<img height="1" width="1" style="display:none;" alt="" src="https://px.ads.linkedin.com/collect/?pid=3353132&amp;fmt=gif">

The Marsello Blog

Everything your business needs to grow, delivered straight to your inbox.

ClockIcon  READ

Loyalty Programs: How Much Should Your Rewards & Points Be Worth?

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

Francesca Nicasio

Content Strategy Manager

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.

Giving back value in a loyalty program-1

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. 

Altering value perception

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

american airlines rewards program structure

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

Screenshot 2024-03-21 at 9.36.25 AM

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 

Screenshot 2024-03-21 at 9.43.24 AM

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:

Reward type

What

Good for

Consider

Percentage-Based Discounts

Customers receive a certain percentage off their purchase.

Businesses with a low average order value (AOV) or those selling commodity products where customers are price-sensitive. This can encourage larger purchases or more frequent visits.

It might eat into margins if not carefully managed, especially for high-value items.

Fixed Dollar Discounts

Offers a fixed dollar amount off, which could be on the next purchase or once a certain points threshold is reached.

Businesses with higher and varying AOVs, as it provides a predictable cost that doesn't fluctuate with the price of the cart. It's also appealing for businesses that want to encourage a minimum spend.

Ensuring the discount threshold doesn't undercut profit margins is essential. It's also less enticing for low-value purchases.

Free Shipping

Free shipping on orders after reaching a certain points number or as a tiered benefit.

E-commerce businesses or those with a significant online presence. It's particularly effective if shipping costs are a known barrier to purchase.

Should be balanced with shipping costs to avoid eroding margins, especially for low-margin products or very distant shipping destinations.

Free Products or Samples

Offering free products or samples once customers reach a certain tier or points level.

Retailers with high-margin items or those looking to introduce new products. It encourages exploration of your product range and can enhance the perceived value of the loyalty program.

The cost of goods given away should be carefully considered against the incremental revenue or engagement they drive.

VIP Access or Experiential Rewards

Providing access to exclusive events, products, or experiences for top-tier loyalty members.

Brands with a lifestyle component or those looking to build a community among their customers. Works well for businesses aiming to enhance brand loyalty and differentiation.

The cost of creating these experiences should be justified by the increased engagement and customer lifetime value they generate.

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. 

Download ebook on structuring your loyalty program

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.

Book a demo

 


 

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

    Most Popular

    Recent Articles

    Loyalty Programs: How Much Should Your Rewards & Points Be Worth?

    ClockIcon  READ
    This guide will help you determine the optimal value for loyalty points. We’ll dive into essential pricing principles, effective strategies, real-world...

    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.

    Giving back value in a loyalty program-1

    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. 

    Altering value perception

    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

    american airlines rewards program structure

    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

    Screenshot 2024-03-21 at 9.36.25 AM

    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 

    Screenshot 2024-03-21 at 9.43.24 AM

    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:

    Reward type

    What

    Good for

    Consider

    Percentage-Based Discounts

    Customers receive a certain percentage off their purchase.

    Businesses with a low average order value (AOV) or those selling commodity products where customers are price-sensitive. This can encourage larger purchases or more frequent visits.

    It might eat into margins if not carefully managed, especially for high-value items.

    Fixed Dollar Discounts

    Offers a fixed dollar amount off, which could be on the next purchase or once a certain points threshold is reached.

    Businesses with higher and varying AOVs, as it provides a predictable cost that doesn't fluctuate with the price of the cart. It's also appealing for businesses that want to encourage a minimum spend.

    Ensuring the discount threshold doesn't undercut profit margins is essential. It's also less enticing for low-value purchases.

    Free Shipping

    Free shipping on orders after reaching a certain points number or as a tiered benefit.

    E-commerce businesses or those with a significant online presence. It's particularly effective if shipping costs are a known barrier to purchase.

    Should be balanced with shipping costs to avoid eroding margins, especially for low-margin products or very distant shipping destinations.

    Free Products or Samples

    Offering free products or samples once customers reach a certain tier or points level.

    Retailers with high-margin items or those looking to introduce new products. It encourages exploration of your product range and can enhance the perceived value of the loyalty program.

