Loyalty is everything. In an increasingly competitive ecommerce market, brands are constantly vying for customer loyalty, for good reason: loyal customers are often the most profitable. 

Plus, one of the best ways to tap into earned media (like word-of-mouth advertising, which most consumers trust above other advertising methods) is through—you guessed it—stronger customer loyalty. 

Perhaps the most common way businesses try to foster brand loyalty is through a points program. However, if companies simply provide a cut-and-dry rewards program and call it a day (as opposed to a spend-based loyalty program or VIP program), it can make customers feel unvalued or not like VIPs. 

In addition, if a program is solely about the points, it may fail to differentiate itself from other more competitive programs in the market. 

Industry data shows that just 18% of rewards program members actively engage with all the programs they're a member of, showing how some rewards programs may offer too little value to the customer. Oof. 

If you want to level up your customer loyalty initiatives beyond a points program, we've put together ten tips that can help.

Let's get started!

1. Set up email and SMS automations focused on bringing customers back

Email and SMS marketing are great ways to increase customer loyalty, as you can reach customers directly through their inboxes and mobile devices.

For best results, send triggered messages based on certain behaviors or actions your customers take. For example, you could send a message to a customer who hasn't made a purchase in a set amount of time or provide a voucher or discount as a way to say thank you after someone has made their first purchase. 

Pinjarra Bakery is an excellent example of a business putting email and SMS marketing to good use. The company uses Marsello to power various campaigns that entice people to come in.

“We send out an SMS blast to our loyal customers first or our loyalty customers first giving them first access to come in and try the product before we release it to the public,” Daniel explains. “And of course, we conveniently time the blast to go out around lunchtime so people are probably getting hungry that time of the day and so far the results have been great.”

Another idea is to reward your customers' birthdays. You could track birthday purchases and the rate of redemption—all of which is valuable data that can be leveraged for more tailored marketing down the road.

Easy-to-implement options include sending a one-time special discount or a freebie via text or email. Just make sure to use unique codes to track the effectiveness of your automations.

2. Setting up targeted segments

Did you know that the average email open rate is just 21.5%? To make your emails more relevant, segment subscribers into different groups or categories based on criteria like location, age, or behavior. By doing so, you can better cater to each segment through the content and deals you offer, intrinsically creating more value for your customers. 

Oh, and as a pro tip, consider using your subject lines to gauge interest in new products and themes you're considering offering.

3. Foster a strong community incidental to your brand

A brand community, when done right, is a way to rally together your most loyal customers or people who are the most interested in what you have to offer. Communities bring people together, which drives loyalty through shared experiences, meaningful connections, and a sense of belonging.

Marsello customer Pace Athletic is a master at community-building. The company has a run club that includes social jogs for all fitness levels. These run events end at local pubs where members can socialize, relax, and build friendships over a meal or drinks.

See if you can implement similar initiatives in your business. If you run a game shop, you could consider running a monthly board game night at your location. Brewery? Maybe a recurring beer tasting event or a pub quiz. Whether you want to keep it casual or more formal, brand communities are a great way to tap into brand loyalty and customer advocacy.

4. Offer exclusive access and early releases

Never underestimate the power of exclusivity. By fostering a sense of unique value or desirability—either by offering limited availability or exclusive access—brands can tap into the age-old desire of customers wanting to get something that's hard-to-get. 

You can use this to your advantage by targeting your top spenders or frequent purchasers and creating a segmented campaign. Reward them with access to exclusive events, pre-sale access to limited edition items, or other similar events. 

Take, for instance, Nordstrom, which gives members of The Nordy Club (the company's loyalty program) early access and extra discounts at sales events.

5. Start a referral program

To start things off, assign each consumer a unique referral code. Then, when they share your business with their friends, you can see if a purchase or subscription was made through the code and offer the customer (and maybe even the referred person) a reward. We recommend offering rewards that aren't point-based, like a free product or exclusive discount.

Also, make it easy to refer others: consider including a template with their unique code that customers can copy and paste. By reducing the friction around referrals, you'll make it easier for your brand to harness the power of earned media.

6. Provide valuable content and resources

Another great way to build customer loyalty is by creating content that's both informative and helpful for your customers: all with your own branding, of course. 

Let's say you run a makeup or beauty company: you could do TikTok or Instagram user-generated reviews of your products, do tutorials on how to apply certain products, or make a Q&A video about frequently asked questions. 

When you offer tips, guides, and tutorials on topics your audience cares about, you position your company as an expert and drive brand awareness by playing the long game.

7. Collect customer feedback

The best way to improve and understand customer satisfaction is through feedback, and what better moment to get feedback than right after a purchase? You can consider offering a small perk like free shipping on their next order as a small incentive, but what's crucial is to make it easy for your customers to provide feedback and to ensure they don't feel pressured into doing so. 

Marsello's customer feedback capabilities allow shoppers to provide input with just a few clicks, so the experience is effortless.

Check out this example from Madame Fancy Pants, which uses Marsello's customer feedback capabilities to create a simple, visually appealing survey so customers can quickly rate their shopping experience.

Already have customer feedback? Be sure to act on it to improve your retention strategies. And don't forget to proactively inform your customers about any changes and updates you've made so they feel heard and seen.

8. Create a customer-centric culture

Improving customer loyalty isn't just about what you put out there—it's very much an inside job. The people in your business play a crucial role in fostering customer loyalty, so you need to instill the value of customer-centricity in your teams. 

You can do this by providing ongoing training and development focused on customer service to keep folks at the top of their customer support game. 

A great example of this in action comes from Zappos, which has built a reputation for exceptional customer service. The company provides extensive training for their employees, including a four-week program that emphasizes the importance of customer satisfaction. This commitment to training has helped Zappos achieve a high level of customer loyalty and a strong brand reputation.

Another example is Pace Athletic, who run a regular running club for their community. Why we love it? Pace Athletic live and breathe what they do - a running club is a natural extension of their brand, and a way to connect on a deeper level with their customers and followers. 

The Pace team don't organize a running club to generate sales (at least not directly). But it does drive brand awareness and sales as a result. When their community build deeper relationships with the Pace team, they want to come in-store and ask for the staff's recommendations, suggestions and pointers. They want to support their local business, and the people behind it.

If you are passionate about what your business sells and what you represent, building community will come relatively easily. But it does take time and requires a commitment, so don't be disheartened if you don't see the revenue impact right away.

9. Invest in unique products and services

People stick with retailers and restaurants that consistently provide products and services they won't find elsewhere. So, strive to deliver unique and high-quality offerings to all of your guests. 

If you're in retail, this can come in the form of trendy fashion or homeware products that enhance your customers' lives. If you're a restaurant, this could mean offering exclusive and innovative dishes, sourcing locally grown and fresh ingredients, or creating a unique dining experience with exceptional ambiance.

When you do this consistently, you build a loyal customer base and differentiate yourself from the competition.

10. Implement corporate social responsibility (CSR) initiatives

Doing good is good for business. Industry data shows that consumers are more likely to choose brands that promote CSR aspects like sustainability. According to Neilsen, "a whopping 81% of respondents said that it's extremely or very important that companies implement programs to improve the environment. When it comes to action, 73% said they would either definitely or probably change their consumption habits to reduce their impact on the environment."

To that end, it may make sense for your business to develop sustainability programs that focus on reducing environmental impact. This could include minimizing waste, using renewable energy, and sourcing sustainable materials.

Of course, CSR isn't just about sustainability. Social responsibility also encompasses societal issues like fair labor and community. So if these values align more with your brand, start exploring ways to support social causes. For instance, the brand TOMS partners with non-profit organizations that work on various societal issues, including access to mental health resources, community rehabilitation, and education.

Before you begin...

To ensure that your customer loyalty approaches are paying off, you must track key metrics regularly. Otherwise, you run the risk of investing significant time and money for no result. While you may not need to track all of the data points below, familiarize yourself with them and check in with your marketing team to determine which ones are the best for your organization. 

• Net Promoter Score (NPS): This measures customer satisfaction and loyalty based on how likely customers would recommend a product/service to others on a scale of 1-10. Detractors are 0-6, while Promoters are 9-10. A score over 50 is generally good, while above 70 is great.
• Customer Retention Rate: The rate at which your customers stay with you over a specific period, which reflects the effectiveness of your loyalty-building efforts. Make sure you balance this with customer acquisition strategies.
• Customer Lifetime Value (CLV): This is an indication of the total revenue expected from a customer over their entire relationship with a brand. It's a great way to identify more valuable customers and assess the long-term value of customer loyalty programs.
• Repeat Purchase Rate: The proportion of customers who make repeat purchases, which indicates ongoing customer engagement and loyalty. Customers with a high RPR should be targeted when launching new products or services.
• Customer Satisfaction Score (CSAT): This provides immediate feedback on customer experience and loyalty; it's the average score given when you ask customers how happy/satisfied they were with an experience.

While this isn't an exhaustive list, tracking some (or all!) of the above metrics will put you well on your way to quantitatively understanding how your brand loyalty efforts are paying off.

Final words

We've covered a lot of ground looking at the top ways your business can foster customer loyalty without needing a points-based program.

While you don't need to implement all of these at the same time, we recommend trialing out at least a couple of these methods and seeing what sticks. Most importantly, this shouldn't be a "set it and forget it" approach. You need to stay attuned to the feedback received and stay in the know on industry best practices. This way, you'll be ahead of the curve and continually improve customer loyalty. 

If you're looking to create an omnichannel loyalty program that offers real value, Marsello has you covered.  From SMS and email marketing to loyalty and referral programs, Marsello can help you from start to finish.

Speak to an expert today.

Need help? Get advice from a loyalty expert and start driving repeat sales.

Read more: 7 Steps To Building A Profitable Loyalty & Rewards Program

It’s the end of an era in New Zealand’s retail landscape. FlyBuys NZ has announced its closure, effective October 2024, leaving around 90 staff members out of work. In a recent press release, the company stated, "After careful consideration and evaluation of our current business environment, we have made the difficult decision to close FlyBuys NZ. This decision was not taken lightly, and we are deeply grateful for the support of our employees, members, and partners over the years."

FlyBuys NZ has been a household name since its inception, pioneering the concept of loyalty programs in New Zealand. For many of us, collecting FlyBuys points was a routine part of our shopping experience, and the rewards catalog was something we eagerly browsed. However, as technology and consumer behavior have evolved, the landscape of loyalty programs has shifted significantly.

The evolution of loyalty programs

Loyalty programs have come a long way from the days of physical punch cards and point collection systems. The advent of digital technology has revolutionized how brands engage with their customers. Platforms like Marsello have made it easier and more cost-effective for businesses to run their own loyalty programs. These platforms offer seamless integration with existing systems, real-time data analytics, and personalized marketing capabilities. Most importantly, they allow brands to own their data.

In the past, brands relied on third-party loyalty programs like FlyBuys, which meant they didn’t have direct access to the valuable customer data generated through these programs. Today, owning customer data is crucial. It enables businesses to make informed marketing and business decisions based on customer preferences and purchase behavior.

The economics of loyalty programs: for consumers

Let’s take a moment to consider the cost of loyalty from the consumer's perspective. With FlyBuys, you had to spend $25 to earn one point. To redeem a hairdryer (RRP $99NZD), which costs 340 points, you would need to spend a whopping $8,500. That’s giving you back 1% of value, after you’ve spent months or even years making transactions with FlyBuys partners. This model made sense in the early days of loyalty programs, but in today’s fast-paced retail environment, consumers are looking for more immediate and tangible rewards.

A brand's own loyalty program usually offers more generous rewards compared to coalition programs—you’re likely to get back 3-10% (sometimes even more) in value. Think about getting your tenth coffee free: that’s an 11% discount across the 10 purchases. And you could easily achieve that in a couple of weeks.

The economics of loyalty programs: for retailers

A loyalty program can play a pivotal role in achieving a business's revenue and profit goals. As highlighted in a 2023 report by Gitnux, the chance of selling to a new customer is less than 20%, whereas this likelihood increases to almost 70% for an existing customer.

In terms of the return on investment, here’s an example from a merchant Marsello has been working with (anonymised as these are real results). In this case, you’ll see the merchant saw a return of $9.22 for every $1 they spent on running the program and rewarding customers.

By improving customer satisfaction, building brand loyalty, attracting new customers, and collecting valuable customer data, your loyalty program can yield significant financial benefits. Additionally, it enables informed decision-making regarding product development and marketing strategies, further boosting revenue.

In essence, loyalty programs are strategic assets that drive sales, revenue growth, and long-term profitability for any business.

The future of loyalty programs

As we look to the future, loyalty programs are becoming more sophisticated and data-driven. Brands want to own their customer data and leverage artificial intelligence to gain insights into customer behavior. AI can analyze vast amounts of data to predict trends, personalize marketing efforts, and improve customer experiences.

Data-backed decision making takes a lot of time. You have to understand where to find your data, how to organize it, then how to interpret it to glean insights. For most people, this is overwhelming—they don’t even know where to begin.

The future? All that data is a knowledge base you can tap into whenever you have a question. You can simply type or speak your question or command in plain language, and the assistant will find you the answer or help you complete a task. AI can also offer you questions or insights you wouldn’t have thought of yourself—like suggesting a new database segment or loyalty incentive. This level of insight and personalization was not possible with traditional loyalty programs.

Why this matters

The overarching theme here is data ownership. By owning their data, brands can make smarter marketing and business decisions, tailor their offerings to meet customer needs, and ultimately drive growth. This shift towards data-driven decision-making is transforming the retail industry.

FlyBuys NZ may be closing its doors, but its impact on the loyalty industry will be remembered. The program paved the way for modern loyalty strategies, and as we bid farewell, we also look forward to the exciting innovations that lie ahead. Thank you, FlyBuys, for your contribution to New Zealand’s retail history.

