Loyalty marketing offers a way to reach existing customers and turn them into repeat buyers, creating more predictable revenue for your business. This is especially valuable as the cost of converting new leads continues to increase.
Jen Yu, cofounder of men’s skin care brand Jaxon Lane, says the brand has responded to rising customer acquisition costs—up 15% between 2024 and 2026, according to Focus Digital—by shifting its focus. “Loyalty and retention are something we really started hyper-focusing on,” Jen says on Shopify Masters.
This article defines loyalty marketing, outlines steps for implementing your own strategy, and explores how to measure its success.
What is loyalty marketing?
Loyalty marketing is a customer retention strategy that encourages repeat business by building long-term relationships with existing customers. Loyalty programs are one of the most recognizable components of loyalty marketing, rewarding customers with points, discounts, or exclusive perks. But a broader loyalty marketing strategy can also include referral programs, personalized offers, post-purchase engagement, community creation, exclusive content, and other tactics that entice customers to return.
For example, an online apparel brand might offer VIP perks to repeat customers, send personalized product recommendations based on past purchases, reward successful referrals, and give brand community members early access to new collections. Together, these loyalty marketing tactics help strengthen customer relationships.
Benefits of loyalty marketing
There are several benefits to implementing a loyalty marketing strategy. For ecommerce brands, those benefits include:
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Increased customer retention. According to SAP’s Customer Loyalty Index, the most common way customers express their loyalty to a brand is by shopping with the brand frequently. Encouraging repeat purchases increases customer lifetime value (CLV), or the total revenue each customer generates throughout their relationship with your business.
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Greater brand advocacy. Loyal customers are more likely to recommend your business to others. SAP’s study found that recommending a brand to family and friends was the second most common way consumers expressed their loyalty. Loyalty marketing can encourage this word-of-mouth promotion through referral incentives, community engagement, social sharing, and creating experiences customers want to talk about.
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Deeper customer insights. Loyalty marketing creates opportunities to learn more about purchasing behavior and preferences from customer data. Those insights can help you segment audiences, personalize marketing campaigns, and better understand which customers are most valuable to your business. Loyalty program members can also be excellent candidates for polls or surveys, particularly when rewarded for participation.
Frameworks for understanding customer loyalty
Several frameworks can help you understand customer loyalty and tailor your loyalty marketing efforts. Here are a few commonly used approaches:
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Loyalty ladder. Describes the stages customers move through as they become increasingly devoted to your brand, from prospect to customer, client, supporter, and eventually advocate. This framework can help you identify opportunities to guide customers from one rung of the loyalty ladder to the next.
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RFM. The RFM framework scores customers based on purchase behavior metrics of recency, frequency, and monetary value. Businesses can use these scores to segment customers, personalize marketing, identify VIP shoppers, and build tiered loyalty programs.
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Customer life cycle. This approach groups customers according to where they are in their relationship with your business, such as first-time buyers, repeat customers, loyal customers, or those at risk of leaving. Understanding each stage can help you tailor marketing campaigns, offers, and experiences to encourage long-term loyalty.
How to develop a loyalty marketing strategy
- Set clear goals
- Determine your loyalty tactics
- Implement your loyalty strategy
- Promote your new initiatives
- Personalize the customer experience
A successful loyalty marketing strategy starts with a product customers want to come back for. As Unbound Merino CEO Dan Demsky says on Shopify Masters: “It really just comes down to the quality of the product. That is the thing that gets people to come back.” Once you have that foundation, these best practices can help strengthen customer loyalty:
Set clear goals
To keep your efforts focused, establish clear, specific goals for your loyalty marketing strategy. Whether your goal is to increase metrics like average order value (AOV) and CLV or to cultivate more brand advocacy and word-of-mouth marketing, deciding which results you want to see will help you decide which loyalty marketing tactics to use.
For example, comic book retailer Revenge Of wanted to drive more in-store sales alongside its online business. Rather than offering discounts, the brand rewards in-store shoppers with double and triple loyalty points. “I think leveraging the loyalty program is something that doesn’t really cost us anything,” cofounder Jeff Eyser says on Shopify Masters. “And it gives people an incentive to come in and spend more money, but then also get more free stuff out of it.”
Determine your loyalty tactics
The next step is to decide which tactics best support your goals and your customers’ preferences. A loyalty program is often the foundation of a loyalty marketing strategy, but you might also incorporate other approaches. For example, referral programs can encourage brand advocacy, personalized offers can increase CLV, and post-purchase engagement or community-building can strengthen long-term customer retention.
If you decide to build a loyalty program, there are several common structures to choose from, including:
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Points-based. Customers earn points for purchases, referrals, and other tasks.