    The cost of goods given away should be carefully considered against the incremental revenue or engagement they drive.

    VIP Access or Experiential Rewards

    Providing access to exclusive events, products, or experiences for top-tier loyalty members.

    Brands with a lifestyle component or those looking to build a community among their customers. Works well for businesses aiming to enhance brand loyalty and differentiation.

    The cost of creating these experiences should be justified by the increased engagement and customer lifetime value they generate.

    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. 

    Download ebook on structuring your loyalty program

    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.

    Book a demo

     


     

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

    How to Increase Customer Lifetime Value

    ClockIcon  READ
    Here are 8 tactics you can use to increase customer lifetime value — how much your customers spend at your store over time.

    “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.

    pace-athletic-discounts

    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.

    cross selling and upselling to increase clv

     

    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.

    tennisgear-available-rewards

    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.

    scottys-makeup-and-beauty-results

    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.

    email showing customer feedback being heard

    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.

    Marsello-Case-Study-Katie-Waltman

    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.

    subscriptions can increase clvThis 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.

    educate customers on the value of your products - gopro example

     

    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

     

    Start free trial

     


     

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

    From Feedback to Rewards: How to Build a Loyalty Program that Resonates with Your Audience

    ClockIcon  READ
    Learn how to build a loyalty program that puts your audience first. We also discuss strategies for creating a customer experience that secures repeat...

    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.

    amazon prime example

    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.

    Alpha60 earn options


    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.

    scottys-makeup-and-beauty-insights-dashboard

    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

     

    Start free trial

     


     

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

    10 Communities For Retail Business Owners To Join: Learn, Connect & Grow

    ClockIcon  READ
    Explore the top communities for small or independent retailers. Connect, learn, and grow together as you navigate the world of retail entrepreneurship.

    It can be a lonely journey being a business owner. Even with family, friends and staff around to support you, there are unique challenges we face as independent retailers and sometimes all you need is to connect with people who can relate.

    We've put together a list of communities, hubs, YouTube channels and online forums filled with experts and peers who can help and support you along the way. 

     


     

    The Boutique Hub

     

    The Boutique Hub home page


    The Boutique Hub is the world’s largest boutique industry community, connecting boutique retailers, eCommerce retailers, wholesale brands, product makers, and industry services and experts. The Hub provides daily connection, strategy, training, wholesale shopping, live events, and a voice for the boutique industry.

    The Boutique Hub has a paid community offering. As a member, you'll find over 7,500 peers to connect with. You'll access hundreds of trainings for all levels of business, daily content calendars, social media engagement libraries, and guest experts with live trainings weekly.

    But if you're not looking to pay, there is a wealth of free content on their website too. Plus, you can follow The Boutique Hub on YouTube for regular updates and tips.

     

    MeetUp groups

     

    Screenshot of a MeetUp search

    MeetUp groups are a great way to connect with other retailers and business owners. Use MeetUp to search for events and communities in your area, and join the groups that resonate with you! Some are structured — sponsored by retail service providers — others are more casual get-togethers with peers.

    Whatever kind of group you're looking for, especially if you're based near a large city, you're bound to find it here.

     

    RETAILMavens

     

    RETAILMavens home page


    If you're looking for training and 1-1 support, look no further than Cathy Donovan Wagner at RETAILMavens. As a former retailer, Cathy knows how much running a business can have you losing sleep... That's why her business focus is more profit, better sleep.

    While this is a more traditional consultation approach, RETAILMavens also has a YouTube channel and Facebook community for those more interested in learning from afar, or connecting with likeminded business owners.

     

    Start A Boutique

     

    Start A Boutique home page


    Are you a woman looking to start or scale your retail business? Raquel at Start A Boutique is dedicated to helping other women become successful boutique entrepreneurs.

    After working at a 9-5 that she wasn't passionate about, she started her first online boutique in 2006 (at the age of 23!) which quickly expanded into a brick + mortar location 6 months later and another location a year after that.

    Starting a new business is no small feat, and she's been through A LOT of trial and error (and money!) to get it right. So for the past 8 years, she has consolidated all her learnings and set up Start A Boutique to help others create their own thriving boutique business.

    Raquel has a YouTube channel, Facebook group and Instagram profile so you can dive right in.