Own your customer data. Start a branded loyalty program today and start driving repeat sales.

Read more: 7 Steps To Building A Profitable Loyalty & Rewards Program

When set up correctly, loyalty programs are one of the best tools for customer retention. 

Every business owner knows that bringing in new customers is more expensive than encouraging repeat business from existing customers. That’s why customer loyalty programs are particularly beneficial for smaller businesses, where money is tight and building a loyal customer base is crucial. 

Successful loyalty programs spark an emotional connection that brings in repeat customers — which translates to greater revenue. 

While bigger companies tend to steal the limelight for their membership programs (e.g., Sephora’s Beauty Insider program), SMBs have cool strategies too!

This article dives into seven of the best SMB loyalty programs, showcasing innovative strategies that would hopefully inspire your initiatives. 

Whether an award-winning, family-owned bakery or a homegrown fashion label — these businesses demonstrate the power of personalized loyalty rewards, community engagement, and seamless digital experiences in cultivating brand loyalty. 

Let’s dive in.

1. Pinjarra Bakery

Pinjarra Bakery, led by the Pantaleo family, is renowned for Australia's top meat pie. It has garnered over 700 state and national accolades, making it one of WA's most decorated bakeries. With over 25 years of satisfying customers, locals and tourists equally flock to enjoy its delectable treats.

Program purpose:

The company used to have an outdated point-of-sale system when it recognized the need for a more efficient sales and marketing approach. It wanted a cloud-based solution to streamline its operations and decided that Lightspeed was the perfect choice.

The bakery also wanted to integrate its loyalty and marketing with its chosen POS. So it partnered with Marsello to integrate its rewards program seamlessly into its existing tech stack consisting of WooCommerce, Bopple, and Lightspeed (O-Series).

With the loyalty program, it hoped to gather customer feedback and purchase data to enhance the customer experience and tailor offers. It also wanted to use the data for automated marketing, such as sending $10 vouchers to encourage repeat visits from inactive customers.

Program style:

Pinjarra decided on a points-based loyalty program where customers receive 1 reward point for every dollar spent. Bonus points could be earned through referrals and by sharing on social media. Members can then redeem their accumulated points for free products, exclusive benefits, and member-only special offers.

Here’s why its loyalty program succeeds:

• Pinjarra Bakery recognizes the importance of cultivating a robust database of loyal customers. A point system is simple enough for program members to understand — earn certain points and get rewards. This encourages more customers to sign up.
• It simplifies customer engagement by offering effortless QR code-based sign-ups at its locations.
• The loyalty rewards program cleverly doubles as a referral program. It’s also a useful strategy for social media marketing.
• One of the program’s main aims is to harness data from an active database. This helps to drive revenue during campaign launches.

• The program offers a delightful user experience as well. Check out the fun names of its rewards — “Magic brew to kickstart your day. Caffeine hit!” or “Pop it like it’s hot with PB pop socket - phone grip & stand.” 

Program results:

Pinjarra attained a 66% repeat purchase rate and increased revenue significantly via targeted marketing campaigns and automation, generating $100k from a single automation.

2. Scotty's Makeup & Beauty

Over four decades, Scotty’s Makeup & Beauty has been a cornerstone of the Aussie beauty industry. Established in 1980 by founder Scott Lattimer, the company introduced global makeup brands to Australia, becoming integral to various sectors including beauty salons, film, TV, and theatre.

Program purpose:

Initially, Scotty’s was searching for an effective email marketing solution. When the team learned about Marsello, they decided to set up a loyalty program as well. It aimed to establish a vibrant, involved customer database. Like Pinjarra Bakery, it also wanted to implement targeted marketing tactics tailored to customer buying behaviors and preferences.

Program style:

Currently, the Marsello app works smoothly with Scotty’s Shopify and Lightspeed (X-series) setup. The brand has chosen a tier-based or tiered loyalty program where certain loyal customers (Artistry Insiders) get exclusive access to better discounts. 

Program results:

63% of Scotty’s marketing-driven revenue originates from email campaigns. Its loyalty program efforts have also enhanced customer lifetime value and purchase frequency. Best of all — it has doubled its end-of-financial-year revenue.

3. Pace Athletic

Pace Athletic was founded by fitness enthusiasts, Will and Stu. They loved the welcoming atmosphere in surf stores and wanted to introduce the same to running stores which felt more exclusive.

Program purpose:

The co-founders knew they needed to build a loyal customer base to make running feel more inclusive. This is where Marsello came in. With its help, Pace Athletic created — what easily qualifies as — one of the best customer loyalty program examples on our list. 

Competing in a market overshadowed by major chains posed a significant challenge for the brand. Nevertheless, it cultivated a loyal customer base by prioritizing the overall experience.

Program style:

Pace Athletic implemented a simple points-based loyalty system that worked wonders. Customers earn points corresponding to the amount they spend. They can earn more points from social media engagement, referrals, etc., and redeem them for exclusive products and discounts. 

The loyalty program aims to seamlessly merge online and in-store sales data, providing a comprehensive overview of customer shopping habits. This integrated approach paves the way for personalized marketing messages and promotions based on customer data. That way, Pace Athletic can enhance customer engagement and drive more sales.

Program results:

Pace Athletic’s loyalty program account helped drive 28% of its total revenue. Because customers are highly engaged, its marketing emails yield impressive conversion rates. In fact, its email marketing campaigns contributed over 40% of its revenue, underscoring the program's impact on sales.

4. ALPHA60

Founded in 2005 by enterprising siblings Alex and Georgie Cleary, ALPHA60 has created a unique narrative since the very beginning. With a solid focus on customer happiness and an unwavering creative vision, the brand has shown that you can find success by traveling the unbeaten path.

Program purpose:

The company was determined to follow a customer-first approach and wanted the brand experience to be consistent for all shoppers. It started using Marsello along with Lightspeed (X-Series), Shopify, Wrapped, and Klaviyo to help with its loyalty program strategies.

On brand with its customer-first approach, ALPHA60 wanted to make its sales, marketing, and rewards programs more efficient. It also wanted to streamline its gift card usage across platforms and synchronize customer data between its online and in-store channels.

Program style:

The rewards program is simple. Customers earn points based on how much they spend and for engaging with the brand on social media. For every 1000 points earn, they get a $50 voucher. 

The purpose of this loyalty program is twofold. First, it excites customers at the point of sale but rewarding them for every purchase. Secondly, the program enables the brand to utilize data for segmenting customers, which then makes it easy to launch targeted campaigns.

Program results:

Every aspect of ALPHA60's business revolves around the customer and the results of its strategies speak for themselves. With a customer-centric approach, it maintains a repeat purchase rate of around 70%, surpassing the typical range of 20% to 40% considered good for retail enterprises.

5. Brandini Toffee

Brandini Toffee is a family-operated company that excels in crafting artisanal toffee through time-honored techniques and top-notch ingredients. It wanted a loyalty program compatible with its tech infrastructure and operational model, requiring seamless integration, in-store and online.

Program purpose:

The loyalty program was meant to capture purchase behaviors and preferences, grow the database, and enable tailored rewards to enhance customer retention rates. This involves integrating data across all channels to ensure a seamless omnichannel experience for Brandini’s customers.

Program style:

Using Marsello, the company set up a simple, yet effective loyalty program system. Like certain brands on this list, Brandini Toffee offers customers 1 Brandini Point for every dollar spent. Bonus points can be earned on birthdays or by completing certain actions, such as sharing on social media.

Program results:

Brandini’s revenue doubled within the first eight months of implementing Marsello. Since then, it has experienced nearly triple revenue growth from 2019 to 2023.

6. TennisGear

Started by accountant and avid tennis player Mark, TennisGear is a tennis center that offers coaching, four tennis courts, and an attached retail store. The company needed the right tech for its multi-channel businesses and wanted to make shopping easier in stores and online. With Lightspeed POS and Marsello, it manages all its data in one spot, helping create customer groups.

Program purpose:

The loyalty program serves multiple purposes. It centralizes sales data from all channels into one platform, aligns transactions with customer profiles, and fosters a seamless omnichannel experience. 

Plus, it facilitates database growth and utilizes customer interaction data to enhance product offerings and marketing strategies.

Program style:

Tennis Gear created a points-based loyalty program. Every $1 spent earns customers 1 point. Reviews, social shares, and other actions earn bonus points. All are redeemable for discounts.

Program result:

TennisGear gains full sales visibility across all channels via multi-site reports and dashboards. On implementing Marsello’s prompts for Lightspeed POS, it saw a 2.5% increase in its customer database. Additionally, Marsello's automation tools efficiently recover abandoned carts and entice lost customers to return, alongside other effective campaigns.

7. HobbyTech Toys

Based in Perth, Western Australia, Hobbytech Toys specializes in radio control products. The brand has recently broadened its inventory to encompass toys, games, Lego sets, model kits, model trains, and more. It has also prioritized improving its online presence.

Program purpose:

Year after year, the business experienced rapid growth. About two years ago, they transitioned to a new ERP, leading to a new point-of-sale system. This prompted integration with Marcello to link Lightspeed and Shopify, enhancing the omnichannel experience.

Program style:

The store recently introduced a $5 discount voucher reward system, replacing the previous 1000-point threshold for a $10 voucher. See, many regular customers weren't reaching this threshold within 12 months due to their frequent but lower-spending visits.

Program results:

The $5 reward significantly boosted redemption rates, enhancing customer satisfaction and the store's reputation. The brand has also used its omnichannel data to improve its email marketing campaigns.

Final words

All the examples mentioned above demonstrate a crucial point — customer reward programs that fit the unique needs of small businesses can work wonders. 

Special loyalty programs, easy omnichannel shopping, and automation can help grow your business and keep customers happy. That’s why if you haven’t done so yet, it’s time to launch a loyalty program that helps you reach your marketing goals. 

To learn how Marsello can help, talk to one of our experts today.

Get advice from a loyalty expert and start driving repeat sales.

Read more: 7 Steps To Building A Profitable Loyalty & Rewards Program

Fun fact: a Statista survey recently found that 70% of consumers engage longer with a brand if they are members of its free or paid loyalty programs. 

So, if you’ve ever wondered — do loyalty programs work? — the stat above proves that focusing on customer retention through loyalty programs can boost customer engagement, and potentially, your business’s bottom line.

Customer loyalty programs (aka rewards programs) are marketing strategies that incentivize repeat business by rewarding customers for continuing to engage with a brand. These programs often offer discounts, points, or exclusive perks in exchange for the customer’s loyalty. 

The end goal? To foster long-term customer relationships and increase retention rates. Effective loyalty programs can help maintain a healthy customer base.

All that being said, the success of rewards programs will vary from one retailer to the next, and if you want to find out if your loyalty efforts are working you need to track and analyze their performance. 

This article takes an in-depth look at loyalty programs, why they work, and why some initiatives are more effective than others.

Understanding customer loyalty programs

Do rewards programs work?

The short answer is it depends. 

Loyalty programs help businesses encourage repeat purchases and promote a stronger brand connection. There are several different types of loyalty programs that you can choose to implement.

Points-based loyalty programs

Point-based loyalty programs are ubiquitous among retail and hospitality sectors for their simplicity and effectiveness. Operating on a straightforward premise — spend more, earn more — these programs incentivize customer spending. 

Points earned correlate with transaction value, redeemable for rewards like discounts or exclusive perks. Customers actively strive to accumulate points, driven by the desire to redeem rewards, which enhances their brand loyalty. 

For example, LEGO-certified stores in South Africa set up an effective point-based program with Marsello’s help that works seamlessly on in-store and online purchases. Customers accrue one point for every R 1.00 spent and get another 100 bonus points on their birthday. The company provides cash-back incentives plus an exclusive LEGO gift, which shoppers can redeem in-store.

Tiered loyalty programs

Tiered loyalty rewards are all about encouraging shoppers to level up their relationship with a brand. Customers accrue points with each purchase, which then enable them to advance different loyalty levels. The higher the tier, the greater the rewards, and this motivates customers to increase their loyalty and engagement with a brand.

Sephora’s Beauty Insider Program is an excellent example of a tiered loyalty program. Not only do customers earn points on all their purchases, they can also move up different loyalty levels based on their spending. 

For example, if a customer spends $350 in a calendar year, they get promoted to the Very Important Beauty Insider (VIB) status. On spending $1000, they will be upgraded to the Rouge status with even better rewards.

Spend-based loyalty programs

In these programs, customers earn loyalty credits corresponding to their spending with tbe business. 

The beauty of spend-based programs lies in their simplicity. The structure is easy to grasp and has proven highly effective in boosting order values and decreasing churn. 

Melbourne-based fashion label and Marsello client ALPHA60 implemented a very successful and simple spend-based program. In line with a customer-centric strategy, it opted for a straightforward loyalty program — spend $1000, earn 1000 points, and receive a $50 voucher.

In the words of its Brand Strategist Kelvin Janissen, “We try not to complicate it too much and add different things in, and that really works for us. I think it’s because it’s simple for people. It’s easy for customers to understand.”

VIP programs

A VIP program is a customer loyalty strategy wherein a business offers exclusive benefits like discounts, premium product access, and special rewards to a select customer segment. Participation in this program might require payment or meeting criteria like a particular purchase amount or engagement levels.

Run by the Pantaleo family, Pinjarra Bakery is the destination for Australia's finest meat pie, boasting over 700 state and national accolades to its name. The brand implemented a VIP loyalty program offering its loyal customers exclusive content as well as early access to new products.

