How to create a Loyalty Program for Your Online Business

Posted on 1.8.2017
Written by Eva Ciga

A recent study by Experian Marketing services has conspicuously shown that approximately 7 out of 10 businesses with a Loyalty program experience the incredibly powerful revenue flow of repeat customers. This clearly shows that the power of loyalty program for online business cannot be underestimated, but it should also be noted that not all are rewarding.

It takes laudable efforts and highly innovative strategies to come up with a loyalty program that will give you a praise-worthy return on investment. When done well, a loyalty program can be a gift but when done wrong it will be a burden to your customers and a waste of time for the business.

So are you planning to create a Loyalty program? Here are some facts to consider.


A good loyalty program should be unique for your business. Taking cues from businesses similar to yours is okay but to build a unique brand you must come up with a unique loyalty program.

The key to the success of any loyalty program is understanding your customer. Once you understand who your customers are, you need to devise the best way to getting the customers enrol to the program.

The first step in getting customers to sign up to your loyalty program is educating your employees. This will make it easy for the staff to conveniently promote and enrol many customers in the loyalty program. The best way to get the enrollment done faster is rewarding your employees based on the number of customers they enrol.

You can also engage you customers in the sites they visit most. You can add sign up links to the online ordering forms or your merchant’s homepage to create attention to the loyalty program. This will increase your signups by up to 4 times. Moreover, you can engage your customers at checkouts. This is usually the best time to approach the customers and introduce the loyalty program to them. Since there is a great potential that the customers will be rewarded with their purchase it makes a lot of sense to mention the loyalty program at this point.

Loyalty program for online business and email list

Alternatively, you can promote your loyalty program via email. If you already have a compiled email list use it as a paragon to generate sign ups for your program. Statistics have shown that most successful loyalty programs utilize emails to send signup reminders and incentives.

Above all, you should make the signup process to be very easy. Once a customer develops the interest in your loyalty program the next step is asking for their contact. This should be done in the simplest way possible, otherwise, the opportunity will be passed on to the customers.


Loyalty program for online business


Customers enjoy the benefit of being registered in a loyalty reward when they redeem a reward. According to statistics, about a third of all the loyalty program points go unredeemed.  So, as you craft a loyalty program you must come up with ways to make your customers redeem the points they get.

Some online stores impose point’s expiry or high spending threshold as a way of making customers redeem. However, this might not be a good way. Customers might get frustrated when their points expire before they cash them in.  Some have also resulted in long-term expiration but without the pressure to redeem the points, customer loyalty might fade. So how do you get the best out of the power of redeeming points and at the same time maintain the customer base? You must come up with a good plan that will strike a good balance.

Reward redemption boosts sales. If a customer is motivated to make the decision to redeem a reward it will impact positively on their buying behaviour before and after the redemption. Actually, redemption creates positive feelings and attitudes that make members of a loyalty program buy more frequently so as to increase the number of program points.


One of the most crucial nitty-gritty details of a loyalty program for online business is the points to reward. Coming up with a comprehensive point based system program will require you to make two very important decisions. First, you will have to decide the actions to reward. The biggest reward should be assigned to the most important customer action. To encourage repeat clients you should aim to reward all check-ins handsomely.  In case your objective is to encourage your clients to spend more when they visit your online store, award the highest points for each amount spent.

Secondly, you need to pick the point’s ratio. A good way of setting the best point’s ratio is first deciding what the rewards are. Both a low-value ratio (a point for each dollar) and a high-value ratio (100 points for every dollar) will have a huge psychological impact on your customers. If your goal is to attract more casual clients the high point ratio will work magic for your business. On the other hand, the low point ratio will work best when looking to encourage power customers.

Statistics show that high points ratio overwhelm customers no matter how close they are to the reward. But on the flip side, this type of point’s ratio is tougher and abstract to track. For this reason, you should settle for such a plan only if you have a good base of loyal customers.

If your business has a gained a wider appeal but only attract casual customers then a low point ratio will work effectively.


Discounts have the highest caliber of universal appeal because it’s easier to apply them to many products.

For long they have been the backbone of loyalty programs because they make terrific rewards. Furthermore, discounts are impressive because they do not give businesses the tiresome task of performing rigorous monitoring. Typically, most loyalty programs provide enticing discounts to members than to the non-members get. This helps the business to build a strong base of customers since most of them are encouraged to join in order to receive the discount.

But a good loyalty program should not only focus on discount on the product as a reward. This is because, to some extent, discount does not impact on all the purchasing behaviour of the customers. Thereby, failing to affirm the ultimate goal of improving business revenue. So, if you thought creating a loyalty program is a puzzle, then discounts are a piece of it.

Just like any other rational reward, discounts should be coupled with a number of experimental rewards. So the loyalty program to stand a good chance. This will make the program more effective since it will address emotional and rational needs of your customers. However, to arrive at the right balance will require some testing and experimentation.


Most of the loyalty programs present a great opportunity for members to earn rewards. One of the most enticing rewards is freebies. When setting up a loyalty program you should try to come up with the most effective way of awarding freebies as rewards.

One of the best ways is awarding freebies to the most frequent purchaser of a particular good. This will develop a desire for all loyalty members to buy a certain product frequently. They will hope to earn the freebie in return. The freebie should also be an attractive reward which appeals most to your customer.


Segmentation of customers will bring 3 indispensable advantages to your loyalty program. The first, creation of different customer levels will help you to send more relevant and personalized content to a specific group thereby generating better engagement, yields, and conversion.

Second, you will be able to establish the group of customers that contribute most profits to the program. And finally, it will give you the freedom to combine customer intelligence with the predictive analysis to expand the scope of your business.

When creating customer groups you should focus beyond purchase history and demographics. Be creative and highly innovative to come up with customer groups based on either customer importance or seniority. You can also classify your customers as either offer induced customers, offer denied customers, offer necessary customers, or offer adverse customers.


Gamification helps online businesses to get the best out of the fundamental aspects of human behaviour. When implemented well, it will make the mundane activities of your business generate enthusiasm thereby creating the desire and motivation for your customers to keep “playing”.

Gamification taps into the human need for social interaction and competition. By nature, human beings are hard-wired to love winning. Everyone loves to achieve more than their friend and become the best in whatever they are doing. Applying this psychology in the online retail space has become a popular marketing tactic.

This is because customers feel more satisfied to participate in game oriented shopping rather than being tricked to purchase. This aspect gives the shopping process a new dimension, and the retailer is utilizing the art of gamification to boost customer loyalty and engagement.

The best way to incorporate gamification into your loyalty program is using a tiered reward program. Such a program will encourage your customers to take certain actions and reach a specific milestone to claim their reward. Every time the customer buys anything from your online shop they will get closer to the goal of ‘winning’.

However, caution must be taken when adopting gamification into your marketing strategies. A bad plan might end up pulling your customers away from the primary goal of your products in favour of misplaced rewards.

Do you want to find out more about Loyalty Programs for Retails? Check out our article 5 Loyalty Programs in Retail that add value to Online Shopping


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Further reading

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