     

    Reddit: r/smallbusiness

     

    Screenshot of the small business subreddit

    While not retail-specific, r/smallbusiness is a great place to go if you are looking for advice or guidance from other business owners. From employee Christmas gift ideas to lawsuits, other Redditors can share their experience or ideas with you and offer support.

    Reddit is anonymous (unless you choose to share identifying details of your business) so it's a great place to ask anything or just have a vent.

     

    How To Run A Retail Store

     

    How To Run A Retail Store home page

     

    Sara Stonecipher of How To Run A Retail Store has spent 20+ years growing, learning, failing, succeeding, and refining her retail skills. Now, she's on a mission to help other business owners work through all the challenges and delights of growing a business. 

    With all her changes over the years, her retail company has doubled in size and is making over a million dollars a year in revenue. She's focused on being an active participant in her local community, creating an immersive shopping experience for the people who live in her city.

    You can check out Sara's workshop and courses on her website, or follow her channel on Youtube.

     

    The Small Retailer Network

     

    Small Retailer Community home page

    The Small Retailer Network in Dubai is a free membership community that host coffee catch-ups, events and workshops for independent retailers. Whether you are an established retailer or just starting your business journey, their community is there to support and encourage you to succeed.

    If you're non-local, they also have a range of places you can ask questions, access support and get advice from the community, including a Whatsapp group chat, Instagram profile and Facebook page.

     

    WhizBang! Retail

     

    WhizBang home page

     

    WhizBang! Retail is all about practical, tactical, money-making ideas and customer-focused strategies.

    On their Youtube channel, retail experts Bob and Susan Negen offer weekly retail tips, world-class online training, business-building events, and transformational programs that help retailers create the wildly successful stores of their dreams.

    WhizBang! are definitely more focused on training and consultation, but they have a rich selection of content on the YouTube channel above, and you can follow them on Instagram and Facebook too.

     

    Retail Minded

     

    Retail Minded conference page

     

    Looking for more of an event or conference? Retail Minded has you covered with the Independent Retailer Conference. Attendees can expect to learn from industry leaders, retail decision makers, technology providers and more. Talks cover the latest must-know insights to help retailers, marketplace sellers, e-commerce operators and other industry professionals thrive.

    Beyond the conference, Retail Minded introduces retailers to leading industry resources, merchant specific news and timely education to help independent businesses – both online and offline – thrive in their unique retail goals.

     

    Retail Customer Experience

     

    Retail Customer Experience webinar

    Retail Customer Experience's on-demand, evergreen webinars cover a wide range of topics, from increasing holiday conversion rates to leveraging AI. Some are more relevant to larger retailers, but much of the content is suitable for any retailer.

    It's also worthwhile checking out their events around the US, especially if you're interested in technology and innovation in the retail and hospitality sector.

    Other communities and forums:

     

    United States

    National Retail Federation

    UK

    The Federation of Independent Retailers 

    British Independent Retailers Association

    Canada

    Retail Council of Canada

    Australia

    Australian Retailers Association

    Retail Leaders Forum

    New Zealand

    Retail Leaders Forum

     

    Have I missed one?

    Are you part of any communities, forums or networking groups that I've missed? Let me know at marketing@marsello.com.

     


     

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

     

    Start free trial

     


     

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

    Retail Outlook: Brick & Mortar Defies Odds, Surge Forecast For 2024

    ClockIcon  READ
    What's in store for retail in 2024? We analyze economists' forecasts, recent trends and the latest holiday sales data to look ahead at next year.

    A millennial born in the digital age, I grew up arrogantly thinking brick and mortar was on its last legs. Ecommerce was the way forward, and before we knew it, we’d be living in floating armchairs with everything we needed on a projected screen in front of us (think Wall-E).

    Turns out, things don’t move so linearly. And while technology might evolve exactly as quickly as you expect, human nature doesn’t quite match up in rate of change. We don’t want to live isolated from others, married to a holographic screen, consuming limitlessly.

    Maybe we don’t want mandated office days, but we do want to be in the office, around people, on our own terms. We want the option to shop online, but we also want to know we can head into the city to try those jeans on for size. We’ll make a day of it—see friends for coffee, go to the gym, or run some errands.