SMS campaigns directed at its VIP members have been especially successful. Over three months in early 2022, just two SMS campaigns brought in 15% of its total revenue. Pinjarra Bakery's loyalty program accounts for one-third of all revenue attributed to marketing efforts.

Paid loyalty programs

A paid loyalty program is similar to a VIP program where certain groups of customers get special access and exclusive products. But as its name suggests, customers pay a fee to be part of a paid program.

It can be harder to implement a paid program as it requires customers to shell out more money — on top of their purchases — to join the loyalty program. The key to making this work is to provide tremendous value to your members, so they’re happy to pay just to be a part of the program.

Amazon Prime is perhaps the most well-known paid loyalty program. For an annual fee, members get access to other Amazon services such as Prime Video and Amazon Music. By subscribing to Amazon Prime, members also get free, priority, and early deliveries for purchases from their eCommerce store.

Economics perspective on customer loyalty programs

Customer loyalty programs change how we think about rewards and prices. They alter incentive frameworks and skew perceptions of price. In traditional economics, people are seen as making rational decisions to get what they want. Loyalty programs add something new by encouraging people to keep buying, which affects how they spend their money. 

These programs take advantage of what people find useful, offering them more than just the items they buy. This fits with the economics of how people make choices, showing how loyalty programs play upon rational decisions and how people actually behave when they shop.

The psychological aspect of customer loyalty programs

When it comes to loyalty program effectiveness, economics are just the tip of the iceberg. There’s also some psychology involved.

The most effective loyalty programs touch on certain psychological aspects that can drive spending and brand loyalty. 

This quote from the Journal of Consumer Psychology describes this phenomenon quite well:

“...‘true’ loyalty must move beyond special pricing “deals” and require some underlying psychological mechanism to increase the consumer's inherent preference for or propensity toward a brand or firm.”  Henderson et al (2011)

The psychological basis of customer loyalty delves into several key drivers. 

• Reciprocity: where customers feel obliged to return a favor, this fuels loyalty 
• Social proof: drawing from the herd mentality, social proof influences choices based on others' actions 
• Commitment: stems from a sense of obligation or attachment that solidifies brand allegiance 

Its also worth noting that customer loyalty isn't solely restricted to brands. It often extends to the identity and community (i.e., the people) associated with brands. 

Signaling theory suggests that loyalty signals one's values or status. So, by participating in loyalty programs, customers not only receive rewards but also signal to others that they are reliable supporters of a particular brand, which can reflect positively on their social image.

For example, if you have a lululemon membership, this could signal that you're a fitness person who wears high-quality, stylish clothes. 

Still on the topic of psychology, there is a concept called comparison theory which asserts that loyalty arises from favorable comparisons to others. This could explain the success of paid and tier-based loyalty programs such as Mecca's Beauty Loop.

Tiers in loyalty programs like Beauty Loop allow customers to compare their benefits and status with others, encouraging them to aspire to higher tiers. As customers see the exclusive perks and recognition that come with upper tiers, they feel motivated to elevate their status by engaging more with the brand and building a higher loyalty status.

According to Henderson et al (2011), the three key pillars of a successful loyalty program are:

1. Assigning status to consumers based on purchase frequency/loyalty: For example, in tiered loyalty programs, brands assign a particular status to customers based on their spending. 
2. Building habits: For example, brands must encourage customers to scan their loyalty card codes in-store.  
3. Developing relationships: Personalized marketing campaigns or automation based on specific customer actions can further enhance the effectiveness of your loyalty programs

Supposing you can implement all the above, what kind of benefits can you expect from a successful loyalty program?

• First, your monthly turnover could increase significantly. Our studies show that loyalty members spend an average of 58% more than non-members. To calculate the ROI of your loyalty programs, use Marsello’s free ROI calculator. 
• Second, it can enhance your customer lifetime value and promote repeat business. 
• Finally, it can provide valuable data and insights into customer preferences and behavior. This can help you implement targeted marketing strategies that further drive turnover. 

Case in point: Four Square, a local supermarket chain in New Zealand, had a store right across the street from its competitors. The owner was under the impression that its customers were mostly 35-60-year-old women and stocked the store accordingly. 

Working with Marsello to analyze loyalty data revealed that its customer base was mostly male. This helped the brand re-merchandize the store, which boosted average transaction values almost immediately. 

Listen to this case study, and others, in this loyalty masterclass:

Final words

Loyalty programs don’t just provide direct benefits such as increased turnover and customer lifetime value but also provide invaluable data insights. If you haven’t done so yet, consider launching a loyalty program that make your customers feel like VIPs.

Need help? Get advice from a loyalty expert and start driving repeat sales.

Read more: 7 Steps To Building A Profitable Loyalty & Rewards Program

Every business owner understands it’s easier to retain an existing customer than to acquire a new one. That’s why many merchants use loyalty programs to incentivize customers to come back and spend more with them. When done right, loyalty rewards, discounts, special early access, etc. can help to drive incremental revenue and maximize your customer lifetime value (CLV).

All that being said, it’s important to remember that loyalty or reward programs are long-term undertakings. Yes, they’re super beneficial to your company, but to reap those advantages, you need to periodically evaluate your loyalty program performance. Some consider loyalty programs to be money pits — and they can be if you don’t keep track of your loyalty program ROI.

So, let’s back up a bit: return on investment (ROI) is a financial metric that evaluates how profitable an investment is. To calculate the ROI, you need to divide the net profit by the cost of the investment, and express it as a percentage. The greater the ROI, the more profitable the investment.

To get a handle on your loyalty program’s success, you need to measure its ROI. The results will help you decide if your loyalty strategy is working or not. If it’s working, you can continue what you’re doing and double-down on your initiatives. On the flip side, you can rejuvenate poorly performing loyalty programs by optimizing offers, running referral programs, or getting customer feedback.

Listen to this post instead:

How do I calculate ROI for my loyalty program?

As with any business initiative, the success of a loyalty program can be measured by its ROI. The formula to calculate it is pretty straightforward.

Return on Investment = (Total Revenue - Total Cost of Running the Loyalty Program) / Total Cost

Loyalty program ROI calculation: A real-life example

Here's an example from a merchant we have been working closely with. I'm not going to share their name, but I can share their anonymized results so you can see how we assess the impact of their loyalty program.

Challenges in measuring loyalty program ROI

The formula for calculating your loyalty program ROI is simple enough to understand. However, there are a few challenges that can make it more difficult to accurately measure your ROI.

Attributing revenue to the right sources

One of the biggest challenges lies in capturing key metrics and pulling the necessary data from various sources — such as your marketing, sales, finance, tech teams, etc. You need to make sure that you’re attributing your revenue gains to the right sources.

For example, your regular customers are your most valuable ones, with or without a rewards program. How can you be sure their value is attributed to your loyalty program?

It can also be tricky to figure out if a purchase was triggered by loyalty program benefits or if it’s just a customer’s normal buying behavior. You need to have the right tracking mechanisms in place to be able to accurately calculate a loyalty program’s ROI. 

Some of the ways to do this include using robust loyalty apps (like Marsello), discount codes, coupons, etc. to track customer behavior that can only be attributed to loyalty programs.

With Marsello, you can track the metrics like change in repeat purchase rate and increase in turnover from loyalty members, as we've done above. This will get you a much more accurate picture of your return.

It takes time to see results

Not only will you need considerable time to gather the data required to calculate the ROI, but it may also take time for your points programs to show results. Customers must first be aware of such programs, engage with them, and rack up enough points on their loyalty cards. It may take months (or more) for your loyalty program to start paying off, so you won’t know your true ROI right away. 

💡 Pro tip: Rather than committing to a 3 month trial across all your sites, commit to one site for at least 1 year (expanding to other sites if you see results earlier). Starting with fewer sites but allowing for a longer time period will give you a much better indication of the impact of the program for your business.

Metrics to consider when measuring the impact of your loyalty programs

Beyond the ROI calculation above, there are many ways you can measure the impact of loyalty programs. You can look at how they affect your revenue, customer base growth, and engagement, among other things.  

You could choose to measure success purely based on financial returns or through KPIs such as engagement rate, brand awareness, etc. Here are some of the data points you may need to track.

• Transaction volume
• Average order value
• Total revenue
• Cost of loyalty program memberships
• Marketing cost
• Purchase frequency of members and non-members

The key is to track these over time. Remember, it takes time to build loyalty, so running a successful rewards program is a marathon, not a sprint. 

And before you calculate the ROI of your loyalty program, make sure you’re clear about your business objectives. What are your specific goals? Do you want to increase revenue by a certain percentage? Reduce your marketing expenditure while boosting sales? Grow your repeat customer base?

This will be essential for setting targets for your loyalty program and understanding its impact on your bottom line.

Direct ROI of loyalty programs

Direct loyalty program ROI can come in several forms, including:

Increased sales and revenue from repeat purchases

A loyalty program can significantly contribute to a business' goal of increasing revenue and profit. According to a 2023 report by Gitnux, the likelihood of selling to a new customer is less than 20%. Conversely, this probability rises to nearly 70% for an existing customer.

By enhancing customer satisfaction, fostering brand loyalty, attracting new customers, and gathering important customer data, your loyalty program can lead to tangible financial gains. You can also make informed decisions about product development and marketing strategies, further amplifying revenue.

Ultimately, loyalty programs serve as strategic tools for driving sales, revenue growth, and long-term profitability in any business endeavor.

Just ask Scotty’s Makeup & Beauty, which was looking for an email marketing solutions provider when it came across Marsello. Very quickly, the business realized the full potential of Marsello’s tools and decided to also set up loyalty programs. This resulted in Scotty’s Makeup & Beauty unlocking new audiences, increasing its customer engagement, and doubling its revenue.

Reduced marketing costs through targeted promotions

Acquiring new customers through marketing efforts and sales outreach can be resource-intensive, consuming both time and funds. Customer acquisition costs pile up especially when leads opt for competitors.

Since loyalty programs help drive sales from existing customers, they enable your brand to mitigate the expenses linked with customer acquisition.You spend less to drive sales, which leads to a higher bottom line.

Indirect ROI of loyalty programs

Now that we’ve covered the direct ways to measure ROI, here’s a look at the indirect metrics that you may want to track.

Improved customer retention

When customers feel valued and content, they are more inclined to remain loyal and make repeat purchases. Implementing a loyalty program can significantly contribute to this effect.

For instance, imagine being a long-term participant in a supermarket’s loyalty program, accumulating rewards for discounts or free items. Such incentives foster loyalty, encouraging folks to continue supporting your brand despite alternative options.

Enhanced brand loyalty and customer satisfaction

Loyalty programs enhance customer appreciation by rewarding purchases with discounts or complimentary items, fostering a sense of value. Tailoring rewards based on individual preferences demonstrates care and enhances the shopping experience.

This helps to elevate customer satisfaction levels. Satisfied customers are more likely to return, which just goes to show the role of customer loyalty programs in enhancing overall satisfaction and fostering repeat business.

Positive word-of-mouth and referrals

Referral marketing, aka word-of-mouth marketing is a highly effective and sought-after strategy for customer acquisition. Recommendations from friends and family, along with good reviews on social media carry more weight than brand messages.

This is one of the most significant gains from loyalty programs — devoted customers become brand advocates, sharing their positive experiences and benefits received from your business. Through their advocacy, your company can gain new customers organically, without incurring any additional costs.

Data collection and insights for better business decisions

Understanding customers is crucial for business success. Rewards programs offer valuable insights into loyal customers, including their personal details and preferences. This enables businesses to enhance customer experiences and satisfaction by tailoring their services to meet individual preferences.

Bonus points if your loyalty program works across multiple channels. Going omnichannel with your loyalty efforts means you can collect data from all customer touchpoints, while providing a seamless experience no matter where or how they’re shopping.

Fashion label ALPHA60 was looking to improve its customer-first marketing efforts by providing all its customers with the same great experience. ALPHA60 brought in in-store and online sales data into Klaviyo, allowing the brand to display points balances, segment customers, and send personalized emails, no matter how customers shop.

By using Marsello for loyalty and marketing, ALPHA60 was able to attain a repeat purchase rate of 70%, wildly surpassing what is considered to be a good repeat purchase rate in the industry (between 20% and 40%).

Tools to track your metrics

Loyalty program solutions like Marsello give you a whole host of tools required to track metrics related to loyalty programs. 

The platform's built in marketing analytics capabilities can shed light on which channels and strategies yield the best results. Plus, you can track your loyalty program performance overtime, so you can improve both in the short- and long-term. 

Final words

Loyalty programs can offer substantial returns on investment for your business. The right program can enhance customer satisfaction, drive repeat purchases, and boost retention rates. It also provides valuable data and insights for informed decision-making and optimized marketing strategies. 

That’s why it’s so important to invest in the right solution AND track your return on that investment. Measuring your loyalty program ROI helps you improve, so you can continue to delight customers and keep them coming back.

Need help doing just that? Check out our ROI Calculator to see how your loyalty programs are performing or talk to an expert to discuss opportunities for revenue growth.

Get advice from a loyalty expert and start driving repeat sales.

Read more: 7 Steps To Building A Profitable Loyalty & Rewards Program

Fun fact: 20% of customers stated that rewards programs influence their choice of where to shop. 

There are clear benefits to having a loyalty program. However, there are also some hard truths: Just because it’s driving customers doesn’t mean it’s making bank. Businesses that fail to recognize they’re overspending on rewards or misjudging their importance are more likely to suffer losses. 

To create a successful loyalty program, be sure to check whether its benefits outweigh the costs right from the outset. This means taking the time to calculate loyalty points accurately and making sure that you’re valuing your program’s points in line with your business goals and targets. 

