How to create a loyalty programme for your online shop

What is a loyalty programme?

A loyalty programme is a scheme in which a shop rewards customers for coming back: those who buy more often collect towards a reward. You know the form from the loyalty card or stamp card in a shop. A loyalty programme for ecommerce works with points on the customer account: the customer earns with every order and redeems the points for a reward.

The benefits of a loyalty programme for an online shop:

• Retention: a customer with a balance has a reason to place the next order with you again
• Larger orders: a reward with a minimum order amount, or a tier that is within reach, gives a reason to add something
• More reviews and newsletter sign-ups, if you give points for them
• New customers through existing customers, if they can refer friends
• A view of your regular customers: the balance sits on a customer account, so you see who earns, who redeems and who comes back

Points alone do not make customers loyal: the product and the service have to be right. A programme gives satisfied customers a reason to order from you more often. Below are the types of programme first, then six steps to create one yourself, from the goal to measuring.

Types of loyalty programme, with examples

Most programmes combine a few types. The table shows how each type works, with an example. The shops in the examples are made up, and so are the numbers.

With a Shopify loyalty app such as Loyalo you set up the first five types and combine them. A paid membership is a different form, which Loyalo does not offer. Which type fits your shop depends on what you want to achieve. That is where step 1 starts.

Step 1: choose what you want to achieve

Start with the behaviour you want to see more often. 'More loyal customers' is too broad a goal to steer on. Choose one or two goals you can measure; the goal decides what you give points for and how you will measure whether it works.

Step 2: points per euro and what a point costs

A points programme turns on two numbers: how many points a customer gets per euro, and how many points a reward costs. Together they decide which share of revenue you give back. An example: at 5 points per euro and a reward of € 5 for 1,000 points, a customer spends € 200 for that € 5. You then give back 2.5%.

Put that percentage next to your margin, not your revenue. And look at how quickly the first reward is within reach: with an average order of € 40, € 200 takes five orders. If that is too far away, add a smaller reward, such as free shipping for fewer points. The numbers are an example; the calculation is the same for every programme.

In Loyalo points are counted over the product amount after discount, without shipping costs. With a refund or cancellation the points are deducted proportionally. You give the points a name of your own; the demo shop in the images collects beans, for example.

Step 3: choose rewards that fit your shop

A reward has to be worth it for the customer and affordable for you. Loyalo has six kinds. Start with two or three and expand once you see what customers choose.

Step 4: tiers for your best customers

Points reward an order; tiers reward a customer. A tier is a level a customer reaches based on the amount spent, the number of orders, the points earned or the number of items. Per tier you set a discount, free shipping, a points multiplier and your own perks, such as early access to new products.

Two choices decide how tiers feel. The first is the threshold: if the first higher tier is within reach of a customer who orders a few times a year, everyone has something to work towards. The second is the period. If everything a customer has ever spent counts, a tier lasts forever. If only the last 12 or 24 months count, a customer has to keep earning the tier; with a grace period in days they first get an e-mail that the tier is ending.

Step 5: more ways to earn

Points per euro reward spending. With bonus points you reward the rest of the behaviour you chose in step 1:

• A new customer account: the first points are there straight away
• The customer's birthday, once a year
• Signing up for the newsletter
• A review, with extra points for a photo and a maximum per customer per month
• Following on social media, once per channel
• A campaign period in which all orders earn two or three times the points
• Extra points on a product you want to put in the spotlight
• Refer a friend: the friend gets a discount on the first order, the customer gets points

For referrals you set a waiting period, for example the return period. The customer only gets the points after that; with a cancellation or full refund they lapse. The discount for the friend only works for customers without an earlier order.

Step 6: show the programme

A programme customers do not see changes no behaviour. Put it where a customer already goes: a rewards page in your shop, the balance in the customer account and a monthly points summary by e-mail. Two e-mails also do a lot of the work: a message as soon as a customer has enough points for a reward, and a message before points expire.

What does a loyalty programme cost, and what does it bring in?

The cost of a loyalty programme has two parts: the software, and the rewards customers redeem. The second part grows with your revenue, and you set it yourself with the numbers from step 2. Points that are still outstanding are a liability: customers can still redeem them later. So keep track of three figures: how many points are outstanding, how many are redeemed per month and how much revenue comes from orders on which a reward was used.

On the return side, look at the share of repeat purchases and the average order value, and compare with the months before the start. Do not compare members with non-members: customers who already ordered often are also more likely to collect points, so part of that difference was already there.

A loyalty programme for B2B customers

You can reward loyalty in B2B with a programme too. A B2B loyalty programme uses the same building blocks, but the rules for consumers do not always fit: business customers usually order larger quantities and often have their own prices already. The same number of points per euro gives a lot back on orders like that.

So in Loyalo you treat the two groups separately. For business customers you set their own number of points per euro, or you switch earning off for them. They get their own series of tiers, on a different basis if you want: consumers on amount spent, for example, and business customers on the number of items. Bonus points, campaigns and rewards can each apply to everyone, consumers only or business customers only. Who counts as a business customer follows from the companies in Shopify B2B or from a tag on the customer; you can also choose the group by hand.

Common mistakes

• The first reward is too far away, so customers drop out before they redeem anything
• The value of a point is calculated on revenue instead of margin
• Points expire without the customer getting a message beforehand
• There are too many rules at once: start with points per euro and two rewards
• The programme is only in the footer and nowhere in the e-mails

• Choose one or two goals and give points for those
• Work out which percentage of revenue you give back and put it next to your margin
• Make the first reward reachable within a few orders
• Decide whether points expire and e-mail customers beforehand
• Measure repeat purchases and order value before and after the start

Frequently asked questions