How loyalty programs benefit ecommerce
Amid economic uncertainty, brands are focused on keeping costs down — yet many overlook their most cost-effective strategy: customer retention.
What research shows:
Acquiring a new customer costs 5 times more than retaining one.
In general, customers spend 67% more in their third year with a business than in their first.
Emotionally connected customers have 306% higher lifetime value, and tend to recommend brands 4 times more often.
Loyalty programs are an effective way to improve customer retention and lifetime value by rewarding customer loyalty, such as repeat purchases and spending more per purchase.
They help customers feel more connected to your brand, and therefore more likely to purchase from you. In fact, about 78% of customers reported becoming loyal to a brand if they’re both rewarded and recognized for their loyalty.
Other studies show companies with loyalty programs grow revenue 2.5x faster than those without them, with 79% of consumers saying they purchased more frequently from a brand because they participated in a loyalty program.
Strategic benefits
★ Data-driven insights
Loyalty programs help identify who’s buying, what they’re buying, and what brings them back — fueling more effective, personalised marketing.
For example, businesses can use this data to recommend products, send re-stock reminders, or push targeted offers to specific customer segments.
★ Improve financial resilience
For businesses that experience seasonal fluctuations in sales, loyalty-programs can help keep revenue flowing through exclusive offers and promotions.
★ Turn customers into brand advocates
Loyalty programs can also lower the cost of customer acquisition by encouraging existing customers to refer new ones. Happy customers are also more likely to become brand advocates, helping attract new business, either through word of mouth, or as official brand ambassadors, leading to organic growth and reduced reliance on more expensive, traditional marketing methods.
★ Set your brand apart and escape the pricing race to the bottom
Loyalty programs help shift focus from pricing to emotional value, setting your brand apart in crowded markets.
Types of loyalty programs
Good loyalty programs reward frequency and spend, typically through tiered benefits and exclusive perks like:
Exclusive discounts
Early access to sales or launches
Free shipping
Birthday gifts
Personalised offers and product recommendations
“Member-only” events to boost brand hype and opt-ins
Loyalty programs can be paid or free. However, a study by McKinsey & Company shows paid programs tend to drive stronger engagement due to higher perceived value.
How to implement a successful loyalty program
★ Understand the goal
Study your customer base and define clear objectives. For example, if your goal is to increase repeat purchases, you might design a tiered program with escalating benefits. Similarly, if you’re looking to increase average order value, you would create a system that rewards customers based on how much they spend, rather than per purchase. E.g. gradually higher discounts as customers move up spending brackets.
★ Match your strategy to your customers
Consider how different demographics respond to different types of rewards and incentives. Younger audiences might prioritise early access to product releases and the latest trends, while older audiences might be looking for the best value for money through cashback or tiered discounts,
High frequency industries often use points, while low-frequency might benefit more from referrals.
★ Assess your resources
It is also important to account for your company’s size and resources. Complex, multi-tiered programs can be manageable for larger enterprises, while smaller businesses might benefit more from a straightforward point-based system.
★ Thinking beyond discounts:
Reward emotional investment. Exclusive content, early access, and community perks cost less but add significant perceived value.
★ Evaluate and tweak as needed
Once launched, continuously measure and analyse program performance and make adjustments accordingly. Common metrics include:
Customer retention
Customer lifetime value
Purchase frequency
Average order value
Redemption rate
Breakage rate
Customer churn rate.
Platform considerations
The right software will depend on your goals, budget, and tech stack. Key considerations include:
How will you set up your program and how will it interact with your existing ecommerce setup?
How are you going to promote your loyalty program and keep in touch with your members? What tools can you use to support this?
How are you going to manage customer data generated from your loyalty program?
Aero offers a cost-effective, unified solution to launch and manage your loyalty program from your ecommerce dashboard. Get in touch to learn more.