This comprehensive guide will help you determine the optimal value for loyalty points. We’ll dive into essential pricing principles, effective strategies, real-world examples, and common challenges.

By the end of this guide, you'll be able to set yourself up to achieve consistent and lucrative returns from your loyalty marketing strategy.

What are loyalty rewards?

Loyalty rewards are incentives offered by businesses to encourage and reward repeat purchases by customers. They can come in the form of:

• points
• discounts
• exclusive benefits

…all of which are designed to build and maintain a strong, loyal customer base.

Think of it this way: loyalty rewards are the currency of customer appreciation, and that’s why some of the world’s most customer-centric brands — including Starbucks, Sephora, and Amazon — invest a great deal in their loyalty and rewards initiatives. 

These companies know that loyalty programs encourage repeat purchases while nurturing relationships with their customers. 

Rewards programs also have a tangible impact on sales metrics. Some programs require reaching a specific cash or credit card spending threshold for loyalty points. This encourages higher splurging in a single transaction to increase basket size and average transaction value. 

In fact, our research shows that on average, a loyalty member spends 72% more than an anonymous shopper.

Principles of pricing rewards

Pricing customer loyalty rewards requires a balance between attraction and sustainability to ensure immediate engagement and long-term profitability. Your rewards must be enticing enough to capture attention without compromising your profit margins or undervaluing your products.

You can achieve this balance by keeping the following in mind:

Considerations when pricing rewards

To calculate loyalty points more accurately, consider the following factors when designing your program.

1. Customer Lifetime Value (CLV)

CLV is the overall expected revenue from customers throughout their engagement. Thus, it helps you determine the maximum reward program investment while maintaining profitability.  

Customers with a CLV above your average CLV indicates that they are long-term customers who are engaged and loyal. You can offer them high-value rewards, such as VIP events, limited-edition products, or loftier monetary rewards. Conversely, lower CLV shoppers can enjoy modest rewards like free shipping on certain thresholds to encourage ongoing engagement while retaining positive ROI.

2. Cost of rewards

Cost of rewards is a key metric to avoid overspending. Your total loyalty point rewards cost mustn’t exceed the incremental benefits generated by increased customer spending. 

Note: Incremental benefits don’t only mean higher sales. It can also include non-monetary benefits like increased customer retention, improved brand loyalty, and more word-of-mouth referrals.

Add the product/service, fulfillment, and administrative expenses associated with granting rewards to get your total cost of rewards. Then, compare that against the benefits to analyze the potential return on investment for different reward options.

For example, if offering a free product as a reward incurs a direct cost of $5 to your business, you should ensure this cost is more than covered by the additional spending or engagement the reward generates.

3. Competitive positioning

This factor influences your offering’s perceived value relative to competitors. If your competitors offer similar rewards at a lower price point, you may need to tweak your pricing strategy to stay competitive. Otherwise, you can justify a premium price with unique, high-quality rewards.

You can even go a step further by identifying areas where competitors fall short and strategizing to fill those gaps. Conducting market research analysis can be helpful in such a case. 

"On average, transactions made by loyalty members are worth over 60% more than anonymous transactions. Imagine even just 5% of your customer-base joins your loyalty program, and spends 60% more per transaction. Think what that would do to your bottom line."

- Rory Moss, Loyalty Expert

4. Economic conditions

Economic conditions can intensify market competition. During downturns, shoppers become more price-conscious and seek value for money. You can choose to engage in price wars or offer aggressive pricing strategies (i.e., offering higher-than-normal loyalty points) to gain customers.

Since this external factor is inevitable, you can only mitigate their effects to some extent. Leverage predictive analytics to anticipate shifts in demand and adjust your pricing like you would for competitive positioning.

5. Market demand

Responding to market demand for loyalty program rewards involves monitoring purchasing patterns, survey results, and industry trends. Insights from these activities shed light on which reward types appeal the most to your customer base.

When market demand for exclusive events is high, customers perceive these offerings as valuable and are willing to pay premium prices for them. Thus, you can charge more for experiential rewards.

Pro-tip: Market demands fluctuate. Continuously monitor your pricing strategy’s performance and adjust it as needed.

Point structuring

Customers may perceive the program as less valuable if it doesn’t meet their expectations or if the loyalty point bonus takes too long to accumulate. It can lead to decreased participation and engagement. 

Here are two ways to structure a well-designed points system that serves your (and your customers’) needs:

Point Valuation

Set a monetary value for each loyalty point. It can be a fraction of the average profit margin per transaction or your CLV. 

For instance, if each loyalty point is valued at $1.00, the program becomes straightforward and highly perceivable in terms of value, making it easy for customers to understand how much they’re earning with each transaction.

It’s best to start with a conservative point value. After monitoring customer response and performance metrics, make adjustments to obtain the optimal point value.

Point-to-spend Ratio

Specify the number of loyalty points‌ customers will earn for every dollar spent on purchases. A higher ratio encourages more frequent purchases to accrue points faster. Meanwhile, a lower ratio delays point accumulation but helps reduce program expenses. 

Industry benchmarks are a good reference point, but maintain it in line with your objectives. For instance, if the goal is to increase customer retention, opt for a higher ratio to encourage repeat purchases and ongoing engagement.

Refer to these price structuring options when deciding on the reward types you’ll offer. But before we get into these, here are more strategies to calculate loyalty points more accurately.

4 steps to sustainable rewards pricing

Follow these practical strategies to optimize your reward pricing while keeping the loyalty program compelling and aligned with your financial goals.

1. Understand cost-based pricing vs. value-based pricing

Cost-based pricing focuses on covering loyalty program expenses and guaranteeing profitability, while value-based seeks to connect rewards with perceived customer value.

Cost-based pricing calculates the direct costs associated with providing rewards. It’s a safer option for startups or small businesses with limited resources. It sets prices based on tangible costs rather than uncertain market factors or vague perceived value. 

Here’s a simplified illustration without factoring in retention rates, seasonal fluctuations, competitor strategies, and other pricing factors. 

You’re running a loyalty program, costing you $22 per individual ($15 for reward product costs, $5 for marketing expenses, and $2 for administrative overhead). If you aim for a 20% profit margin, you should be earning $27.60 per customer enrolled ($22 total cost per customer / 0.8 profit margin).

Value-based pricing, on the other hand, doesn’t focus on cost recovery. You calculate loyalty points pricing based on its impact on customer satisfaction and loyalty. It’s ideal for businesses that value brand reputation, such as luxury goods and high-end technology.

For instance, you could offer personalized services or products not available to the general public. This approach enhances their perceived value and can justify a higher points requirement, encouraging more purchases and engagement from members.

2. Incorporate customer feedback and insights from your data

Feedback lets you understand what your customers truly value. Solicit their ideas through surveys, reviews, and direct communication channels. 

In addition, data analytics can help you see exactly what works and what falls flat in your program. It tracks key metrics like CLV, redemption rates, and engagement levels. Use these insights to tweak your offerings and personalize rewards based on each customer base’s behavior and preferences.

3. Define your objectives

Your loyalty program’s objectives ensure that each reward contributes to attaining your bigger goals. Specify your target goals, whether it’s increasing customer retention or boosting sales.

Review your current reward offerings and assess how well they support these goals. Suppose your initial objective is to boost customer retention, but you notice that reward redemption rates are low. You can adjust your reward structure to include more experiential rewards or exclusive perks to pique more interest.

4. Analzye competitors and position yourself strategically in-market

Your competitors can overlook market gaps — and that’s where you come in. Study their offerings, including their reward types, pricing strategies, and program features. Recognize their shortcomings and make them your strengths.

Let’s say your findings show competitors lack flexibility in redeeming rewards. In this instance, having multiple redemption channels (e.g., online, in-store, and mobile) can help make your program stand out in a crowded market.

3 examples of successful rewards pricing structures

Check out these three brands that have captivated customers and driven business growth through their loyalty programs. Here are their real-world success stories:

American Airlines

The American Airlines AAdvantage® program offers elite status to frequent flyers with exclusive privileges such as priority boarding, systemwide upgrades, and extra baggage allowance. AAdvantage members can also earn bonus miles with partner airlines with every purchase using any Citi®/AAdvantage® Aviator® credit card.

Anyone can enroll with no annual fee, suggesting that value-based pricing can be as profitable as cost-based pricing. The AAdvantage® program’s longevity speaks volumes about its success. The increased engagement and revenue from more airline bookings and card purchases outweigh the reward costs, resulting in a favorable bottom line.

Neal's Yard Remedies

After decades of successful sales, Neal's Yard Remedies wanted to take the next step. It was time to undergo a digital transformation to offer a truly omnichannel experience. Unfortunately, their old POS was complicated to use and lacked an open API. Neal’s Yard Remedies wanted to find a POS and loyalty solution that worked seamlessly with their ecommerce platform to deliver that omnichannel experience.

Now, Neal’s Yard Remedies run an easy-to-use loyalty program across all their sales channels. It’s clear how to earn points, and there are multiple ways to earn. For a purchase, their points to spend ratio is set at 5:1 (customers earn 5 points when they spend £1). They’ve opted for a simple framework for rewards too: 500 points are worth £5.

Alpha60 

Alpha60 takes a different approach. Brand Manager Kelvin explains that Alpha60's loyalty program is about 'surprise and delight', rather than a promotional tool used to incentivize sales.

As part of the customer-first approach, ALPHA60 decided to make the loyalty program as simple as possible. Spend a thousand dollars, get a thousand points (a 1:1 points-to-spend ratio), get a $50 voucher.

“We try not to complicate it too much and add different things in, and that really works for us. I think it’s because it’s simple for people. It’s easy for customers to understand.” Kelvin believes simplicity helps customers get more invested with their points: they always know when they have a voucher ready to redeem.

Challenges in pricing rewards

The most common types of loyalty rewards include:

• Percentage-based discounts
• Fixed dollar discounts
• Free shipping
• Free products
• VIP experiences

Each ​​loyalty program reward has its cost implications. For instance, percentage-based discounts work well with price-sensitive customers or low average order values. They encourage larger purchases or more frequent visits, although they could hurt your bottom line if applied to high-value items.

If shoppers mostly have higher and varying average order values, setting fixed dollar discounts on specific thresholds or repurchase intervals can make pricing predictable.

E-commerce and online businesses benefit from free shipping because it eliminates potential barriers to online purchases. But you’ll have to set an average order value before you hand it off to your customers. Otherwise, it’ll erode your profits.

Offering free products or samples can boost product discovery and your loyalty program's perceived value. But like free shipping, the total cost shouldn't exceed the incremental revenue or engagement they generate.

VIP access or experiential rewards are an excellent option for building a loyal customer base. It helps enhance brand trust and differentiation by fostering a sense of belonging among top-tier loyalty members. To ensure profitability, only offer this reward when increased engagement and CLV can justify the expenditure of delivering such experiences.

Here’s a table to simplify your comparison:

To minimize costs while maintaining attractive rewards, don’t put all your eggs in one basket. Spread your investment across multiple reward types to target diverse audience segments. It won’t alienate customers who may not prefer a particular reward type. If you still can’t decide, talk to an expert for tailored advice.

Free Download: PDF and calculator for structuring your points and rewards

For more loyalty program optimization insights and tools, download our new PDF and calculator on pricing points and rewards. 

Notable trends in loyalty rewards

60% of brands claim experiences are indispensable for their success. Consider delivering experiential loyalty program perks they can’t get elsewhere to drive stronger brand advocacy.

Cutting-edge AI and analytics tools are another innovation that can help refine your reward pricing strategies. With online shopping, AI algorithms can track the most viewed, added to cart, and purchased products. Understand these patterns to maximize your pricing strategy on popular items.

Businesses also gather and analyze customer data in real time, urging more personalization and dynamic pricing. That way, you can streamline the redemption process with reward recommendations or one-click redemption. Implementing dynamic pricing could mean offering personalized discounts or bonuses tailored to individual customer profiles.

With so many emerging trends, it can be difficult to know where to begin. So, start with investing in the right loyalty software to harness these innovations and create highly effective reward systems.

Optimize your loyalty program today

Well-priced rewards inspire more loyal customers, reduce churn rates, secure repeat business, and differentiate your brand. All these benefits rely on how you calculate loyalty points and manage reward offerings.

With smart loyalty software like Marsello, customer-centric rewards with consistently high ROI are now more feasible than ever. Here’s our detailed guide to building a loyalty program that resonates with your audience.

Get advice from a loyalty expert and start driving repeat sales.

Read more: 7 Steps To Building A Profitable Loyalty & Rewards Program

“Is the juice worth the squeeze?”

If you’re running a small- to medium-sized business, you may be asking yourself this question when calculating how much it costs to acquire and keep your customers. For retailers – where profit margins often run thin and every customer counts, increasing the Customer Lifetime Value (CLV) is one of many levers you can pull to create loyalty and ensure repeat business.

What is Customer Lifetime Value?

Customer Lifetime Value is the metric used to calculate how much revenue or profit your business will generate during the amount of time your customer shops with you (customer lifetime). 

How do I calculate Customer Lifetime Value?

While having a clear, single answer to this question would be great, there is more than one answer on how to calculate CLV, and methods range from the most foundational to more complex calculations. 

The simplest way to measure customer lifetime value is to subtract your lifetime customer costs from lifetime customer revenue. Here’s what the formula looks like:

CLV = Lifetime Customer Revenue - Lifetime Customer Costs

For instance, if a business has a subscription service charging $100 monthly, with customers staying for 3 years, the Lifetime Customer Revenue is $3600 ($100 * 36 months). Assuming Lifetime Customer Costs are $600, the CLV is calculated as:

$3600 - $600 = $3000

This means each customer's net value to the business over their lifetime is $3000.

