likely to increase their spending after joining, while free loyalty programs improve purchase frequency by 30%.
Also, the study found that paying members are 43% more likely to buy weekly and 59% more likely to choose the brand over competitors.
How Amazon Prime—Amazon’s paid loyalty program—drives higher purchase frequency
Amazon Prime is probably the world's biggest paid online loyalty program, with over 200,000 members.
The subscription service, which costs $139 per year or $14.99 when billed monthly, offers members these benefits:
- Expedited shipping
- Free movie streaming,
- Exclusive access to Prime Day deals,
- Early access to lightning deals, and
- Huge discounts
Joining the Amazon loyalty program doesn’t come too cheaply, so Prime members usually shop more to take advantage of available benefits and maximize their subscription fee, driving higher purchase frequency.
Data shows that 7% of Prime members shop almost daily, while one-fifth shop at least a few times weekly. Also, Prime subscribers purchased over 250 million items on 2021’s Prime day, generating nearly $12 billion in sales revenue.
Key Takeaways from Amazon Prime Rewards Program
Paid loyalty programs generate more value from customers than free reward programs.
10. REI Offers Premium Rewards to Drive Value Sharing
Science: Provide premium rewards that are too expensive to offer broadly.
Of course, average customers are fanatically loyal. But they're also value maximizers. They're always looking out for the best deals and would gladly dump the brand if they see it elsewhere.
Several businesses offer premium benefits to keep customers. However, the move adds to the overhead, which might be too expensive to sustain in the long run, putting customer experience at risk.
A paid loyalty program becomes a more sustainable option.
Albeit premium programs don't often sit right with most customers, bolstering the value proposition with premium rewards lets them justify the access fees and key into your program.
How REI drives value sharing with premium rewards
REI Co-Op Membership packs a lot of premium rewards.
With just a $30 one-time payment, subscribers get member-only discounts on select gears.
For example, they’ll get up to 50% off camping deals, a $100 discount on kayak deals, and up to 25% off cycling deals.
Members also enjoy these rewards:
- Free standard shipping forever,
- Unlimited early access to curated and limited-edition products,
- 33% off gear rentals, and
- A share of the Co-op's annual profits
- Buy and trade in used gear,
- Get free flat tire repairs,
- Vote in board elections and
- Attend local events
These premium benefits over-justify the $30 one-time access fees, making the paid program attractive to many customers, enabling the Co-op to retain loyal customers and drive real value from them.
The consumer Co-op reported a staggering $3.7 billion in sales in 2021, an impressive 36% growth from the previous year. Plus, it added a record 1.4 million users to the community, upping it to over 21 million loyal members.
Key Takeaways from REI Rewards Program
Funding premium rewards that are too expensive to offer broadly with paid loyalty programs can drive profitable value sharing.
11. GrubHub’s Loyalty Program Creates a Loyalty Loop That Makes Brand Switching Unfavorable
Science: Locking in customers in a highly fragmented or undifferentiated line of business
Product differentiation helps companies gain and keep customers’ loyalty.
However, it becomes challenging in industries with a highly fragmented or undifferentiated line of business or where most companies offer comparable products or services.
But getting customers to subscribe to a premium loyalty program could make them stay loyal.
It automatically locks them into the company's ecosystem, creating a loyalty loop that makes brand switching unfavorable, enabling brands to generate value from their high-value customers continuously.
How GrubHub Rewards Program creates a loyalty loop that makes brand switching unfavorable
GrubHub enables people to order food from local restaurants. It partners with over 250,000 local diners and popular chains to deliver a diverse selection of cuisine to its customers.
In this industry, where multiple businesses offer comparable and undifferentiated services, GrubHub can always lose customers to competitors.
Perhaps to check this, the company runs a $9.99 monthly subscription membership, GrubHub plus, that offers subscribers unlimited $0 delivery fees on orders over $12 and other perks.
Of course, committing nearly $10 monthly for zero delivery cost makes it unfavorable for customers to switch to the competitors.
Consequently, the company keeps users loyal and drives more value from their high-value customers.
Key Takeaways from GrubHub Rewards Program
Businesses operating in an undifferentiated market can offer paid loyalty programs to lock high-value customers into their ecosystem and minimize brand switching.
12. Sephora Reward Program Grows Membership With Emotional and Hard Benefits
Science: Benefits must outweigh fees to encourage sign-ups.
Well-designed premium reward programs drive a higher purchase rate and create higher switching costs. So, companies with paid loyalty programs run at a lower risk of losing their highest-value customers to competitors.
The biggest downside is that premium costs create an entry barrier.
The good news is customers are sensitive to value offerings.
So, delivering value that outweighs the subscription cost could convince them to join the program. And the best way to deliver this value is by offering emotional and transactional perks in one package.
