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The definitive guide to retail loyalty programs

In this resource, we’re going to cover actionable strategies on loyalty for retail, which you can use to encourage repeat purchasing behavior, increase engagement, and build lasting relationships with your customers.

Customer loyalty in retail is what sunlight is to plants; without it, a retailer can’t thrive. Having loyal customers who repeatedly buy from you leads to reliable revenue streams, stronger shopper relationships, and a healthier bottom line. 

But what exactly does brand loyalty mean in the eyes of consumers? Industry data shows that consumers define loyalty in the following ways:

  • I tend to buy from the same brand (67.77%)

  • I love the brand (39.51%)

  • I buy from the brand despite cheaper competitors (37.68%)

So why do you need to focus on developing long-lasting customer relationships, and how can you build customer loyalty for your brand?

Why you need to build loyal customer relationships for successful retailing

In today’s landscape, customer loyalty must be a priority for brands. Here are some of the reasons why it should be a key focus point of your strategy. 

 

Repeat customers are the most profitable for your business

It can be tempting for retailers to focus on acquiring new customers rather than retaining existing ones. But acquisition is only going to get your brand so far. A study by Bain & Company found that:

“ [...] a 5% increase in customer retention produces more than a 25% increase in profit. Why? Return customers tend to buy more from a company over time.”

The hard truth is that acquiring customers can be a serious drain on a retailer’s revenue. The cost of paid ads, combined with decreased organic reach across social media platforms, has made CAC (Customer Acquisition Cost) higher than ever. 

As such, failing to cultivate long-term loyalty is a bit like leaving money on the table; why turn away such an easy source of revenue? By developing omnichannel loyalty across touchpoints, retailers can provide a robust boost to their bottom line.

 

Strengthen your position in a competitive market

When entry barriers into the marketplace are so low, it’s never been more challenging for brands to consolidate their gains. With as many as 24 million eCommerce retailers globally, it takes something out of the ordinary to stand out from all this noise.

Loyalty for retail initiatives such as rewards programs is a vital tool in the fight against customer churn.

68% of millennials report they won’t be loyal to a brand unless it has a good customer loyalty program, while 46% said they’ve increased their purchasing activity with a retailer because it offered a VIP rewards program.

Having a retail loyalty program in place means that your customer’s buying habits are much more likely to stick; forfeiting potential rewards adds friction to the process of switching brands, helping to increase customer lifetime value.

 

The customer experience is now the biggest competitive differentiator

We’re past the era of retailers building customer loyalty through price or product selection. A 2013 research study by Frost & Sullivan predicted that by 2020, customer experience (CX) would overtake both product and price as the biggest brand differentiator.

Current surveys back up this development: 

  • 86% of today’s buyers are willing to pay more for a great customer experience

  • 73% of customers point to CX as an important factor in their purchasing decisions.

  • PwC found that one-third of consumers will leave a brand they like after just one negative experience.

This means that if customers feel a retailer isn’t putting their needs first, they’re unlikely to come back. In sum, brands can’t afford not to prioritize CX in the pursuit of a loyal customer base. 

How to improve customer loyalty in retail stores and eCommerce [with examples]

One of the ways to figure out how to best improve customer loyalty is to learn from other retailers. Below, we’ll be taking a look at excellent examples of loyalty programs done right. 

 

VIP programs

VIP programs focused on loyalty in retail are one of the most effective ways of creating a closed customer engagement loop. The more that your shoppers engage with your brand, the more rewards they earn, which then encourages them to keep spending.

2021 industry research shows that almost 68% of respondents wanted to join a VIP program – up from 59% in 2019.

There are several retail loyalty program models that retailers can use, including:

  • Points programs

  • Tiered programs

  • Paid (premium) programs

Merrell NZs loyalty program email promotion

The outdoor apparel and footwear brand Merrell partnered with Marsello to pioneer an omnichannel loyalty and VIP program in 2021. 

Merrell, which initially started using Marsello's email campaigns to promote eCommerce, saw great success, which led them to launch an omnichannel loyalty program. Merrell has seen a 15% repeat purchase rate and 3.5 x average purchase frequency by promoting their program via automated email flows.

Retailer tip: When creating a VIP program, give your customers a reason to join straight away by offering them a reward just for signing up. Then, as they move through the tiers, consider their lifecycle stages and your average cart size and use that data to incentivize shoppers to make purchases with you for years to come.

You can also continue growing your loyalty base using automated flows that encourage shoppers to join.

Referral programs

Word of mouth marketing is an exceptionally powerful tool for driving loyalty in retail.

92% of customers say that they trust recommendations from friends and family more than any other kind of advertising. 

Referral programs are some of the best loyalty programs for businesses because they leverage personal recommendations to build credibility with new customers. Customers acquired via referrals have a 37% higher retention rate than those acquired by other means.