There are other ways to measure customer lifetime value. So if you want more in-depth information on calculating CLV, check out this article and try our Customer Lifetime Value calculator.

How do I increase Customer Lifetime Value?

After you calculate your baseline CLV, it’s time to pull the levers to increase it. Here are some tips to do just that.

1. Enhance your customers' experience

Increasing customer retention requires understanding the customer journey and making personalized recommendations. Delivering a better customer experience than your competition is a surefire way to reduce your customer churn rate and build loyalty. 

There are critical metrics to gather regarding customer satisfaction, including your Net Promoter Score (NPS). This information highlights areas of opportunity and gives your team a chance to rectify poor experiences before they become bad reviews.

In addition, personalized marketing campaigns are important to increase customer engagement. That’s why segmentation is key. There are several ways to segment customers to better direct your marketing efforts, and understanding the customer journey, pain points, checkout experience, behavior, and other customer data metrics are the foundation of your customer segments. Consider how much your customer spends, their buying patterns, engagement with social channels, and more. 

Creating a community of long-term, loyal customers who organically spread word-of-mouth referrals is an effective way to increase CLV.

Marsello customer, Pace Athletic, created their community by focusing on customer relationships, having an inclusive and welcoming environment, hosting a regular running club, and implementing a loyalty program with a referral rewards program. This strategy creates more touchpoints, listens to and incorporates customer feedback, and leverages customer loyalty programs – all of which lead to more conversions.

2. Implement cross-selling and upselling tactics

Another way to increase customer lifetime value is to point shoppers to products or services that add value to their purchases. You can do this through upselling and cross-selling. When done right, these sales tactics boost customer spending and AOV, ultimately helping you increase customer lifetime value. 

The retailer Scotty's Makeup & Beauty, for example, has a section on their product page recommending similar or complementary items. That way, when you view one of their products, you are also presented with items that enhance your purchase. 

Aside from driving additional sales, this practice improves the overall shopping experience by making it easier for customers to find and acquire everything they need in one place.

3. Create a customer loyalty program to increase Customer Lifetime Value (CLV)

Offering incentives and perks in a customer loyalty program is often successful in reducing customer attrition, boosting repeat purchase rate, and creating long-term customers. The best loyalty program for you will depend on your pricing, business type, and if you are looking for omnichannel support.

There are four main types of loyalty programs: 

• points systems
• tiered programs
• punch cards
• community-based incentives 

With points systems, customers earn points for every dollar they spend, which can be redeemed for products or services. Tiered loyalty programs are based on engagement or spending; the higher the tier, the more exclusive the reward. With punch cards, customers receive punches or stamps for purchases, with a reward once the card is filled. Community-based incentives are based on activities that help grow your brand and include activities like social sharing.

When thoughtfully created, rewards and recognition for customer loyalty can make a significant impact on your bottom line. 

"On average, transactions made by loyalty members are worth over 60% more than anonymous transactions. Imagine even just 5% of your customer-base joins your loyalty program, and spends 60% more per transaction. Think what that would do to your bottom line."

- Rory Moss, Loyalty Expert

And if you’re implementing personalized marketing efforts, personalized rewards are the next logical step. A successful rewards program often drives repeat business with exclusive offers, like VIP tiers and omnichannel support to keep your customers coming back, referring others and thus increasing their CLV.

Once your loyalty program is created, the work is far from over. You have a wealth of data at your fingertips, and using those data-driven insights to adjust your program is key. Offering rewards that resonate with your customer’s preferences and shopping behaviors is the art and science of personalized marketing campaigns and loyalty programs – and our customers see great success in this holistic approach.

Marsello customer, TennisGear, now has complete visibility into their sales across all channels through multi-site reports and easy-to-use dashboards. TennisGear experienced a 2.5% increase in their customer database soon after implementing a point of sale system that prompts staff to add customers to the loyalty program.

But the work didn’t stop there. With Marsello’s automation capabilities, TennisGear is seeing success in recovering abandoned carts and incentivizing lost customers to return and complete their purchase. Together, Marsello works with TennisGear to create a loyalty program that sets them apart from the competition and seamlessly integrates with their other systems.

"I think Marsello is the only solution that we found that had a native integration between all the systems that we are using. Now we can really easily separate our in-store and our online customers. In terms of loyalty, campaigns, and everything, it's certainly the best solution that we found," highlights TennisGear Project Manager, Declan.

4. Send strategic email marketing campaigns

Your customers receive dozens of emails, if not more, every day, and rising above the noise requires strategic planning. To save small marketing teams from being bogged down by the complexity of email marketing, content marketing, and the like, automation is key and optimization is the goal.

From the initial welcome email onboarding process to abandoned cart emails and win-back campaigns, being intentional and targeted in your communication is key. Automated emails tailored to customer behavior and buying patterns helps nurture customer relationships. 

To do this, the aforementioned segmented email campaigns based on customer shopping patterns and preferences provide a customized feel and increase open rates, engagement and then ultimately, CLV. Depending on your business, mixing up personalized recommendations with related products, offering abandoned cart discounts, providing relevant content marketing materials with insights, tips, early access, etc., all work in tandem to create a strategic marketing campaign that works for you. 

At Scott’s Makeup & Beauty Supply, their brick-and-mortar and online store marketing efforts are tracked to view where they’re having success. Their pre-built automations help recover more abandoned carts, drive repeat purchases and win back lost customers. With Marsello, they can see their email campaigns generate 63% of all revenue attributed to marketing activities, delivering on the metrics that matter.

5. Proactively collect customer feedback—and act on the insights

One of the best ways to get customers to stay with your brand is showing them that you value their input. And to do that, you need to get better at collecting — and acting — on their feedback. 

Regularly send out surveys to glean insights into customer satisfaction. Ask shoppers what they love most about your brand, whether they would recommend you to their friends, and what you can do to serve them better. 

You should then use those insights to improve your products and services. For example, when customers told the apparel retailer Klassy Network that they wanted long sleeved tops with built-in bras, the brand listened and launched those styles. 

Klassy Network sent out an email with the subject line “You Asked… We Listened,” highlighting how customer feedback directly influenced their latest product offering.

As for how to collect feedback, the best way to do it is put the process on autopilot. Use marketing automation software to send out surveys and feedback requests after each purchase.

We can see this in action in the fashion store Katie Waltman, which uses Marsello to automate feedback collection. 

After loyal customers collect points, Katie Waltman's team sends an automated email to show their points balance and asks for feedback on their purchase experience through a simple survey.

Katie Waltman's customers are eager to give feedback, with the jewelry brand receiving a 97% positive rate, especially for product quality, customer service, and value.

6. Encourage subscriptions

Subscriptions turn one-time shoppers into long-term customers, which then increases CLV. Subscriptions can also stabilize your finances, because they create reliable and predictable revenue streams.

Businesses selling consumable goods like food and supplements lend themselves well to the subscription model. If you fall into this category, you can encourage subscriptions by offering discounts when customers opt for recurring purchases.

Boba Tea Protein, a site that sells fitness supplements, does exactly that. When you’re on their product page, you'll notice the one-time purchase price of their protein powder is $47.99, but if you choose a subscription, the price drops 10% to $43.19.

This approach prods people to consider subscribing, which then boosts customer retention and increases the likelihood of generating consistent revenue over time.

7. Focus on high value customers

Segment your customers based on their purchase activity, then identify those who spend the most. From there, consider creating personalized offers, rewards, and communications specifically for them to enhance their loyalty and encourage continued high spending.

This targeted approach not only maximizes your ROI from marketing and customer service, it also strengthens brand loyalty (and CLV) among your most valuable shoppers. Ultimately, concentrating on high-value customers leads to increased revenue, higher customer satisfaction, and a more sustainable business model.

8. Educate your customers on the value of your products 

People will continue buying from you for as long as they find value in your products and services. That’s why it pays to educate your customers and show them how they can get the most out of your products. 

One brand that does this well is GoPro. They have a special section on their website called “GoPro Tips,” where they provide extensive how-to videos, tips for capturing great footage, and advice on using their cameras to the fullest, helping customers maximize the potential of their products.

Final words

At Marsello, your customer success is our success – and calculating CLV is an important metric to help determine what is working and where improvement can be made. If you’re looking to achieve business growth, you need a trusted partner and a strategy in place to get where you’re headed.

Ready to learn how Marsello can contribute to your business growth goals? Get in touch to learn more.

Join a community of 5,000+ retailers building sales with Marsello's customer loyalty software

Read more: 7 Steps To Building A Profitable Loyalty & Rewards Program

Fact: Loyal customers are some of your most reliable income sources during uncertain times. 

We can see this in action in some of the top brands in the market.

Starbucks, for example, was one of the companies that quickly recovered after the Great Recession. Despite the economic downturn, Starbucks continued to invest in its loyalty program, enhancing its value proposition by offering free refills, free Wi-Fi, and special offers.

Or consider Sephora, which launched its rewards program, Beauty Insider, in 2007, and has since expanded and diversified the program to include personalized offers, exclusive events, and early access to new products. Today, the majority of Sephora’s sales come from Beauty Insider members. 

All this to say that rewards and loyalty programs can unlock lasting customer retention and revenue.

But there’s a catch: you’ll only achieve these benefits if your loyalty program stands out in an increasingly competitive landscape. 

In today’s crowded market, consumers are bombarded with them left and right. That’s why we’re big believers in customization—tailoring your program to meet your target audience’s preferences and needs.

In this article, you’ll learn how to build a loyalty program that puts your audience first. We also discuss strategies for creating a rewarding customer experience that secures repeat business.

Importance of customer insights in developing notable loyalty programs

Guesswork often influences strategies when developing loyalty programs. So before proceeding to launching or overhauling your loyalty program, make it a point to challenge your views.

Start with a hypothesis. Let’s say you assume your customers are motivated by discounts. Consider the variables that made you think this way. Is it based on sales performance? 

Next, look at your data and analyze your sales trends. What impact do discounts really have on your sales?

Maybe you discover that discounts do work, but not as much as they used to. Poring over customer insights may show you that many of your customers favor tangible freebies, such as complimentary samples.

In this instance, you may need to discard your original hypothesis. Markets adapt, and customer preferences shift. Use your assumptions as a framework, but refer to actual insights as you tailor your loyalty program accordingly.

Loyalty expert Rory Moss talks about getting data & survey results to customize your loyalty program and appeal to higher value customers.

Benefits of insight-driven customer loyalty programs

Learning to fine-tune your customer loyalty programs directly translates to concrete benefits for your business. These include.

• Higher customer engagement. By basing loyalty programs on real insights, you can design initiatives that resonate with your customer base. They’ll feel a deeper connection with the tailored rewards and incentives. The more relevant you are, the better your customer relationships will be.
• Better resource allocation. Insight-driven loyalty programs help your marketing team manage resources. You’ll avoid spending on generic incentives that may not align with customer expectations. Instead, you can direct the resources toward more enticing initiatives, maximizing the loyalty program’s long-term impact.

Customer insights ensure program success with strategic implementation. Here’s how to leverage this data to build customer loyalty programs that stand out and connect with your target demographic.

6 steps to develop a successful customer loyalty program

From getting customers on board to measuring performance, launching and managing loyalty programs take work. Follow these 6 steps below to start and gradually increase signups and engagement levels.

1. Conduct customer interviews

Shoppers stay loyal to brands that understand them. To get to know your customer base, conduct direct surveys and interviews. Talk to a sample of 10 to 20 customers in person or on the phone, varying between regulars and one time/new customers.

Regulars are the most engaged audience with repeat purchases. Use the interview to identify what they want from a loyalty program. 

One-time/new customers are not as engaged–at least not yet. Take the interview as an opportunity to learn their preferred incentives, offers, or experiences to keep them coming back

Keep the questions consistent across both groups to get a well-rounded perspective. Here’s a set of potential questions you can ask these individuals. 

• How often do you purchase from our store?

• On a scale of 1 to 10, how likely are you to participate in our loyalty program?

• What types of rewards or perks would motivate you to join the program? (e.g., discounts, freebies, cashback promos, special offers, exclusive event access, early access to sales)

• How important is it for you to feel valued and rewarded for your loyalty to us?

• Do you prefer tiered membership systems or ​​points-based loyalty programs? (i.e., point-based voucher amount vs. bronze, silver, and gold tiers with more valuable rewards as you progress)

• How likely will you recommend us to others if we offer reward/referral programs?

• Are there any specific products or categories you’d like to see in the loyalty program rewards?

• What communication channels do you prefer to receive loyalty program updates and offers? (e.g., email, SMS, social media, in-store notifications)

• How do you typically redeem loyalty rewards or benefits? (e.g., online, in-store, mobile app)

• Would you be more likely to participate if the program offered early access to new product releases or exclusive benefits?

• Do you have any concerns or reservations about joining a loyalty membership program?

• How likely will you continue shopping at our store with vs. without a loyalty program?

• What additional features or benefits do you want to see in our loyalty program?

Regular and one-time shoppers have distinct preferences, motivations, and expectations. Engage with both ends of the spectrum to know what drives each group from a 360-degree standpoint. 

Pro-tip: Gather contact details, such as email addresses and phone numbers, should you require a follow-up.

2. Collate survey and feedback responses

You can also use surveys to get more quantitative data on your customers. The goal here is to organize and analyze customer feedback to identify recurring patterns. 

You can do it in a formal, informal, or a hybrid approach.

Formal surveys are recommended for large-scale operations. Here are the approaches to implementing this method for a more thorough understanding of survey responses.

• Use advanced software to categorize feedback systematically. For instance, you can implement customer feedback management platforms that tag and sort responses based on common themes.
• Statistical analysis. If you have the resources, consider applying statistical methods to identify patterns quantitatively. It involves frequency calculation of particular keywords or sentiments expressed by customers.

