Loyalty Program Cheat sheet: How to get more repeat purchases

Loyalty Program Cheat sheet: How to get more repeat purchases

Did you know that copper tokens were one of the earliest methods to encourage repeat purchases in the late 1800s?

Modern customers are drawn to loyalty programs and the rewards they offer. These stats prove it.

 Over 55% of retail shoppers think loyalty rewards are the most valuable aspect of their retail shopping experience.

 70% of consumers say they would recommend a brand with a good loyalty program.

 77% of consumers say that a good loyalty program would make them want to stay with the brand.

 63% of consumers say that they would change their spending habits to get the most out of a loyalty program.

One stat stands out is:

Based on HubSpot survey, 69% of consumers have no trust in advertisements. 71% of consumers consider sponsored ads on social media untrustworthy.

These statistics are not definitive. These stats show trends that must be followed by all marketers in the D2C, e-commerce and retail space.

The trends are clear: Brands need to capitalize on customer loyalty programs. It will attract loyal fans and buyers and increase repeat customers.

You will be able to:

  • Know the benefits of a loyalty program for your brand and customers
  • Define your loyalty management strategy
  • Learn how to make a loyalty program that increases customer LTV
  • How to measure success
  • To increase loyalty program sign ups, you need to define an engagement process






Retail customer loyalty programs offer many benefits

When you look at what a KPMG Survey found, you see how powerful loyalty programs can be. Their research shows:


Customer loyalty programs become self-sustaining because they build customer loyalty over time.

Also, research by the creator of the Net Promoter Score proves that if customer retention increases by only 5%, profit increases by 25% to 95%.

Are these programs of any value?

The same survey found that there are!

75% of customers would rather switch brands than receive the same quality and rewards from loyalty programs offered by other brands.

Are you still not convinced?

These are just a few reasons why you should consider joining a loyalty program.

 Brands can stop competing on price. Loyalty cards are a strong emotional reason to stick with the brand. Loyalty programs are so powerful that customers will choose expensive brands with loyalty programs they trust.

 Brands find ways to increase the lifetime value of customers with your brand.

 Predictive data analysis forms the backbone of loyalty programs. This allows brands to identify granular segments of their customers and create deeper relationships with them.

 A well-designed loyalty program results in a highly predictable bottom-line for your brand revenue.

 Brands can make their customers feel special with loyalty rewards. These brands can create emotional bonds with customers.

How do you calculate the customer’s value?

The value of a customer is the amount of business they bring to the brand. It may sound cold but it’s a great way to see patterns in the revenue flow.

Businesses don’t want customers who have little or no value. Businesses want more customers to drive repeat purchases and increase customer lifetime value. This term can be abbreviated to CLV, LTV or CLTV.








Customer lifetime value (LTV) formula

The next step after understanding the meaning of the CLV is to calculate it.

The actual definition of customer lifetime value is as follows:

“.. is a sign that the net profit contributed towards the entire future relationship with customer.”

LTV (lifetime valuation) allows brands to put more emphasis on long-term value than lowering acquisition costs.

Here’s a simple formula that will calculate predictive LTV for one customer:

customer lifetime value

A brand can trace its steps back to find out what caused this increase in value. You can improve your CLV by using techniques that worked first time.

Encourage repeat purchases to increase Customer Lifetime Value (CLTV)

Roy Hollister Williams is a marketing consultant who created the Wizard of Ads Trilogy.

customer loyalty roy quote

Analyzing the offerings of your competitors is a great place to start. It won’t show you how loyalty programs work for your competitors. It will show you the offerings made to customers in your niche.

You can also poke holes in the strategies of your competitors and increase your loyalty program.


Repeat customer definition

Although it may seem simple, repeat customers are not always profitable.

A “repeat customer” is someone who purchases more than one time. As yourself:

Which customer is more profitable, a customer that buys twice or a customer that buys ten times?

The recurring customer is the most important. These customers are loyal because they see the value in your products and keep coming back. They are attentive to your latest releases and continue buying products for weeks and even months.

A customer loyalty program is a way to convert occasional customers into regular customers.


Define your loyalty management strategy

Modern customers love loyalty cards. Customers expect loyalty cards and points from their favourite brands.

These are the principles that will make it possible to retain customers with a loyalty program:

Loyalty programs for customers are a way to build loyalty and reward loyalty.

Let’s consider a hypothetical situation:

John has used Google Pay multiple times to order ham sandwiches or steak from a restaurant. Google knows John is a meat lover. Google then sends John a coupon for another app to order meat for home cooking.

John can get a coupon for raw meat to prepare for a party.

The second app, the meat supply aggregator, didn’t wait for John and started ordering through its app to give him his coupon. To encourage brand loyalty, it offered rewards via Google Pay.







Customers must use loyalty programs, not create them.

Here’s how to get started with creating loyal programs:

To create loyalty programs for your brand, you don’t have to know order data.

Track reactions to your social media pages and pages of competitors brands to get the data. This data-mining activity is time-consuming but it can also provide value to your future customers.

