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Loyalty Loophole: How To Design A Subscription Loyalty Program Customers Can’t Resist

loyalty-loophole:-how-to-design-a-subscription-loyalty-program-customers-can’t-resist
Loyalty Loophole: How To Design A Subscription Loyalty Program Customers Can’t Resist

Subscriptions and customer loyalty go together like cereal and milk—so much so that it’s hard to imagine one without the other—but that doesn’t mean they’re the same.

Subscription programs are routine deliveries of a specific product or service at a set frequency, usually monthly, but other types of subscription frequencies are available, such as quarterly or annually.

Customer loyalty refers to an ongoing positive relationship between a customer and a brand — not a specific product, but the brand itself.

Realistically, customer loyalty can exist without a subscription model (i.e., loyalty is the milk), but subscriptions don’t function anywhere near as well without customer loyalty (dry cereal, right?)

Just look at the landscape of ecommerce subscription churn rates — across the most common verticals in commerce subscription (e.g., fashion, health and wellness, pet supplies); in December 2022, churn rates were between 6.3% and 8.1%. While it’s almost impossible to have no churn at all, the lower the churn rate, the better.

For a Shopify store using a subscription model, there are tons of benefits to having a loyalty program to keep subscribers locked in for longer and reduce those churn rates.

So, in this guide to subscription loyalty, we’ll be covering:

  • How to plan a subscription loyalty program
  • Ideas and inspiration for subscription loyalty rewards
  • Implementing and managing your loyalty program
  • Inspiring case studies to show you what’s possible

By the end of this guide, you should have a greater understanding of what it takes to build a subscription-based loyalty program and feel ready to start building one for your store.

Crafting your subscription loyalty program

Before diving head-first into building a loyalty program, you need to take a step back, assess your situation, and plan ahead by defining the goals you want your program to achieve and understanding your audience.

Defining your loyalty program goals

Developing a subscription loyalty strategy without goals is a bit like sailing out into the open ocean without a specific destination — it’s easy to get lost and overwhelmed, and you wouldn’t know if you’ve reached the place you wanted to find.

With a little reverse engineering, setting out specific goals for your program can help you map the journey it takes to reach them.

For example, let’s say your store is in a growth stage, and you want to increase your customer lifetime value (CLV), or in other words, keep subscribers signed up for longer; implementing a tiered loyalty structure can be a great method of achieving this. 

By adding higher value rewards (such as double points earning and free shipping) in subscriber tiers, you encourage customers to stay signed up for better rewards, and since they’re earning more points, they’re more likely to use them to add more products to regular orders.

So, before you get too many ideas for your program, consider what it is you want it to achieve to help you map out an appropriate strategy.

Understanding your audience

Once you’ve got some goals in place for your loyalty program, you’ll need to make sure you understand your audience to tailor your loyalty program to their specific preferences and behaviors.

To help you gain more long-term subscribers, analyze your audience to understand three main groups: 

  • Customers who shop regularly but aren’t subscribed—for this group, you can highlight the benefits of subscribing and the rewards they could earn.
  • Customers who were subscribed but have churned — you can try to win these customers back with a great ‘re-subscribe’ reward. For example, On That Ass, an underwear subscription brand regularly sends win-back emails to customers offering a free pair of boxers when they re-subscribe.
  • Customers who are “at risk” because they’ve paused their subscription — you can offer these customers a reduced rate for their first month of re-subscription (Hello Fresh is an example that uses this strategy).

Once you understand the landscape of your customers and put a loyalty program in place, you can then track other important metrics such as customer lifetime value (CLV), repeat purchase rates, and churn. 

Taking the time to prepare these two steps prior to building your program will save you a lot of time down the line.

Rewarding positive consumer behavior: Inspiration and ideas

In this section, we’ll look at some ideas for rewarding your loyal subscribers using loyalty program features — there are quite a few, so we’ll jump straight in.

Tiered rewards structure

The reason a tiered rewards structure helps to improve CLV is that it helps incentivize engagement with higher value rewards compared to minimal engagement for basic rewards.

By having a dedicated subscriber tier, you can focus on creating VIP rewards for customers who commit to your products. For example, you can offer them more points for specific activities (e.g., extra points for purchasing products outside of the subscription or referring new subscribers) — and you’re likely to feel more comfortable offering higher value rewards since subscribing customers are regularly recurring revenue.