Informal surveys are best for small businesses with limited resources. They’re more qualitative in nature and require first-hand assessment to understand your customers. 

• Manual review. Evaluate customer comments, emails, or survey responses. The goal is to absorb the qualitative aspects that may be overlooked in strictly quantitative analysis.
• Key learnings. As you review feedback, jot down a few bullet points that summarize key learnings. These could be recurring themes, noteworthy suggestions, or significant areas of concern raised by customers.

You can also combine formal and informal approaches (hybrid) to maximize both methods’ strengths. Doing so balances qualitative findings with objective insights in a more accessible yet scalable manner.

3. Review and act on the data

Knowing what appeals to new and existing customers helps ensure your loyalty program aligns with your overall brand identity. It helps craft your Unique Value Proposition (UVP), which you can use to reinforce your brand message and create a cohesive experience across all touchpoints.

Review the preferences and needs you’ve discovered from feedback responses. Then be sure to offer customers enticing rewards to meet those needs. 

Take Amazon Prime’s paid loyalty program, for example. Industry data shows that 71.8% of its loyalty program members find the $99 annual pricing worth it for all the shipping, shopping, streaming, and reading perks. 

How does Amazon know this? Simple. The company actively creates, distributes, and collects online survey responses.

Not many businesses have the same resources as Amazon. But it doesn’t mean you don’t have enough data to analyze in your hands. 

Sports retailer TennisGear actively observes their database to understand customer behavior. They grow and keep it accurate through complete visibility across their sales channels and prompts that reminds staff to update or add customer information.

Maintaining a continuous feedback loop with your customers is key to creating a loyalty program that resonates. Send out regular surveys or perform ongoing database analysis to stay current with changing preferences and market trends.

Additional tip: Look at review sites and Google Reviews to draw information about what customers might appreciate seeing more in your programs.

4. Design and optimize the program based on feedback

Now that you know your rewards and incentives, optimize your program’s structure and mechanics to incentivize customers to spend more. 

Choose between non-tiered and tiered programs. Non-tiered appeals to a broad audience, whereas a tiered point system suits a diverse customer base with varying spending levels.

Balance the program’s exclusivity and inclusivity if you opt for the latter. Introduce exclusive high-value perks for top-tier loyalty cardholders (e.g., premium rewards, VIP events) and accessible rewards for those in lower tiers (e.g., birthday discounts).

Lastly, decide if your customers prefer simple or gamified types of loyalty programs. Gamification adds interactive elements but often requires more resources in terms of design, development, and ongoing management. 

In Sephora’s Beauty Insider Challenges, for instance, members must first complete a series of tasks to earn rewards. Some tasks don’t involve a purchase but require active engagement. The first challenges include checking out online, picking up orders in-store, signing up for text alerts, and trying Sephora’s in-store shade-matching tool.

If you’re still testing the waters, a straightforward loyalty program can be equally lucrative. 

Melbourne-based fashion label ALPHA60 exemplifies this with a simple earn-and-redeem model: spend a thousand dollars, earn a thousand points, and receive a $50 voucher.

ALPHA60’s Brand Strategist, Kelvin, explained that ALPHA60 customers prefer simplicity. Just by understanding this tendency led to the brand enjoying a high repeat purchase rate.

Find what works best for your audience, and consistently seek feedback for future adjustments if needed.

5. Make communication personalized wherever possible

Before you roll out the loyalty program, establish customer-centric communication channels. Identify where they prefer to receive updates and redeem rewards. Do they prefer traditional in-store redemption like punch cards or through handy technology like an app or a digital card?

If customers raise concerns or suggestions, acknowledge and address these in your response. Show that you value their input and actively strive to improve their experience.

A one-size-fits-all approach in communication may alienate customers who seek tailored interactions. Don’t lose your regulars to more attentive competitors. Pay attention to customer behavior when launching or announcing loyalty program updates.

6. Choose technology to run the loyalty program

Invest in user-friendly technology to simplify the implementation process. It’ll help your staff to adjust fast, minimizing the learning curve and likelihood of errors.

Loyalty program software like Marsello features seamless integration with ecommerce and POS systems (e.g., Shopify, WooCommerce, Bigcommerce, and Lightspeed) to leverage data analytics.

Syncing in-store and online transactions generates insights to help you deliver consistent loyalty experiences. It’s a hands-off process you can leverage to offer custom-tailored promotions, point earning, and reward redemption across all platforms.

With the right tools, tracking your loyalty program’s performance becomes easy. Take note of the key metrics and indicators to measure in the next section.

How to Measure Your Program’s Success

Define key performance indicators (KPIs) that align with your goals to gauge initial success. Some KPIs to consider are customer retention, referral rates, average order values (including credit card transactions), and customer lifetime value. These metrics measure the program’s overall contribution to your revenue stream.

Tracking KPIs is more efficient with Marsello’s dashboards and automated reporting. These tools feature real-time updates with charts, graphs, and other visual elements to interpret complex data patterns. You can also set up predefined schedules to receive detailed reports.

Invest in technology to keep your efforts on track. Let your staff focus on refining your marketing strategy rather than spending significant hours on data gathering and reporting.

FAQs

How can small businesses with limited resources effectively compete with larger companies in offering attractive loyalty programs?

Small businesses can level the playing field with larger companies by focusing on personalized experiences and leveraging community ties. Even with smaller budgets, they can create loyalty programs that resonate deeply with their local customer base by offering unique, personalized rewards and experiences that big chains cannot. Using social media and local events for promotion can also enhance visibility and engagement without significant investment.

What are the common pitfalls or challenges businesses face when implementing loyalty programs, and how can they be overcome?

Common pitfalls in implementing loyalty programs include failing to understand customer needs, overcomplicating the rewards system, and lack of promotion. Businesses can overcome these challenges by conducting thorough market research, simplifying participation processes, and using multiple channels to inform customers about the program. Continuously gathering feedback and adjusting the program based on customer preferences ensures it remains relevant and appealing.

How do businesses ensure the long-term sustainability of their loyalty programs?

Ensuring the long-term sustainability of loyalty programs requires continuous adaptation and engagement strategies. Businesses should regularly review and update their loyalty programs to keep them fresh and aligned with evolving customer expectations. Incorporating customer feedback, analyzing participation data, and staying informed about industry trends can help businesses adjust their offerings. Creating a community around the brand and offering exclusive, time-sensitive rewards can also maintain interest and participation over time.

Streamlining Loyalty Programs with Marsello

The best customer loyalty program prioritizes the customer experience. So, rather than rushing to launch your rewards or loyalty program, take time to solicit shopper insights, analyze data, design a responsive program, personalize communication, and use technology wisely.

Loyalty programs shouldn’t remain static. Keep ongoing customer engagement by regularly evaluating and updating your program.

If you’re ready to reward customers on their next purchase, start with Marsello’s free trial. Build your loyalty program today while synchronizing your omnichannel strategy.

Join a community of 5,000+ retailers building sales with Marsello's customer loyalty software

Read more: 7 Steps To Building A Profitable Loyalty & Rewards Program

A well-designed loyalty program is the most powerful tool a retailer can have in their marketing arsenal. They offer you a way of engaging your audience, growing revenue, and ensuring your customers stick around for the long term.

But, how do you create a great loyalty program? In this blog, we’ll dive into a few simple steps that can help you design and launch an effective loyalty program for your brand.

• • 1. What is a loyalty program, and why is it important?
    2. How to create a loyalty program in 2024
    3. Decide what you want to achieve with your loyalty program
    4. Determine the type of loyalty program you want to launch
    5. Creating your loyalty program
    6. Set up your points system
    7. Configure your rewards and VIP tiers
    8. Promoting your loyalty program
    9. Final words
    10. Bonus tips

What is a loyalty program, and why is it important?

A loyalty program is a system that encourages customers to return by rewarding them with points and incentives for each purchase or interaction they have with your brand.

A well-designed loyalty program goes beyond superficial benefits and genuinely enhances the customer experience. It gives your customers a reason to spend more and shop with you more frequently. The best part is that it can be automated to reward them for activity that grows your brand, like making a purchase, referring a friend, or sharing your profile on social media.

These incentives not only keep your customers engaged but also help your business thrive, driving repeat purchases, winning new business, and cultivating long-term relationships with your brand. 

How to Create a Loyalty Program in 2024

Decide what you want to achieve with your loyalty program

For most retailers, the ultimate goal of a loyalty program is to increase repeat business and promote activity that grows your customer base and brand, however, it's crucial to tailor your loyalty program to your specific needs.

Here are some specific goals you might want to achieve with your loyalty program. Keep in mind that every business is different so it’s worth reflecting on what your overall business goals are.

1. Increase customer retention: Perhaps your repeat purchases rate is low, and you don’t often see the same customers coming back.
2. Build your customer database: Gather more valuable customer data to inform your marketing strategy and increase brand engagement.
3. Generate more sales: Increase repeat purchases and provide customers with incentives to spend more per transaction with your brand.
4. Word-of-mouth marketing: Encourage your customers to spread the word by offering incentives for referrals, growing your database, and increasing your brand awareness.
5. Reduced marketing costs: 80% of all sales come from 20% of your customers, and it’s much cheaper to target your existing customers than to attract new ones.
6. Competitive advantage: Stand out from your competition by adding value to your customer experience. Give customers a reason to choose your brand first.

Remember, specific objectives will vary based on your business needs and market situation. It’s essential to define clear goals for your loyalty program so you can measure performance and know what works.

Determine the type of loyalty program you want to launch

There are many types of loyalty programs available to you, each with its benefits and tailored to different business models. Here are some common types:

1. Points system for rewards: Customers earn points for every dollar they spend with your business, or for specific actions. These points can be redeemed for free products or other rewards.
2. Tiered loyalty programs: Customers can progress through various tiers based on their level of engagement. The higher the tier, the more significant or exclusive the reward.
3. Punch cards: Customers can receive punches or stamps for each purchase they make with you, with an exclusive reward or free product available after a certain amount.
4. Community-based incentives: Customers can earn points of rewards for activities that grow your brand, like sharing your profile on social media, liking you on Facebook, or successfully referring their friends to your store.

In 2024, we’ll see brands adopting a ‘hybrid’ loyalty program model combining various loyalty program types. The best loyalty software providers offer a range of customization options, helping you craft unique loyalty rewards that align with your business model and customers’ shopping habits.

Creating your loyalty program

Now that you’ve decided on what type of loyalty program you’ll launch, it’s time to dive into the creation process.

In this example, we’re going to focus on a comprehensive loyalty program setup.

But before you jump in, here are some key metrics you’ll need handy before you configure your reward settings.

Know your margins!

... And how much you're willing to give away. Here are some helpful metrics to have on hand 👉

Average purchase value

First, identify how much your average customer spends when they purchase at your store. This metric is crucial as it serves as the foundation for determining the number of loyalty points you should offer to your customers.

Average purchase frequency

Knowing how often customers purchase from your store is a critical part of configuring your loyalty program.

Say you decide to offer 1 point for every $1.00 spent and your first reward (in this case, 20% off) requires 250 points to unlock. That means a customer will need to spend $250 at your store before they can unlock this reward.

While it might initially seem like a substantial amount, consider this: if your average purchase frequency is once a week, and your average purchase value is around $125, your typical customer will gain access to this reward within 2 weeks. If this is the case, your rewards system is probably too generous and may be eating away at your margins.

Product margins

When you’re configuring your rewards, it’s important to know your product margins. Platforms like Marsello allow you to choose between percentage and fixed discounts (i.e. $20 off), giving you more flexibility to reward your customers the way you want.

Typically, we recommend using percentage-based rewards as they scale alongside your order total. Here’s why: If you opt for a fixed discount like $20 off, customers might find ways to abuse it, potentially impacting your profitability. Additionally, if your average purchase value is low, then customers may be forced to add to their cart to redeem the discount.

Percentage-based rewards scale naturally with the order total, creating a fair balance between your customer’s expectations and your company’s wallet.

Set up your points system

Designing your points system is the first step toward a successful loyalty program. Loyalty points encourage customers to engage with your brand by rewarding them with loyalty program points for purchases and other activities. Customers’ points can then be redeemed for discounts, free products, or other rewards of your choosing.

Though there are countless ways for customers to earn loyalty points, here are some of the basic options:

• Making a purchase: Customers earn points for every purchase they make at your store.

💡 We recommend offering 1 point for every $1.00 spent to keep things simple.

• Creating an account: Encourage customers to kick-start their earnings with points when they create a new account. This is a great way of increasing your customer database.
• Completing their profile: Reward customers points for providing their personal details, like birthday, gender, and mobile number. This helps you build an information-rich database.
• Say Happy Birthday: Personalize your loyalty experience by enabling the Happy Birthday points option. Surprise your customers on their special day.
• Product reviews: Encourage customers to review your products.
• Acting sustainably: Reward customers for acting sustainably. I.e. bringing a reusable shopping bag when they shop with you.
• Liking on social media: Grow your social media following by gifting points to customers who engage with your brand online (Facebook, Instagram, and Twitter).
• Sharing on social media: Incentivize customers to spread the word about your store.
• Refer a friend: Kick-start your referral program by rewarding customers when their referred friend makes their first purchase.

Beauty in simplicity - How ALPHA60 keeps their loyalty
program as simple as possible.

"We try not to complicate it too much and add different things in, and that really works for us. I think it’s because it’s simple for people. It’s easy for customers to understand.”

Kelvin, Brand Manager

Configure your rewards and VIP tiers

Now that your customers have the means to earn points, it’s time to map out your rewards ladder and VIP tier structure.