Show them your progress and show your support for their “finish line.”

Designer Shoe Warehouse (DSW), created a loyalty program that offers frequent shoppers automatic rewards. It was so simple that many customers forgot it existed.

They reacted to customers by reminding them about current deals and the points required for a $10 discount coupon. In the email, they also included a photo of their loyalty rewards.

Your customers view rewards as a way to set goals. Customers will remember your brand if they can see how far they have come from these rewards.

Personalize rewards by using data

Rewards are not enough. If they have loyalty memberships, your competitors may also offer rewards. To win customers’ hearts, your brand must be different by offering personalized rewards.

Loyal customers are more likely to buy more and generate more data. These loyalty programs should be tightly integrated with customer data.

Predictive analytics is used to identify customer types and their preferences/quirks. It also helps them understand their buying habits. This prevents the loyalty program becoming a hollow portal for rewards.

It’s easy to redeem loyalty point

Your loyalty program will be less accessible if it has a complicated points system. Do not make people do calculations or go through complicated check-points in order to receive their rewards. This will create a dysfunctional loyalty system.








Is it possible to create a loyalty program that is paid?

Paid rewards programs seem counterintuitive. Why would people pay for “rewards?” These programs are still used by powerful global brands.

Amazon Prime is a loyalty program that pays a fee. Membership programs are available at Restoration Hardware and lululemon.

Why are paid loyalty programs so rewarding

Social media is full of marketing noise, which lowers barriers for new brands to enter the market. The power of social feed algorithms means that smartphone users are more distracted than ever. This creates a formidable challenge for customer retention managers.

Paid loyalty memberships can be a great way to mitigate that effect and build deeper customer relationships.

Combining predictive analytics and loyalty programs can create a lot of personalized value. Customers don’t know what is happening behind the scenes. These customers see the value of expensive systems. Customers pay for the brand’s value by becoming loyal members.

Where is the evidence that loyalty programs for paid customers drive loyalty?

The data from the McKinsey Consumer Paid Loyalty 2020 Survey suggests that:

  • Subscribers are encouraged to spend 30% more by signing up for loyalty programs.
  • Paid loyalty programs double repeat spend probability to 60%

Customers are now questioning how loyalty programs work in light of the economic crisis. These stats show this shift:

Source: McKinsey Consumer Paid Loyalty Survey


How do you combine paid and free loyalty programs?

This simple strategy creates a synergy between the customer and the brand.

A brand starts with a free, points-based loyalty program without any targeted data for personalization. The benefits of shopping with the brand are realized when frequent buyers accumulate points. This builds over time into a relationship.

These frequent buyers are used to collect data for the brand through cross-selling and upselling. They help the brand extract accurate insights about the customers’ preferences.

The paid program is the second stage. This is the second stage:

  • Through the redemption of loyalty points and building relationships with each other, members have already established a trusting relationship. They’re ready to do more.
  • Brands already know their customers well enough to offer personalized value.

This tiered model offers the brand the best of both worlds.








These loyalty program trends will help you create exceptional programs

Partnering with brands that are in the same niche is a great way to make your loyalty program stand out. Examples of such partnerships include the partnership between Shell and Dunkin Donuts, and the partnership between Hilton Honors and Lyft. These partnerships make loyalty programs irresistible.

A social cause component to your loyalty program is another important trend. There is data to prove that 74% of millennials want their favorite brands to stand publicly for a social cause. This strategy is not without risk, but we see many brands use it.

  • United Airlines Mileage Plus members have the option to donate their points for the American Red Cross.
  • Target Circle members vote to determine which local charities receive Target’s charitable donations.

To achieve (achievable) loyalty KPIs

A health check is necessary to ensure that your loyalty program continues to improve.

These are the top metrics that will help you track the success of your loyalty programme:


Customer retention rate (CRR)

This is the number of repeat customers that your customers have made in a given time period.

This is the formula:

customer lifetime value

You should track your CRR over longer periods (monthly or quarterly) as it doesn’t show any quick changes.


Redemption Rate (RR).

This is a measure of the value of your loyalty program for your customers. Your loyalty rewards will be more effective if the PRR is higher.

Redemption rate

A PRR below 20% is common.


Participation Rate (PR)

This is a measure of how many customers are enrolled in loyalty programs. These customers love to redeem their points regularly.

active lifetime value

A PR between 5% and 7% is a sign that the program doesn’t offer any unworthy rewards.


Repeat Purchase Rate (RPR).

This metric can be measured over 365 days. This is the best way to gauge how your loyalty program is performing.

repeat purchase

A loyalty program is considered successful if it has a RPR of between 20-40% for a full calendar year.








Loyal Customer Rates (LCR).

LCR is measured over a full year, just like RPR. We choose loyal customers, not the RPR, who have purchased from us at least 4 times.

loyal customer purchase

Do not forget to collect voice-of-customer data by asking loyal customers for questionnaires. This helps to improve LCR and other stats for your loyalty program.


Inactive Participants Rate (IPR).