Cost considerations
Think about the different costs and how they measure against potential benefits. These can include upfront costs like technology and software set up, design and development of assets, advertising and marketing, but can also include ongoing costs like software maintenance, the cost of rewards, as well as staff training and management.
Understand the net benefits derived from the programs (revenue from increased sales, customer retention). Consider indirect benefits such as increased brand awareness and customer satisfaction. Some of these can be hard to quantify, but will have a significant impact on your long-term business growth.
Common pitfalls
We’ve covered the benefits and positive impact loyalty programs can have on a your ecommerce business, so let’s go over some of the common mistakes - and what you can do to avoid them:
★ Vague or overcomplicated reward structures
If customers can’t instantly understand what they’ll get and how to get it, they’ll disengage. Keep the structure simple, transparent and easy to track. Use clear examples, like “spend £100, get £5 back”, and provide visual progress indicators.
★ Poor messaging or lack of promotion
Even the best program fails if customers don’t know it exists or why it is worth joining. Communicate benefits clearly across all customer touch points - email, messaging, on your website, checkout prompt, or in-store materials. Promote it consistently, not just at launch.
★ Underuse of collected data
Loyalty data is a goldmine for personalisation, but it’s often underutilised. Use it to segment customers by behaviour, trigger targeted campaigns, refine rewards, and identify churn risk. If you aren’t acting on this data, you’re missing ROI.
★ Reward costs eroding margins
Discount-heavy programs can eat into profits. Balance financial rewards with low-cost, high-perceived-value perks like early access, exclusivity, VIP content, or members-only experiences.
★ Ignoring non-purchase engagement
Programs that only reward purchases miss out on deepening customer relationships. Failing to incentivise reviews, referrals, and social engagement leaves valuable touchpoints untapped.
Tips and best practises
★ Personalisation
Leverage loyalty data to tailor rewards, messaging, and offers to individual behaviour. Use name recognition, recommend products they’ve browsed, and offer birthday perks. This strengthens emotional connection and boosts engagement.
★ Member reactivation
Active members spend more. Use reactivation campaigns to win back lapsed members - think exclusive limited-time offers, bonus point events, or personalised “We miss you” messages highlighting unclaimed rewards.
★ Flexible rewards
Reward actions that benefit your brand without denting your margins. Reviews, profile completion, social shares, referrals, or participation in community events. This fosters brand engagement and builds advocates.
★ Gamification
Points, badges, prize wheels, point milestones, games and challenges turn transactions into engaging, immersive experiences. Layer in limited-time promotions to create urgency and re-engage dormant customers.
★ Sustainability
Eco-conscious shoppers reward brands with loyalty when values align. Incentivise green actions like choosing carbon-neutral delivery, purchasing sustainably sourced products, or bringing reusable packaging in-store.
★ AI insights
AI can analyse purchase history and preferences to predict customer behaviour and tailor interactions and incentives in real-time. This ensures offers remain relevant and engaging, maximising impact and effectiveness.
★ Omnichannel experience
Let customers earn and redeem points across every channel, ensuring loyalty programs are fully integrated across every customer touchpoint. Keep branding and messaging consistent across channels, and allow customers to manage their accounts through their preferred communication methods.
★ Partnership opportunities
Collaborate with like-minded brands to expand reward options. This can increase perceived program value, introduce your brand to new audiences, and create co-marketing opportunities.
Retailer success story: Jules B B-Rewarded
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Established in 1984, Jules B is an award-winning independent retailer in the designer wear and luxury fashion space. With a strong commitment to quality and staying ahead, they decided to take the next step in elevating their customer experience.
Leveraging Aero’s built-in loyalty program tools, Jules B partnered with web development agency Techquity to launch their B-Rewarded loyalty scheme, seamlessly integrated with their ecommerce store.
How to set up a loyalty program with Aero
With Aero’s loyalty program module, you can build a fully integrated program that rewards customers, supports long-term growth, and enhances your brand - all from within your ecommerce platform.