When editing your rewards, it’s essential to strike a balance. If your rewards are too easy to unlock, customers may unlock them too quickly, leaving them with nothing to work towards. On the other hand, if you set the bar too high, customers might lose interest.

The key is to establish a logical and well-structured progression that ensures customers feel like they’re advancing towards greater rewards with each interaction. This keeps them motivated and engaged throughout their journey with your brand.

Rewards

To illustrate, let’s take a look at a hypothetical brand, Opal Essence.

At Opal Essence, members earn 1 point for every $1 spent at their store.

• • Average purchase value: $100.00
  • Average purchase frequency: 3 months

The key to your rewards ladder is to make them realistic and attainable, without giving too much value away. For example:

• • 10% off - 200 points to redeem
  • 15% off - 400 points to redeem
  • 20% off - 600 points to redeem

In this case, with customers spending an average of $100 per purchase, they would need to make two purchases to unlock their first reward. And so on… four purchases for the 15% discount, and six to unlock the 20% discount.

This rewards setup creates a logical sense of progression for customers, making them feel like they’re working towards substantial perks with each visit to your store. Not only does it drive repeat sales, but it also fosters brand loyalty and increases customer lifetime value.

While percentage-based discounts are the easiest to implement, there are various other reward options to choose from. Here are 5 common types of rewards:

• Percentage (%) off rewards: storewide, on a specific item, or on specific collections
• Fixed value ($) off rewards: storewide, on a specific item, or on specific collections
• Free shipping
• Free product(s)
• Spend threshold rewards: Requires a minimum purchase value to redeem

Learn more

VIP Tiers

A VIP program elevates your loyalty strategy by making your best customers feel special. With VIP tiers, you can offer additional benefits to those who reach higher tiers, such as exclusive rewards, free shipping, early access to sales, VIP events, and faster points earning.

Consider how the VIP tiers align with your overall business strategy. For example, if you sell high-end fashion products and are launching a new collection, granting VIPs early access to new product lines creates an aura of exclusivity. This makes them feel like valued insiders.

Here are some VIP perks ideas you could implement:

• Faster points-earning: Silver Tier customers earn 2 points for every $1 spent, and Gold Tier customers earn 3 points for every $1 spent.

• Exclusive rewards: Offer unique rewards to your VIP customers, making them feel valued and understood.

• Blanket discounts: VIP tier customers enjoy ongoing discounts for every purchase they make from your store, such as 10% off.
• Free shipping: Ship products out to your VIPs free of charge to thank them for their ongoing support. This makes them feel appreciated and encourages them to stick around.

VIP tiers not only boost customer loyalty but also create loyal advocates who will spread the word about your brand.

💡 Pro-tip: Utilizing VIP tiers and customer lists enables you to craft highly personalized email and SMS campaigns. Perhaps you’re hosting a VIP-only event, or want to offer exclusive styling services, VIP tiers, and segmentation lists can help you tailor your marketing to cater to your most loyal customers.

Promote your loyalty program

Before you enable your loyalty program, take a moment to review your settings and ensure that your points, rewards, and VIP tiers are configured correctly. This is the perfect time to revisit your business goals and check that your program aligns with your business strategy and overall direction.

With your loyalty program ready to go live, it’s time to spread the word. Send a captivating loyalty program announcement email to share the exciting news with your customers. This announcement can serve as your invitation to customers, encouraging them to shop again and engage with your new loyalty program.

💡 Pro-tip: To build excitement for your loyalty program, consider sending an email a few weeks before the official launch, teasing the upcoming loyalty perks and getting customers excited about what’s to come.

Final words

Loyalty programs aren’t just about giving away discounts; they’re a highly strategic tool that helps you drive repeat sales and build long-term relationships with your customers. Done right, a loyalty program fosters a community of loyal advocates, expanding your brand’s reach and ultimately increasing your bottom line.

If you’re looking to create a loyalty program for your business, Marsello makes it easy to set up, launch, and promote your loyalty program with ease.

Create your loyalty program with Marsello

Bonus tips

Embrace an omnichannel approach

Building a successful loyalty program begins with understanding your customers’ needs. An omnichannel loyalty program is one of the best ways to engage and reward your customers, no matter how they shop with you. Customer loyalty platforms like Marsello enable you to run your loyalty program seamlessly across both in-store and online channels, ensuring customers can access the benefits of your program, regardless of their shopping preferences.

Learn more

Measure your performance and optimize

Remember, the job’s not finished once your loyalty program is live. By monitoring your loyalty reporting and customer activity, you can uncover insights to inform your future marketing and loyalty program optimization. Regular optimization will ensure that your loyalty program continues to evolve, providing the best experience for your customers.

Have fun with it

Creating a loyalty program can be an exciting journey that helps you understand and connect with your customers on a deeper level. It’s a chance to get creative and celebrate your brand’s unique selling points. So, while you’re planning your loyalty program, don’t forget to have fun with it.

Good luck with your loyalty program creation!

Next read:  How to create a points system for rewards

Updated 3 June 2024.

You win a lot of new business over Black Friday, but do they stick around? Black Friday isn't just about sales; it's a unique opportunity to build long-lasting customer relationships and strengthen brand loyalty.

While the typical approach emphasizes short-term gains in the form of sales and revenue, this strategy falls short in fostering lasting loyalty beyond the holiday season. So, how can you transform Black Friday into a platform for building customer loyalty that endures?

Quick links:

• • • 1. Prioritizing Relationship-Building Over Discounting
    • 2. The 3 Types Of Black Friday Shoppers
    • 3. Maximize Black Friday Sales To Your Regulars
    • 4. Attract Newcomers Who Will Stick Around
      
    • 5. How Marsello Helps Merchants Sell More Over & After Black Friday

Prioritizing Relationship-Building Over Discounting

Black Friday presents an opportunity to engage customers on a deeper level. While many shoppers chase discounts, true brand loyalty goes beyond price reductions. Consider your own shopping habits – you likely have loyalty to brands that resonate with your values and engage with you through various channels. Brands that prioritize customer experience, for example, tend to have more committed customers.

Building authentic relationships with your customers creates a defense against competition and discount-driven strategies, enabling your brand to thrive even in a volatile market.

The 3 Types Of Black Friday Shoppers

There are three types of customer who jump on a Black Friday sale. Some customers you’ll want to avoid entirely, while others will be left with a lasting, positive impression of your brand (and come back for more).

1. Bargain Hunters

These Black Friday shoppers are notorious for scoping out the best deals and discounts, rather than building long-lasting relationships with brands. They’ll look for the store with the best price on the products they’re looking for, and will happily choose Amazon over you.

2. Loyal Regulars

Your most loyal customers love keeping tabs on your sales so they can enjoy the odd discount. They’re shopping with you at most times of the year anyway, but sometimes there’s that item they couldn’t quite justify at full price and they’re elated to pick it up at 10% off. This segment will also typically purchase more items from you over sale periods than other segments.

3. Brand Newcomers

This is your ideal segment of new customers. These customers are first-time shoppers who discovered your brand because they spotted a sale, and were overjoyed by the product and brand experience. They loved what they found, and they are more than happy to sign up to your loyalty program or email list to hear from you more. Let’s take a closer look at the second two segments, and how you can maximize sales from each of them during (and after) Black Friday.

Maximize Black Friday Sales To Your Regulars

Black Friday is the perfect time to show your loyal customers some extra love. This shopping season, you can boost your sales by following a few key strategies. Let's dive into these tactics to make this Black Friday a memorable one for your loyal customer base.

Send more campaigns

Send more emails and SMS messages—the normal marketing rules don’t apply. If you run a loyalty program, make sure you’re using your customer purchase data to send targeted discounts and offers where possible.

Prepare your loyalty program

There’s a lot you can do to add value over Black Friday beyond discounting. You can award more points per dollar spent, introduce exclusive seasonal rewards, or offer limited-time access to a higher loyalty tier.

Give them special treatment

Make your existing customers feel even more loved by giving them VIP or early-bird access to your sales. Alternatively, you can offer a kickstarter voucher as a bonus—an initial $10 off to stack onto their Black Friday discounts.

Encourage them to share your sales

Encourage your customers to let their friends know about your sales. Offer incentives for referrals. You can sweeten the deal by offering extra loyalty points or rewards for sharing over the Black Friday campaign period.

Remind them of the value they earned

Send frequent points balance emails to remind these customers of their rewards, reinforcing the value you delivered over the sales period. (This has the bonus effect of encouraging them to return and redeem their rewards!)

Attract Newcomers Who Will Stick Around

Over Black Friday, you’ll welcome newcomers into your customer base who have potential to become loyal supporters in the long run. Let’s explore some strategies to keep newcomers engaged beyond the sales season.

Prepare your loyalty program

Will Brand Newcomers get anything extra in your loyalty program if they sign up over Black Friday? Double or triple points for a Black Friday purchase perhaps? A 10% voucher on their next purchase? Make sure your offers are all set up, ready for your campaigns.

Capture their details!

Make sure you effectively communicate the benefits of joining your loyalty program to increase your customer attachment rate during the holiday season. This will grow your marketable database and help you retain them beyond Black Friday.

Customer attachment rate: The percentage of your total sales that are linked to a customer profile. A higher customer attachment rate signifies superior data quality and enhances your ability to effectively market to your database.

Encourage them to share their experience

Promote active participation in your loyalty program and create opportunities for these customers to share their positive experiences with friends and family. Encourage them to refer new customers and reward them for doing so. This not only helps you acquire new customers but also solidifies the bond with your newly discovered audience.

Ask for their feedback

Asking for private customer feedback can reinforce positive interactions and help iron out any hard feelings. Customers who reciprocate by leaving feedback (good or bad) indicates a promising level of engagement, and can mitigate bad reviews.

How Marsello Helps Merchants Sell More Over & After Black Friday

Marsello merchants went over and above in Black Friday in 2022—running extra loyalty program incentives, rewarding customers for referring friends, and sending countless email and SMS campaigns. Over the Black Friday / Cyber Monday sales period, more than 2.6 million orders were placed by their loyal customers.

How do Marsello merchants set up for success?

• A beauty retailer in the US sent a whopping 2-7 emails per day over the sales period, and made more than $350k in revenue Black Friday sales, with one email making over $26,000.
• A food retailer in the US sends around 1 email per day over the BFCM period. Their points earned by customers triple in November and December each year compared to other months.
  
  

Top tactics to retain and grow Black Friday customers

• Points campaigns: To award more points per dollar spent over a particular time period or in a specified store
• Tiered loyalty: To incentivize shoppers to unlock more valuable rewards and spend-to-points ratios
• Prompts for staff at POS: Add reminders at point-of-sale so staff remember to add customers to each sale. Lightspeed users can do this with the Advanced Marketing add-on, powered by Marsello.
• QR codes & digital membership cards: Help to increase customer attachment rates by making it easy for them to identify themselves at point-of-sale.
• Referral programs: Make the most of the sales frenzy by offering referral incentives. Drive word-of-mouth and brand awareness from regulars, and let new shoppers know about the program too.

Final Words

Black Friday is undoubtedly a powerful tool for businesses to boost sales and revenue. However, its true potential goes beyond the short-lived excitement of discounts and one-time transactions.

To truly harness the value of Black Friday, companies should shift their focus towards prioritizing relationship-building over discounting.

While Bargain Hunters may provide a quick spike in sales during the holiday season, their loyalty tends to be fleeting. Instead, businesses should concentrate on cultivating relationships with Loyal Regulars and Brand Newcomers.

Loyal Regulars, who already have a connection with your brand, can be nurtured further through personalized marketing efforts, VIP access, and special offers during Black Friday.

On the other hand, Brand Newcomers, attracted by the sale, present an opportunity to convert them into long-term customers through effective communication, loyalty programs, and referral incentives.

Read more: 7 Steps To Building A Profitable Loyalty & Rewards Program

Marsello has integrated with Klaviyo to create the ultimate customer marketing platform.

In the fast-paced world of retail and eCommerce, one constant remains: your customers. However, in today’s highly competitive retail environment, customers are inundated with irrelevant promotional emails, making it harder than ever to cut through the clutter and get them shopping.

By connecting Marsello to Klaviyo, you can harness your in-store loyalty and order data to create detailed segments and run more effective campaigns in Klaviyo.

Let’s explore the integration in more detail.

What is Klaviyo?

Klaviyo is a unified customer marketing platform designed to help engage customers and drive sales with email campaigns, SMS, and more. It’s one of the few email marketing services designed specifically for eCommerce, and with an impressive database of over 110,000 paying customers, it’s no wonder brands choose Klaviyo to manage their campaigns.

Here are a few benefits Klaviyo has to offer:

• Segment your database using historical data and real-time behaviors for targeting
• Build coupon codes for automated flows and campaigns
• Use built-in templates and automated emails for simple workflow management
• Accurate reporting and attribution for each campaign and channel

Not using Klaviyo? Discover more about its features and benefits here

What is the Klaviyo loyalty integration?

The Marsello and Klaviyo integration combines Klaviyo's advanced email marketing features with Marsello's omnichannel loyalty software to create the ultimate marketing platform.

Marsello’s point of sale data is the key factor here, syncing in-store loyalty and order data to Klaviyo customer profiles in real-time, empowering your team to personalize your marketing with the latest insights from both your eCommerce and POS channels.

Why connect Klaviyo to your Marsello account?

Because Klaviyo does not integrate directly with POS systems, you’re only using a fraction of the customer data that’s available to you.

When you integrate Marsello with Klaviyo, you can bridge the gap between your POS and eCommerce data, providing you with valuable insights into customer purchase history, spending behavior, and preferences. This connection enables you to centralize your customer data and create a more seamless omnichannel shopping experience.

