Thought Leadership
How loyalty programs can turn customers into devoted fans
Loyalty programs drive serious customer dedication. In fact, according to the Achieving Customer Amazement study, 74% of American consumers surveyed feel customer loyalty programs are critical when deciding where to give repeat business.
Your subscription model is already full of loyal customers — why not reward them?
Combining subscription-based businesses with loyalty programs creates a powerful combination that can win over customers and turn transactions into long-term customer relationships.
The benefits of subscriber loyalty programs
What are loyalty programs and how do they work? Loyalty programs work by giving customers incentives to shop with their favorite brands over a long period of time.
A common struggle eCommerce businesses face is high customer acquisition costs — and subscription businesses are no exception. However, when adding loyalty programs to subscription business models, these companies can offset higher acquisition costs by encouraging long-term relationships with active customers, which increases customer lifetime value (CLV).
58% of shoppers are more likely to make a higher number of incremental purchases with a brand when they’re part of the loyalty program, according to Bolt’s 2021 consumer report on loyalty programs. Additionally, 77% of consumers from the Bond Loyalty Report say they’re more likely to stick with a company that offers brand loyalty programs.
It’s not enough to know what is a loyalty program, let alone to implement a loyalty program — the incentives need to be worth using. By creating programs with rewards that people want to use, companies have the opportunity to learn about their customers by tracking reward redemptions. When businesses know who redeems loyalty rewards, they know their biggest fans.
How subscriptions and loyalty programs work together
While subscription programs offer consumers convenience (and often reduced cost), loyalty programs focus on emotional connections.
This combination is highly effective. Why?
When it comes to convenience, consumers’ actions speak the loudest. The National Retail Federation’s 2020 consumer survey uncovered that 97% of customers have backed out of a purchase because it was inconvenient. Additionally, 52% admit that convenience influences at least half of their purchases.
Customers want a quick and easy shopping experience, and subscription services deliver.
A Motista study of buying behavior of over 100,000 U.S. consumers across more than 100 brands revealed that emotionally connected customers have a 306% higher CLV, spend up to 2X as much with their preferred merchant, and stay with that brand for longer.
Loyalty programs offer that emotional connection by rewarding repeat purchases customers, offering meaningful and charitable missions, or awarding volume-based points toward top-tier benefits.
When businesses combine subscriptions and loyalty programs, they leverage emotional connections and convenience to create a powerful customer experience.
5 types of rewards you can add to your loyalty program
Getting started with a loyalty program can be overwhelming as there are many types of loyalty programs, so we’ve curated a list of the most common rewards associated with subscription experiences. While some businesses choose only one experience type, many combine multiple strategies to offer expanded perks and benefits to their customers. You know your customers best, so pick the ideas that resonate.
1. Loyalty points
Points-based programs urge customers to come back to use points and can promote customer longevity. By allowing customers to accumulate points toward new rewards, businesses give customers something to look forward to while encouraging participation in beneficial activities, like social media shares or purchases.
CBDistillery offers subscriptions for hemp-based CBD products along with a points-based loyalty program. Customers can earn points in various ways, including referring friends and making purchases. Once they hit 100 points, customers can redeem 10% off their next order.
According to the Bond Brand Loyalty Report, nearly 4 in 5 loyalty program members have a redemption goal, which means customers are excited about loyalty redemption options. Customers can redeem rewards points for discounts, freebies, or perks like early access and products created for program members only with points-based loyalty programs.
2. Tiered VIP programs
Tiered loyalty programs offer customers access to different levels of rewards based on spending volume or a monthly fee. A McKinsey survey revealed that paid programs do a lot for business — they increase order totals, purchase frequency, and brand loyalty when compared with non-paying loyalty plans.
The Vitamin Shoppe automatically enrolls customers into one of three tiers based on their annual spending to build customer loyalty and provide exclusive perks.
Vitamin Shoppe’s bronze tier is free for all customers, and the silver and gold tiers activate when customers spend a specific dollar amount within a calendar year. These higher-tier customers receive advanced nutrition coaching, exclusive savings, and more points per dollar spent.
While it may seem counterintuitive, research shows that customers don’t mind buying more from a brand to be a member of a top tier. For example, 60% of respondents from Bond’s Brand Loyalty Programs Survey said they would be willing to do just that — spend more to receive elite status. Additionally, over half of the customers surveyed in Hyken’s Achieving Customer Amazement study said they were willing to pay more if it meant they would receive first-class customer service.
3. Charitable giving
Those in executive leadership positions agree that businesses should connect charitable giving to a brand’s core values. According to the Porter Novelli 2020 Executive Purpose Study, 85% of leaders interviewed feel that companies shouldn’t just make money but also must find ways to contribute to society positively.
Mission-oriented loyalty programs are a way to demonstrate those values and make customers’ purchases meaningful by giving back to critical social causes.
Lush’s popular skincare brand lets customers customize subscription plans to stay stocked up on their favorite products. They also connect to their favorite causes by donating 100% of the purchase price of Charity Pot body lotions to grassroots organizations that advocate for human rights, animal protection, and environmental justice.
In addition to helping those in need, clear and specific charitable programs like Lush’s also have a competitive advantage. According to the Harvard Business Review, most corporate charity programs aren’t connected to thoughtful social objectives and tend to be unfocused.
By offering customers a concrete way to give back that aligns with a brand’s values, businesses can increase brand loyalty and partner with customers to do something positive for society.
4. Referral perks
Existing customers are effective word-of-mouth marketers because they already have the trust of their friends and family. According to a survey by Talk Triggers, 83% of respondents said they are more likely to make a purchase when they receive a word-of-mouth recommendation from family and friends. Therefore, offering loyal customers an incentive for sharing their positive experiences is a win for everyone.
Luxury haircare brand Kérastase offers auto-replenishment subscriptions for hair care products, plus a referral program that boosts exposure to new audiences. Kérastase’s referral program offers a 20% discount to new customers and the friends who refer them.
5. Incentives for feedback
Creating benefits for customers who write reviews helps you fine-tune your offerings based on feedback.
For example, Ipsy, a beauty box subscription service, gives customers points for each review. Let’s say a customer leaves a glowing review of one eyeshadow palette but reviews another negatively. If enough customers leave similar remarks in their reviews, Ipsy can modify the palettes they offer, so customers are happier with the products.
When Ipsy customers leave reviews and earn points, they can use these points to earn items (for free!) from the Ipsy points store.
How to implement loyalty programs into your subscription experience
It’s easy to overlook loyalty rewards programs as a way to boost subscription business, but the benefits make implementing a program a no-brainer.
The best customer loyalty programs will offer customers a personalized experience and easy transactions and redemptions. Be sure to tailor your loyalty program or programs to the needs of your subscribers to increase customer retention and give customers the rewards that matter to them.