Anna Beck's loyalty widget for their eCommerce store

Shopify Plus retailer Anna Beck recognizes the power of non-purchase forms of customer engagement with its eCommerce loyalty program. The jewelry brand rewards customers for a variety of actions, including referring friends and reviewing products. As a result, Anna Beck has experienced a 728.33% increase in revenue directly attributable to the success of their Marsello-powered loyalty program for Shopify.

Retailer tip: Recognize that valuable customer actions don’t always come in the form of purchases. Make it a point to reward shoppers for non-purchase activities like talking up your brand on social media and referring their friends. Rewarding these behaviors makes customers feel more appreciated, ultimately strengthening the relationship they have with your brand.

Seamless user experiences

With consumers increasingly expecting to encounter the same experiences offline as they do online, going omnichannel with your loyalty program is a must. 

Katie Waltman understands this, which is why the brand has set up a loyalty program that works across KW's online and brick-and-mortar stores. Because of Katie Waltman's omnichannel loyalty offerings, members can shop, earn, and redeem points no matter where they're shopping. 

Katie Waltman's 'points earned' email notification

Retailer tip: Utilize a loyalty platform like Marsello, which comes with omnichannel capabilities. This allows customers to shop, collect, and redeem points on both physical and digital channels. And be sure to integrate your loyalty solution with your ecommerce site and POS system to ensure a smooth customer experience. 

Personalized loyalty

Many retailers assume that customers don’t want to hand over the data needed to personalize loyalty programs. 

However, surveys show that this is far from the case; 91% of consumers say they would be more likely to shop with brands who provide relevant offers – and 83% are willing to share personal data to access this.

Brandini's loyalty program has an excellent personalization component. The brand asks customers to fill out their profiles and share their birthdays. In exchange, program members get a Birthday Bonus to surprise them on their special day. 

Brandini Toffee's loyalty rewards explainer page

Retailer tip: Don’t just collect customer data, be sure to put it to good use through personalization. Like Brandini, you can easily do this through personalized birthday rewards.

You could also use customer data beyond your loyalty program. By gathering info on shoppers’ behaviors and purchase histories, you’ll create campaigns tailored to each customer’s needs. Marsello does this by automatically segmenting your subscribers so you know who your new customers are, who spends the most, and who’s at risk. From there, you can launch personalized email campaigns to engage them in the most relevant way.

Points campaigns

Initiatives such as limited-time double points or extra points promotions are a great way to drive buyer urgency and increase average order volume, especially if you add a minimum spend requirement. 

My Sister's Closet's double points email campaign

My Sister’s Closet is an excellent example of how “spending to save” is a very attractive proposition to customers. Powered by Shopify Plus and Marsello’s retail loyalty software, their rewards program “The Pink Club” enables members to earn double points on purchases bought within the specified timeframe. The promotional opportunities offered by this strategy have helped My Sister’s Closet to turbo-charge customer engagement, with a whopping 641% increase in marketing-related revenue.

The bottom line: as we’ve seen in the examples above, there are plenty of ways to drive loyalty and engagement. When launching or running your loyalty program, be sure to take advantage of quick wins like:

  • Set expiry dates for points to incentivize shorter purchase cycles.

  • Use data-driven product recommendations in-store and online, to encourage customers to buy and earn points (take advantage of Marsello’s Shopify POS product integration, which makes it easy to offer personalized recommendations on all channels).

  • ​​Reward customers on their birthday to keep them engaged even when they’re not actively spending. This is also an excellent way to bring back at-risk or lost customers.

How to set up a customer loyalty program in retail

Ready to get your loyalty program up and running? Here are the key steps you need to take to set it up.


1. Align your program with customer behavior

There’s no such thing as a one size fits all loyalty for retail strategy Everything about a retailer – its price point, its products, and its customers – should feed into how a program is designed.

Remember that unless a store loyalty program reflects how customers shop, it’s unlikely they’re going to engage. 

For example, if your brand primarily sells small-ticket items, there’s little point in setting a redemption threshold that takes months for the average customer to reach. By utilizing data points such as Average Order Value (AOV) and Customer Lifetime Value (CLV), you can find a sweet spot that feels accessible to customers.

Moreover, you should be engaging with customers to find answers to the following questions: 

  • What sort of loyalty program would they be interested in?

  • Would a tiered rewards system encourage them to spend more?

  • How would they like you to communicate with them about the program?

  • How would they most like to earn rewards?

2. Decide how customers are going to earn points

A solid earning structure is essential to ensuring high levels of customer engagement. 

A HelloWorld study found that 54% of loyalty members think it takes too long to earn rewards, while 39% think it’s too difficult. 

Rewarding activities such as customer reviews or completing their loyalty profile is low-hanging fruit that keeps customers interested in engaging with your brand. Moreover, there are major advantages to rewarding customers for behaviors that align with your brand’s marketing strategy. 