“We have many customers that shop with us in both channels and expect a seamless loyalty and marketing experience.”

Hayley Greenstein, Managing Director at LEGO® Certified Stores

How do Marsello and Klaviyo work together?

Marsello's customer loyalty and order data gets synced to Klaviyo in real-time. This enriches Klaviyo customer profiles with omnichannel insights, enabling better segmentation for more effective, tailored marketing campaigns.

Here’s what you can do with Marsello and Klaviyo connected:

• Push customer properties to Klaviyo profiles: Sync customer properties into Klaviyo, enriching customer profiles with relevant data.
• Sync customer events to your Klaviyo account: Use events to automate timely and targeted emails based on your customer shopping behavior, loyalty engagement, or feedback responses. These events are dynamic and sent to Klaviyo in as close to real-time as possible. Sync events like POS and eCommerce orders, loyalty activities, and feedback responses.
• Sync your loyalty and order data into Klaviyo: Seamlessly transfer POS and eCommerce loyalty and order data to Klaviyo customer profiles in real time for a complete view of customer spending behaviors. Understand who your customers are, and how they like to shop.
• Create omnichannel offers and coupon codes to use in Klaviyo campaigns: Generate omnichannel discount codes for your campaigns and automatically load them against specific customer profiles. Give customers the flexibility to redeem their coupons in-store or online.
• Create more detailed customer segments for campaigns in Klaviyo: Utilize your in-store and online data to create targeted customer segments and workflows in Klaviyo. Harness your segments to run more personalized campaigns that go way beyond your VIP database.

Diving deeper into event sets

When you connect Marsello and Klaviyo, you unlock a treasure trove of valuable loyalty and order data such as purchase site, order total, product selections, and more.

Let’s learn more about the specific data sets that get synced to your Klaviyo profiles.

POS and eCommerce orders

By syncing your POS and eCommerce order events into Klaviyo, you can create a 360-degree view of your customers’ spending behavior with your business. With this data, you can create targeted segments and automations based on in-store and online orders, enabling further personalization of your email marketing efforts.

Loyalty activities

Using Marsello’s loyalty program, you can encourage customers to return by rewarding them with loyalty points for each purchase they make. Sync loyalty events into Klaviyo to create custom segments and automations based on loyalty program engagement, then use customers’ loyalty profile information to further personalized your marketing efforts. For example, when a customer claims a coupon but hasn’t redeemed it, you could send a follow-up email that recommends products and encourages them to shop.

Feedback responses

Finally, using Marsello’s customer feedback features enable you to measure customer satisfaction with their shopping experience, helping you keep track of what you’re doing well and how you can improve. Sync feedback responses to Klaviyo to help measure customer sentiment. Create segments and automate follow-up emails to help nurture customer relationships with your brand.

Learn how to use Marsello properties and events in Klaviyo

How to connect Klaviyo to your Marsello account

Now that you know how Marsello’s loyalty and order data can empower your email marketing campaigns, here's how to enable the Klaviyo integration within Marsello.

In your Klaviyo account, you will need to generate a new API key with Full Access to Profiles. 

To create an API in Klaviyo

1. Navigate to API keys under your profile settings
2. Enter “Marsello” as your Private API Key Name

1. Under Select Access Level, select Full Access Key
2. Click Create. This will generate your new API key.
3. Copy this key and keep it ready to paste into your Marsello add-on settings.

If you haven’t already created a Klaviyo account, you can do so here.

How to enable the Klaviyo integration in Marsello

1. First, log in to your Marsello account
2. In your Marsello admin, navigate to Integrations > Add-ons
3. Find Klaviyo in the list of add-ons and click Connect

1. Under ‘Klaviyo API Key’ paste your Marsello API key, or follow these instructions to create one.

1. Click Save. Your Marsello & Klaviyo accounts will now be connected.

Final words

Integrating Marsello and Klaviyo creates a more cohesive customer marketing experience, unlocking new levels of customer engagement, satisfaction, and loyalty.

This powerful integration brings together the best of both platforms, combining Marsello’s in-store POS data with Klaviyo's advanced customer marketing tools to help you understand your customers and increase engagement with highly-personalized marketing campaigns.

Now that you know how Marsello’s POS data can enrich your Klaviyo campaigns, it’s time to try it for yourself!

Next read: 5 Klaviyo Integrations Every Retailer Should Be Using

Quick links:

• • • 1. Design your tiered loyalty program
    • 2. Get everything ready on your website and in-store
    • 3. Promote your program
      
    • 4. Set up important notifications as SMS messages
    • 5. Keep optimizing!

Want to build a loyalty program like Mecca’s Beauty Loop, but don’t have the money or time for custom solutions?

Before building brand loyalty, you need to build a brand. And building a brand? That journey starts with the very first business plan, that spark, that idea on a napkin, that leads you to register a company and step into the wild, wicked, unruly world of retail.

So let’s forget loyalty points programs for the time being.

Look inward for a minute, and ask: Why did I start this business?

For a lot of retailers, their business started out of frustration. Frustration that you couldn’t find what you wanted at other stores, frustration about the lack of selection or curation, frustration about the customer service, concern that salespeople only wanted to sell you what they were getting the most commission for (rather than what suited your needs best).

Mecca Founder Jo Horgan shared why Mecca came to be back in 1997 in an interview for the Australian Financial Review.

“I loved cosmetics – I thought there was a real space for them that should be fun and entertaining. And yet when I went to a department store I found it exhausting, going from one counter to another,” Horgan says.

So she started to think: “Imagine the best product offer, a beautiful environment and my best beauty friend next to me taking me from zero to expert in one session…” 

“That’s how I wanted to experience cosmetics myself,” she says.

The first time I went to Mecca, I admitted I used $3 foundation and substituted in cheap eyeshadow with a 10-year-old makeup brush for eyebrow pencil. The response? “Oh darling, sometimes that’s all you need to do the trick!”

He told me he often does the same… and still managed to sell me $150 worth of foundation and an eyebrow pencil. Now that’s some serious sales game.

I tried to unpack this later. The feeling I got was: He’s on my side. He knows where I’m coming from. And I can trust him.

Lesson 1: Hold on to that “why” and don’t lose sight of it. It’s your greatest brand asset.

It’s highly likely the reason you started your business is why your customer is here. 

I was surprised to learn that Mecca founder Jo Horgan felt frustrated by the department store experience, just like I did. But in the same vein, it makes sense, based on how shopping at Mecca makes me feel.

Lesson 2: Points programs do not magically create brand loyalty.

A points program is one tool you can use to keep customers coming back. But the truth is, if you’re not doing anything else to support it—it’s not going to have the Mecca effect.

So, let’s take your “why” and I’m going to show you how you can build an extraordinary loyalty program with ordinary, off-the-shelf loyalty software.

How to Build An Extraordinary Loyalty Program With Ordinary, Off-The-Shelf Software

Everything here can be done using Marsello, when integrated with your eCommerce and POS software.

Step 1. Design your tiered loyalty program

Most loyalty software has the functionality to build a tiered loyalty program off the shelf. But before you jump the gun and turn it on, think about what the tiers should look like. Revisit your brand’s vision and mission, and come up with a strategy.

How many tiers are there?

Three is a good place to start. Mecca recently added a fourth tier to give those extra high spenders a more tailored experience, but we’d recommend only adding more than three tiers when you see a clear need for it.

How are the tiers structured?

Are the tiers based on spend, or number of loyalty points? And is it lifetime spend or annual spend? Generally, most retailers want their customers to maintain a minimum spend or number of points per year to keep their status. This requires the ability to expire tiers (you can do this in Marsello).

What are the rewards?

This Level 4 Beauty Looper (below) worked out that her free sample box had a retail value of $80. With 4 of these per year, plus an extra birthday box, that’s $400 for a year of free gifts. However, this person had to spend $3,500 to reach this tier. That’s an 11.4% discount, or about the same as giving away every 10th coffee for free.

The beauty (ha) of giving away free boxes, is that you mitigate price perception. Receiving a free box in the mail is a serious dopamine hit, and Mecca knows this. Customers perceive the value of the loyalty reward to be much higher than it really is. They will happily spend more to receive the reward than “risk” missing out on retaining their status by shopping somewhere else.

What will you call the tiers?

Don’t rush this part, take your time to really find the right fit for your brand. “Bronze, Silver, Gold” isn’t very creative. Mecca chooses names that really connect to its brand mission, product, and the relationship they have with its customers.

Step 2. Get everything ready on your website and in-store

Now that you’ve got your loyalty program designed, you need to make sure it’s all set up properly.

Do you have an online store and physical shops?

If so, make sure your loyalty software is integrated with your POS and eCommerce platforms. This will ensure that points can be earned and redeemed easily across all your sales channels. Marsello integrates with a range of POS and eCommerce apps off-the-shelf, no expensive customization required.

How will customers find out about it?

In-store: Train staff on your loyalty program, and make sure they’re asking customers to sign up point-of-sale. Focus on the benefit to the customer—if you’ve really taken the time to build a considered loyalty program, customers won’t be able to resist.

On your website: Make sure it’s impossible to miss! Set up a loyalty widget on your online store to show visitors how they can earn and redeem rewards, and show the available tiers. Best practice is to create a website page dedicated to your loyalty program that goes into even more detail. See Mecca’s Beauty Loop page:

Step 3. Promote your program

How do I launch it?

Once you’ve designed your program, prepare a launch campaign. Whether it’s a ‘soft’ launch or a full-scale event—make sure your customers know about it. Marsello has all the marketing tools you need to communicate with your customers: email, SMS, automations, website pop-up forms, and more. Use these to craft your promotional campaigns.

• Teaser campaign: Pre-launch, let people know something’s coming. Get people curious and excited for the launch date. For example, you could run contests or giveaways to generate hype.
• Soft launch: It’s okay to do a soft launch to start off, just to test everything is working. But once you’re confident, prepare a launch campaign.

• In-store promotion: Let your customers know about it in-store. Make sure staff are trained on your loyalty app and can answer basic questions about how to get set up, the tier structure, and what the benefits are for the customer.

• Full marketing launch: add a pop-up to your website, send out email campaigns to your database, and promote the program on social media. You can even run a limited-time launch offer—for example, 200 extra points for signing up in the first week.

How do I keep customers engaged?

The promotion doesn’t stop after you launch the campaign! There are lots of light-touch, low-maintenance campaigns you can run to keep your loyalty program interesting. Plus, you can talk about all the cool campaigns you’re running to non-loyalty subscribers to get that FOMO going.

Here are some ideas to get you started:

• Run points campaigns: For example, you could have a double points week. These are great to run in slower sales seasons, as they incentivize loyal customers to accelerate their points growth.
• Hype the program on social media: Use social media to promote the loyalty program and engage with customers through interactive content and contests. See Mecca’s Beauty Loop hype in the Instagram post above!
• Run limited-time offers: Offer special rewards for a short period of time to incentivize customers to participate in the loyalty program.
• Build up a community: Foster a sense of community among loyalty program members through events, forums, or social media groups.
• Collaborate with partners: Partner with other brands to offer joint rewards and increase the value of the loyalty program.
• Build your mobile experience: Encourage customers to save your loyalty portal to their mobile home screen, so they can access their points balance and engage with your brand on the go.
  
  

Step 4. Set up important notifications as SMS messages

Your customers get so many emails, they’re missing important updates. An SMS will cut through the noise by going direct to their mobile. While you don’t want to overdo SMS marketing, automated texts triggered for important loyalty updates and reminders will be much appreciated.

Notify customers when they have a reward coming!

Whether it’s a discount in their inbox ready to redeem, or a gift coming to their physical address, let them know it’s on the way and when they can expect it. 

Let customers know when their tier is about to expire

Like Mecca, you probably want customers to keep up a minimum annual spend. Expiring tiers is a fantastic way to keep customers spending to retain their status… but it won’t have much impact unless they know how they’re progressing! Send customers an automated text message to let them know they’ve got a bit more shopping to do to keep up their tier.

Let customers know when they hit a milestone

Your loyal customers will want to know when they’ve unlocked a new reward, or hit a big points milestone (for example, they’ve entered a new tier). Don’t leave them guessing, automatically deliver the good news right to their mobile.

Step 5. Keep optimizing!

The final step is that… there is no final step. Running a loyalty program is an ongoing, ever-evolving journey that you’re on with your customers. So it’s important to have fun and keep innovating as you go. Loyalty is a regular and ongoing business activity, just like marketing and sales. There will always be improvements and new ideas you can implement, so have a regular reminder set up to check in and evaluate how it’s going.

What are the top loyalty metrics I should be tracking?

Marsello’s dashboard keeps track of all your important loyalty metrics. Top things to track are repeat purchase rate and rewards redemption rate. These will show you that your loyalty program is moving the needle on sales and revenue, and getting good engagement from customers.

How do I know if my brand is doing better over time?

While Marsello doesn’t track brand impact, there are some incredible new tools you can use to measure your brand health. Take a look at Tracksuit, as one example.

Final Words

Building a successful loyalty program like Mecca's Beauty Loop starts with understanding your brand's "why." A loyalty program is just one tool to keep customers coming back, and it should be built with a clear strategy based on your brand's vision and mission.

Mecca's founder Jo Horgan was frustrated with the department store experience and wanted to create a fun and entertaining shopping experience, which is exactly what Mecca and the Beauty Loop experience provides.

Using ordinary, off-the-shelf loyalty software like Marsello, you can create a tiered loyalty program with rewards that offer value to customers and keep them engaged. However, it's important to remember that a loyalty program is only effective if you're doing other things to support it and build a strong brand relationship with your customers.

Read more: 7 Steps To Building A Profitable Loyalty & Rewards Program