This is the opposite of Participation Rate (PR). This metric should be lowered over a period of time.

inactive lifetime value

This guide will show you how to create a loyalty program.

Planning the order value milestones, and the rewards associated with them, is key. However, the end-to-end planning for a loyalty program requires a lot of work.

Step 1: Conceptual stage

You should keep the original idea in mind when creating a business case. Do not create a loyalty program just to look cool or copy other brands.

  • To set long-term goals, use your KPIs.
  • Definition of process requirements. (Revamp an existing plan, or create a new one). This will help you determine how much work is required and how you can plan it over time.
  • How can you make your brand’s program an integral part of your brand image?
  • Examine internal data regarding customer buying habits and expectations
  • Is it a tiered or free loyalty program? What are the reasons?
  • What are the steps to offer this program on all channels? mobile app, website or e-commerce shop, etc.

Step 2: Designing, implementation

There are three choices:

  • You can do everything in-house.This is expensive and takes a while. Targeted expertise in UX, Customer Research, Development, etc. is also required. This program is an excellent learning opportunity for your company. This program will require a long-term commitment from your business team. They should be able to commit for at least one year
  • Hiring an agency: Use their industry knowledge to smoothen the rollout.
  • Create customized loyalty programs quickly and cost-effectively with software.

Step 3: Promotion and launch

Loyalty programs work in the same way as product launches. First, you must announce the release. You must then make sure it is always in the forefront of your customers’ minds.

These are the key parts of the process.







Before enrollment begins, prepare

Some brands launch the program in a single day. This is not enough.

Your customers need to be excited about the launch in order for it to be a success. Social media is an excellent tool to build excitement for your loyalty program.

They will be cold-turkeyed without being warmed up, which will create a little buzz around the launch date.

In order to create a buzz, invite influencers and ask them to test the program during a “beta launch”.

oyalty program launch

Define your target customer set

A loyalty program rollout should, as with all marketing activities. It must be aligned with your customer personas. This program’s goal is to build loyalty. You should define the criteria for customers you invite to the program.

To create buzz, you can either make it an invitation-only program or open it up to all members of your audience. This strategy could be a mix of both.

Communicate with your team, before you speak to your audience

When Decathlon ran a similar program, internal training was a cornerstone of success. They taught their employees about the app and how it works.

Every customer-facing executive should be familiar with different scenarios and what their role is in them. Customers can ask them questions about the program and they should be able to answer their questions.

Training internal is more than just a one-day course. This new program must be monitored regularly to ensure its success.

Describe how you plan to market your launch

An omnichannel launch strategy works best in most cases.

Customers will see that this is a campaign when they follow you on multiple channels. This launch is not for customers who feel like they are just another number.

Give them reasons to sign up for the program. Tell them about the benefits. They will be more likely to join if they can see the benefits they are getting from it.

This strategy can be personalized to increase the likelihood of high numbers of enrollments in its first week.







Step 3: Develop an engagement strategy to encourage sign-ups

Loyalty programs are about more than just transactions. They look at the bigger picture and help customers live longer. How can you amplify it? Reward your customers for their actions with the desired rewards. If you have a solid, logical engagement strategy in place, all this will be possible. You need to have a complete user engagement journey orchestrated using dynamic lifecycle campaigns.

Personalized, distinct engagement approach

Your loyalty program must be unique and not generic. It is best to learn about your customers’ shopping habits and preferences so that you can send them personalized rewards. After this is done, you can make your program stand out. You must focus on enabling your users to redeem and earn rewards.

Define user actions, events

Once you have decided on your approach, it is time to analyze and understand user shopping habits. You will need to learn all user actions and corresponding events in order to do this. MoEngage, a customer engagement platform, can be used to analyze user behavior and to add them to custom cohorts that you create based on your requirements. You can create a reward catalogue based on the various user events that you have created using all of this data.

*Note your product purchase points is subject to change based on the product pricing (high-priced product = more points)

Custom triggers for engagement workflow

Now that you have a good understanding of user actions and the corresponding events, what next? You can create custom workflows using event data if you use customer engagement platforms like MoEngage. These workflows allow you to create a customized event-level framework with complex triggers and conditions. You can use these workflows to create customized rewards engagements to send messages to your users based upon their actions. These messages will be customized based on the rewards that will be redeemed, and will focus on user-preferred categories/products.






Approach that is socially-driven

You can send messages to social media channels, as well as sending push notifications, SMS, and email personalized push notifications. You can use Facebook and Whatsapp to engage users in loyalty programs. You can also reward users for liking, sharing, and commenting on product/category link posts. These channels can be used to send messages encouraging users to do more.

Your users will only be happy to communicate with you if it is relevant and logical. Be smart about how you use engagement channels and make sure your communication is relevant. You can use on-site surveys or feedback emails to better understand your users’ pulse. These feedback methods can be used to determine customer preferences and help you create a loyalty program. Loyalty programs can be a great way for customers to stay connected with you, and they will also help you get more ROI if implemented well.