Offering a dedicated subscriber tier can also help your subscribers feel like they are part of an exclusive community and feel more affinity towards the brand, which helps build loyalty.

Personalized birthday rewards

A simple “happy birthday” message can be a nice touch to make customers feel valued, but an even better approach is to offer them a loyalty reward for their birthday.

Common birthday rewards include an exclusive discount code or a different special offer (e.g., buy X product and get X free).

Whichever reward type you choose, make sure it’s personalized — the average annual spend of members who redeem personalized rewards is 4.3 times higher than those who redeem non-personalized rewards

Free shipping incentives

If you don’t ordinarily offer free shipping, it can be a great incentive for your subscribing members to reward active subscribers— according to Appinio, 80% of UK shoppers felt that free shipping was a very important factor in purchasing products online.

Exclusive content and experiences

It’s a good idea to include some exclusive content and experiences in a subscription loyalty program—for example, early access to sales, product tutorials, behind-the-scenes content, etc.

These types of rewards help you reduce your reliance on financial rewards and build a stronger emotional connection with your audience. Research from Emarsys suggests that 46% of consumers expect exclusive offers when signing up for a loyalty program.

Gamification and a points system

If it suits your brand, a gamified points-based system can help boost loyalty subscriber engagement and incentivize specific behaviors (for example, 500 points for referring a new subscriber, 150 points for a product review, etc.)

An example of a brand that does this well is Edgard & Cooper, a pet food brand that uses a points-based structure (belly rubs) and challenges to complete to achieve the next tier of loyalty rewards.

Early access to new products

If you’re expanding your product line, it’s a perfect opportunity to test the first impressions of a product by launching it as a subscription-membership exclusive — an active subscriber is likely more engaged with your brand, which leads to a higher chance of getting feedback as early as possible without launching your product to the general public.

For example, if your store sold personal hygiene products (e.g., a deodorant brand such as Nuud) and you were launching a new scent or a limited-run scent, you could offer your subscribers a discount to try the new version or a free tester.

Donation matching and charity rewards

Another method you can use to reward your subscribing customers is to give them the option to donate their loyalty points for an equivalent charitable contribution and (optionally) match their contribution.

According to Deloitte research, one in four consumers pay more for brands that commit to environmentally sustainable and ethical practices. So, not only will you be helping a relevant charity, but you’ll also be able to improve the customer’s perception of your brand.

Referral programs with rewards

When you build a loyalty program, in most cases, they’ll have a built-in referral program option to help spread the word about your brand and its products (LoyaltyLion offers this feature).

With a subscription-based loyalty program, you could offer a special reward for customers who refer new subscribers (not just one-off purchases)—a higher number of points or a discount on their next subscription date are good options.

Member-only events and workshops

Similar to offering exclusive content, you can also hold loyalty member-exclusive events and workshops. For example, a skincare store could hold a workshop on setting up the perfect skincare routine, or a makeup brand could offer “create this look” tutorials.

Don’t be afraid to think outside the box though — you can build events and workshops around nearly every type of product vertical. This method can help you foster a sense of community among your customers.

Free trials and samples

The last type of reward you can use in your subscription-based loyalty program we’ll discuss is offering your loyal membership free trials and samples. Let’s say you come out with a new range of products — you don’t necessarily want your existing customers to quit their membership to try them in case they churn and don’t restart their old membership.

You can help prevent this behavior by sending your subscribers a free sample of the new product without committing to a new subscription if they don’t like it as much as their current one.

Implementation and management

Once you’ve decided how you want to structure your loyalty program and what rewards you’d like to offer (based on your business goals and audience research), you can start implementing it and managing it as it runs.

We won’t go into the finer details of setting up your program (even though it’s pretty easy). We have a complete set of tutorials in the LoyaltyLion help section to get you started with the program building.

However, we’d like to cover a few details specific to subscription-based loyalty programs, including planning and integration, communication and promotion, and tracking and optimization.

Planning and integration

Before you decide on which loyalty platform you want to host your program, make sure you check what integrations it has available. What you don’t want is to decide on the program provider and start building your program only to find out it doesn’t integrate with your existing subscription model and customer relationship management (CRM) system.

For example, Recharge is a popular subscription service for Shopify stores. If you’re already using this system, you can easily integrate it with a LoyaltyLion subscription-based loyalty program in a few clicks—there’s no need to switch providers.