With Marsello’s retail loyalty software, you can reward customers for 13 different actions, including, but not limited to:

  • outline of a woman with a plus sign
    Creating a profile
  • outline of a party popper
    Birthday rewards
  • outline of a social like icon
    Social media like
  • a positive customer review
    Customer referrals
  • 5 star product review
    Product reviews

You can easily set this up on your account by navigating to the “Earning Points & Referrals” page on the sidebar. From there, you can enable the actions that you want to reward.

How to enable points earn options for loyalty with Marsello

3. Set your rewards

Next up, decide on the types of rewards that customers can redeem. You have a number of options here, including free products, free shipping, a fixed discount amount, or a percentage-based discount. 

In Marsello, you can configure this on the ‘Rewards’ page. Just select the type of reward, give it a name, and specify the number of points required to redeem the reward.

How to create a reward in Marsello

4. Brand your loyalty program

Consumers, on average, belong to 14 different loyalty programs but only engage with around half of them. So, how do you make sure you’re in that 50%?

The best retail loyalty programs are an extension of your brand and everything that makes you unique as a retailer. Whether they’re checking their point status via email updates or a dedicated widget, your customer’s interactions with your rewards program should always be consistent and memorable.

Despite already having an instantly recognizable brand, LEGO has worked hard to build a seamless omnichannel loyalty experience for customers shopping online and offline:

Lego's eCommerce loyalty widget with rewards showing

With Marsello’s retail loyalty program software, companies can build an entirely customizable loyalty widget that seamlessly links the rest of the shopping journey. Choose custom colors, fonts, and layouts to create a customer-centric loyalty experience that boosts engagement.

How to edit a loyalty widget in Marsello.

5. Market your loyalty program effectively

Here’s the thing about customer loyalty programs in retail: if people don’t know that your program exists, you’re not going to get a strong uptake when it launches. So, what does successfully promoting your loyalty program look like?

Here are some ways to get your program in front of new and existing customers:

  • Put a pop-up or banner on the home page of your website.

  • Add an online loyalty program explainer page in the footer of your website (Marsello’s customer loyalty software can help you with this).

  • Run a limited-time referral promotion by rewarding members who refer friends to your program.

  • Post about your program on your social media channels with a link to the sign-up page.

  • Invite customers to your program via an email newsletter (and embed the sign-up link into all future emails).

Retailer tip: Marsello’s loyalty program app makes it easy to set up your loyalty program, but in case you need help or want to take your initiatives to the next level, you can opt for our Premium Onboarding service. 

With Premium Onboarding, we'll set you up for success by creating a loyalty program, complete with a custom-designed widget. We'll optimize your program configurations, and we'll even design a tailored launch campaign email so you can announce the program to your customers.

Learn more about Premium Onboarding and discover how Marsello can help you maximize the results of your loyalty program.

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How building stronger customer relationships with loyalty marketing can generate ROI and business longevity

While new customers provide a stable source of revenue, the cost of acquisition and the competitiveness of the retail marketplace means that many brands will ultimately exhaust this source of revenue.

Truly setting yourself up for longevity means investing in initiatives that bring back customers time and time again.

Whether it’s working towards higher AOVs to meet redemption thresholds or more customers talking about your brand online to earn points, rewards programs for businesses are a highly effective way to incentivize customer loyalty and shape customer behavior in favor of actions that boost profitability. 

With the customer experience now playing a more significant role than ever in purchasing decisions, just offering points for purchases isn’t enough to get customers genuinely invested in your program. By providing your customers rewards for engaging with your brand in a variety of different ways, you can foster strong emotional connections that boost customer loyalty and your bottom line.

Learnings and key takeaways

Customer loyalty is increasingly important in today’s competitive retail climate. You need to create a customer retention strategy that works for your business to start marking the most of it. The right loyalty practices depend on your specific business. Broadly speaking though, the best loyalty programs involve:

  • Low barriers to entry that make it easy for customers to join and earn points.

  • Omnichannel capabilities that promote a seamless shopping experience on physical and digital channels.

  • Clear and consistent branding across all touchpoints.

  • Personalized rewards and experiences.

In addition, you could improve the performance of your initiatives by marketing your loyalty program via automations, email campaigns, SMS campaigns, and encouraging customer shares and referrals.

Final words

At Marsello, we’re experts in the art of loyalty marketing and building initiatives that turn first-time customers into long-term sources of revenue. Our in-built loyalty and referral program product gives retailers the tools they need to create a bespoke VIP program app that meets their customer’s expectations.

Marsello’s marketing toolkit doesn’t stop at loyalty either. From email and SMS campaigns and customer feedback collection to automated marketing and data-driven insights, Marsello’s customer marketing platform gives you all the tools you need to run a seamless marketing strategy across all sales channels.

Learn about Marsello’s features