How Sephora grows membership With emotional and hard benefits
Beauty Insider, the company's eCommerce reward program, combines transactional and emotional benefits to deliver compelling value to subscribers.
The program rewards purchases with select sample products, giving customers access to luxury beauty products they usually wouldn't know existed.
Anyone can become an insider, but the top tiers—VIB and ROUGE—have $350 and $1,000 annual minimum spending requirements, respectively.
Sephora understands that experiential rewards might not be enough to drive subscriptions.
So it offers several transactional benefits like free standard shipping, a Sephora Credit Card that incentivizes shopping, and huge discounts to win customers over.
Additionally, subscribers earn points each time they shop. However, unlike most point-based loyalty programs, Beauty Insiders can use their reward points as they want.
For instance, they can redeem points for gift cards or discounts to offset part of the product costs, which are usually pricey, or to access experiential perks like limited-edition products, events, or in-store beauty classes.
Insiders also enjoy other experiential rewards like access to the app, exclusive events, and product launches.
Sephora's rewards program currently has over 25 million members and accounts for nearly 80% of the company's sales.
Allegra Stanley, Sephora's VP of Loyalty, believes that the right balance of transactional and emotional perks is essential to creating a loyal customer base.
Key Takeaways from Sephora Loyalty Program
In-building transactional and emotional perks into a reward program make value sharing profitable to the brand and customers.
Hey, you’ll love this: 31 insanely powerful Online Sales Promotion ideas for eCommerce
13. Lemon Laine Retains Customers With Experience-Led Loyalty Rewards
Science: Retaining customers rely on offering more experiential advantages.
Offering huge discounts, free shipping, and other hard benefits could convince customers to join your loyalty program. But the experience is what keeps them coming back for more.
Experiential rewards like access to personalized experiences, live event tickets or members-only content create excitement that connects customers emotionally to the brand. These experiences also create profitable loyalty that reduces brand switching, enabling brands to retain their most valuable customers.
eConsultancy believes that brands with experience-led reward programs win and retain more customers than those offering just discounts.
How Lemon Laine employs an experience-led loyalty program
Lemon Laine runs a $100 yearly loyalty program offering members hand-picked beauty routines.
In addition to enticing customers with hard benefits like a $75 gift card and 5% discounts on every $1 spent, the brand offers experiential rewards. This reward category gives members personalized beauty routines and recommendations to reach their unique beauty goals.
Lemon Laine members also receive beauty concierge services, enabling them to get assistance whenever needed. They can reach the concierge through their preferred channels, including video chats, emails, phone calls, or text messages.
The club subscribers also have access to private events and a Text2Buy service that lets them ask questions via texts and shop on the go.
Key Takeaways from Lemon Laine Rewards Program
Experiential rewards drive customer retention more than hard-value benefits.
14. Mirenesse’s Reward Program Drives High Customer Engagement
Science: Keeping engagement levels high can retain loyal customers.
A McKinsey study found that half of the paid program cancellations occur within the first year of membership. Sadly, subscribers often cite the inability to justify costs compared to benefits as their primary cancellation reason.
So a reward program must keep engagement high to maintain customers' loyalty.
You can create top-of-mind awareness that puts the brand high in customers' consciousness and makes it easier to retain them past the critical first year by offering these:
- Weekly discounts,
- Daily tips,
- Regular events access, and
- Social media contests
How Mirenesse’s reward program keeps customers highly-engaged
Mirenesse’s premium reward program offers customers $10 and 200 points when they subscribe, hitting them with the value from day one.
Also, members earn two points for every $1 spent, a recurring benefit that could get them to engage regularly with the brand.
They also get
- Free shipping on all orders,
- Annual birthday surprises,
- Exclusive rewards, and
- Secret sales,
This creates an infinite value loop that could make them stick around.
Key Takeaways from the Mirenesse Rewards Program
Finding means to reward customers frequently creates a high engagement level that leads to enduring customer loyalty.
Keep Reading: The Founder's Guide to Customer Journey Map (eCommerce)
Launch Your Science-Backed Brilliant Loyalty Programs
You have ten eCommerce loyalty options. And you can even combine ideas when creating or upgrading yours.
Understanding the science behind the move when replicating these loyalty ideas can help you deliver a loyalty experience your customers love, enabling you to retain them.
However, regardless of the loyalty model you choose, ensure the reward program offers long-term benefits, creates value that exceeds the cost of value delivered, and aligns with the company's capability.
It's the only way you can deliver profitable value sharing.
Also, don’t forget to pilot your program to test the waters before delving deep. TOMS almost went bankrupt when it launched its buy-one-give-one model. It pivoted to the current program to save the business.