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Subscription-based. Customers subscribe to products or services in exchange for discounted rates, special offers, and other benefits.
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Tiered. Customers earn their way into different tiers and increase their rewards along the way.
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Value-based. Customers maintain their loyalty to support a particular cause you sponsor.
Often, businesses will combine elements to create a hybrid loyalty program.
Implement your loyalty strategy
Once you’ve chosen your tactics, you can use one of several tools to put them into practice. Loyalty platforms like Smile.io, Loyalty Lion, and Yotpo on the Shopify App Store can be integrated with the ecommerce platform to run, manage, and track progress on your loyalty program.
Then, use Shopify Flow to automate tasks such as inviting customers to join a loyalty program after they’ve reached a spending threshold, promoting shoppers to higher reward tiers, or sending personalized messages based on purchase behavior.
Promote your new initiatives
A loyalty marketing strategy only works if customers know it exists. Introduce your program and other loyalty initiatives at multiple touchpoints throughout the customer journey so shoppers understand the benefits of participating.
Promote your strategy on your website, during checkout, in post-purchase emails, and through your social media channels. If you have a physical location, train staff to mention your loyalty program at checkout and use Shopify POS to enroll customers in person (it can also sync points earned in-store and online). Regular reminders about available rewards, referral opportunities, or exclusive communities or benefits can encourage participation.
Personalize the customer experience
Consumers increasingly expect personalized experiences from the brands they support. Deloitte found that personalized experiences and rewards ranked among the most important attributes of a loyalty program.
Segment customers using marketing tools or built-in customer segmentation rules so you can group them based on purchase behavior, predicted spend tiers, RFM scores, and more. You can then tailor your marketing for each group. For example, customers with higher RFM scores might receive access to early product launches or exclusive offers based on their purchase history.
In an interview with Shopify Masters, Hannah Beals, who was CEO of hair care brand Ouai at the time, highlighted Ouai’s use of loyalty-based personalization and segmentation. When launching a new product, the company identified all the customers who had already purchased something in the same fragrance, so it could “do something personalized and high-touch for all the customers that we know love the scent.” By tracking customer behavior and segmenting, you can create targeted campaigns built around people who are already fans of the product you are promoting.
How to measure loyalty marketing success
Once you’ve implemented your loyalty marketing strategy, you can track key performance metrics to understand what’s working and what you can improve. The following metrics provide insight into customer behavior, program performance, and long-term business impact:
Customer retention metrics
Customer retention metrics measure whether your loyalty marketing strategy is improving customer satisfaction, keeping customers engaged, and encouraging them to return over time. These include:
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Retention rate. The percentage of customers returning to your business over a particular span of time.
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Repeat purchase rate. Also known as returning customer rate, this is the percentage of customers who make more than one purchase.
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Churn rate. The percentage of customers who stop buying from your business.
Together, these metrics help you understand how well your loyalty marketing efforts are retaining customers. A successful loyalty marketing program should lead to increased retention and repeat purchase rates, while reducing churn.
Loyalty program metrics
These metrics help you evaluate whether you’re running a successful loyalty program based on how actively customers participate and whether the program is delivering value for your business:
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Redemption rate/reward redemption rate (RRR). The percentage of rewards customers actually redeem.
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Net Promoter Score (NPS). The likelihood that customers will recommend your business to others.
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Loyalty program ROI. The revenue generated by your loyalty program compared with the costs of offering it.
Customer value metrics
These customer value metrics show how loyalty marketing influences the long-term value of each customer relationship:
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Purchase frequency. The average number of purchases a customer makes in a given time frame.
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Average order value. The average amount customers spend per order.
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Customer lifetime value. The total revenue a customer is expected to generate throughout their relationship with your business.
When these metrics trend upward over time, it means your loyalty marketing strategy is creating more valuable customer relationships.
Loyalty marketing FAQ
What does loyalty mean in marketing?
In marketing, loyalty refers to customers who continue choosing your brand over time. Loyalty marketing encourages long-term relationships through tactics such as loyalty programs, personalized offers, referral incentives, post-purchase engagement, and community-building.
What are the two types of loyalty in marketing?
The two types of loyalty in marketing are transactional loyalty and emotional loyalty. Transactional loyalty is driven by practical benefits such as price, convenience, or rewards. Emotional loyalty occurs when customers identify with your brand’s mission and core values.
What is an example of loyalty marketing?
Loyalty marketing can take many forms. For example, Moon Juice’s loyalty program lets customers earn points on purchases that can be redeemed for store credit to put toward future transactions. Other examples include Polysleep’s referral program, which provides gift cards to customers when someone they refer makes a purchase, and Blacktoe Running’s community-focused running groups.