By choosing your loyalty program provider with integrations in mind, you’ll save yourself a big headache later.

Communication and promotion

If your customers don’t hear about your new loyalty program, they’re much less likely to engage with it on their own. After all, how often have you gone Googling to see if a brand you shop with has a loyalty program?

Piggybacking on the previous section on integrations, you can use an email marketing integration to help you communicate personalized rewards and the program benefits to your existing subscribers.

Recent research shows that building awareness of the program among your customers leads to greater usage and loyalty among active members.

Tracking and optimization

Remember how we said having goals for your program is super important? Well, you also need a way to measure your progress towards your goals, otherwise you won’t know if you’re on track to reach them.

You can track your goal(s) progress by setting up key performance indicators (KPIs) or metrics and measuring them at a regular frequency. We don’t necessarily recommend daily measurements since loyalty is a feeling that grows with time.

However, some important metrics to monitor include engagement rates, reward redemption rates, and churn. Most loyalty program providers, including LoyaltyLion, will have some form of program analytics to help you measure these metrics.

Once you have metrics in place and you monitor them, you’ll be able to spot areas for improvement and focus your effort on optimizing them instead of blindly trying to improve everything and getting stretched thin.

Inspiring case studies

To help you get a better understanding of the impact a subscription-based loyalty program can have on a Shopify store using this business model, we’ll show you a couple of case studies that succeeded with this strategy, namely Waterdrop, Feel and Franklin.

Waterdrop

A company dedicated to helping people drink more water, Waterdrop sells “waterdrops,” small cubes of fruit and plant extracts to help improve the taste of water without sugar — but the founders wanted to scale the business faster.

To do it, they built a subscriber tier in their loyalty program using LoyaltyLion and its integration with Recharge. This subscriber tier gave customers who subscribed unique benefits, such as community giveaways and early access to new releases, to help show customers it’s worth staying subscribed.

Waterdrop Club perks

Integrating with Klaviyo, an email service provider, they promoted their program and combined their loyalty and email marketing strategy.

The results?

By making loyalty the heart of their marketing strategy, they increased customer spending by 90% and repeat purchase rate by 70%.

Feel

Feel is a health and wellness brand specializing in supplements. It has a similar story to Waterdrop and a mission to empower customers to take control of their health.

The folks at Feel also built a loyalty program that uses a points-based tier structure to build significant rewards, e.g., 10,000 points for creating “bundle orders”, which are subscriptions.

Feel discounts and rewards

Unlike many loyalty programs, Feel rewards a high number of loyalty points and also “prices” redemption rewards highly — this gives the customer the impression that rewards, which include free products and access to member-exclusive sales, are also high-value but still attainable.

So, how has this strategy helped the business?

According to companycheck.com, Feel’s net worth was £ 169,928 in 2019. Only four years later, in 2023, it had shot up to £2.84 million, an improvement of 1361%.

Franklin

Another brand that uses a dedicated subscription loyalty tier is Franklin, a French pet food company that helps pet owners get quality, nutritious food tailored to their sensitivities. Their loyalty program is simple: as a subscriber, you earn double the amount of “Franki’s” (points) for every Euro the customer spends:

Franklin subscription loyalty tier

Since subscribers get to earn double points on every purchase (as well as a 15% discount), they’re likely to stick with the brand to earn more rewards and save money compared to if they bought one-off products regularly — which leads to a greater number of subscribers and higher CLV’s.

Build your subscription loyalty program today with LoyaltyLion

In all, building a subscription-based loyalty program only takes a few steps:

  • Defining your program goals and understanding your audience (for personalized rewards).
  • Choosing the types of rewards you’d want to offer in your program.
  • Choosing a loyalty program provider with integrations in mind.
  • Promoting your loyalty program and communicating its benefits to existing customers.
  • Tracking and optimizing your program based on performance.

By creating a loyalty program for your subscribing customers, you’ll improve your store’s chances of reducing churn rates and boosting other key metrics such as CLV, repeat purchase rates, and overall revenue — if it’s possible for other Shopify stores, it’s also possible for you. If you’d like to build a loyalty program for your subscribing customers, check out LoyaltyLion’s prices and features page to find a plan that suits your business.

The post Loyalty Loophole: How to Design a Subscription Loyalty Program Customers Can’t Resist appeared first on LoyaltyLion.

This article originally appeared on LoyaltyLion and is available here for further discovery.
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