    Over COVID, we hedged our bets on direct-to-consumer commerce. Big Tech like Amazon went all-in on hires during the pandemic, then made massive staff cuts when eCommerce transactions tapered off earlier than expected.

    Retail giants also bet big on leisurewear—anticipating a pivot to work-from-home comfies to stick around. But it wasn’t long before they realized they’d over estimated demand. Shoppers reported seeing leisurewear littering Target shop floors, and sales abounded to move stock.

    Looking ahead, what can we expect from 2024? More of the same, or a shift for the better?

     


     

    Online Retail Sales: 2024 Outlook


    2022 saw a contraction in online sales worldwide, but 2023 has been back to growth again—around 7%. Now, even with the possibility of recession still hanging thick in the air (will it happen? will it not?), the consumer appears to be resilient.

    The Economist Intelligence Unit, EIU, is predicting online retail sales growth globally to head back into double-digit growth (10.5%).

    But the US and Western Europe will still be playing catch up, with more sluggish single digit growth than the global average. We’ll be seeing profitability pressures continue to restrict growth in the DTC space, with investors seeking better returns.

     

    Brick and Mortar Sales: 2024 Outlook


    If you’ve been following retail news, you’ll have seen Kohl’s has been suffering in eCommerce sales. Following other big brands, Kohl’s has committed to modernizing its physical presence, as well as providing offers and promotions consistently across all channels.

    Where SMB and mid-market retail can provide a more personal touch, retail giants are under pressure to supplement a lack of personalization with expensive tech and impressive fitouts. Consumers are voting with their wallets, demanding a slick, engaging experience of the bigger players. Think Mecca, IKEA, Apple and LEGO.

    Post-pandemic, consumers seem more likely to switch brands for a better product, deal or experience. We’re so used to buying online now, that after the lockdowns it feels like an experience in itself to wander the stores and physically touch what you intend to buy.

    Rory Moss, loyalty and retail expert weighs in: "While I believe we’re seeing a shift back to brick-and-mortar experiences, retailers are still feeling a lot of the lagging pressures they faced during the pandemic lockdowns, and they’ll still be navigating these effects during 2024."

    Pressures include staffing issues, stock delays and increasing supplier costs (a lot of which are driven by fuel prices and production delays from China).

    "These are all passed on to customers and inevitably eat up retail margin," Rory says, "so we’ll still see consumers considering ‘price’ at the checkouts until the later half of 2024."

    In saying that, EIU forecasts that brick and mortar sales will make up a whopping 85% of total retail sales in 2024. The businesses that have made it through high interest rates and rising costs will enjoy recovering foot traffic and a sales boost.

    “2024 will see the strongest pace of growth for offline retail since the post-pandemic rebound of 2021,” EIU predicts.

    This trend will be global. Beyond Kohls, other large retailers like Nordstrom (US) and Primark (Ireland) are planning store expansion in the US in 2024.

     

    Overall Outlook for Retail in 2024

     

    While the online sales forecast is still overcast, the clouds are clearing and a growth surge is on the horizon for brick and mortar.

    Black Friday / Cyber Monday 2023 proved that the consumer is ever-resilient. We also saw that loyal customers are a critical asset to retailers—brick and mortar in particular.

    Marsello’s latest data shows around half of eCommerce shoppers were repeat customers, and half new shoppers.

    For brick and mortar retailers, on the other hand, repeat customers made up 80% of BFCM sales. What's more, physical retailers grew their customer databases by around 22% over Black Friday in 2023.

    Loyalty programs and customer marketing will play a huge part in boosting 2024 brick and mortar sales.

    "All of this is good news for discount brands and fast-food chains, but if you’re not a price discount retailer, now is the time to utilise your customer data and deliver campaigns which deliver better experiences for your customers," Rory emphasizes. "It’s a great way to mitigate price perception and that’s really where loyalty programs shine."

     


     

    Start a free trial of Marsello, connect your eCommerce and POS platforms, and start syncing the last few months’ worth of sales!

    In 2024, it’s time to put all that data into motion… 

    Start free trial

     


     

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

    Subscribe to the Marsello Blog

    Everything your business needs to grow, delivered straight to your inbox.