Customer lifetime value (LTV) is one of the most crucial metrics that ecommerce businesses should measure. It shows the average amount a shopper spends with your store throughout their lifespan as a customer—or the amount of revenue a business can expect from the average customer.
As a result, LTV is closely tied to customer loyalty. How badly do shoppers want to come back and make another purchase with your brand?
Focusing on customer loyalty efforts can lead to better customer retention and higher lifetime value. Especially for stores with subscription programs, boosting loyalty is a valuable way to retain customers and encourage those repeat purchases.
One tried and true way to ensure customer loyalty stays high (especially as customer acquisition costs continue to rise) is by offering an unpaid loyalty program to your shoppers. In this post, we’ll cover the ways in which you can increase LTV with a loyalty program, and cover some examples of successful customer loyalty programs that already exist today.
Why customer loyalty programs are important for driving LTV
Customer loyalty programs provide motivation for customers to continue making purchases with your brand. They can also provide a level of surprise and delight that gives existing customers a reason to purchase again—increasing their lifetime value.
By encouraging these repeat purchases, customer loyalty programs also increase customer retention by leading to more purchases over a customer’s lifetime. Other loyalty program benefits include:
- Better cross-selling and upselling opportunities
- Referrals and word-of-mouth marketing
- Higher customer satisfaction and engagement
5 ways to drive LTV through loyalty programs
Cultivating loyal customers—and therefore increasing customer lifetime value—is made easier with a loyalty program. Below, we’ll highlight five ways you can improve LTV by incentivizing repeat purchases, positive reviews and social media shares, and brand advocacy.
1. Provide meaningful rewards
This might seem like the most basic way to drive more purchases, and that’s because it’s the basis of any loyalty program. Giving customers the opportunity to earn incentives like free products, discounts, and special access to new items will ensure they continue making purchases so they can earn their rewards.
When creating their loyalty program strategies, ecommerce brands should ensure these rewards are meaningful and aligned with your shoppers’ interests while not being overly costly to your business. Look at customer data and demographics to determine what the most successful rewards will be within your customer loyalty program.
2. Remind customers of their rewards
Customer loyalty programs are only successful if customers know how many points they have, or what status tier they’ve reached. Ensure shoppers have easy access to their points balance through their customer portal and email reminders. Keep customers informed about the program, including how to earn and redeem rewards, and any changes or updates.
The customer loyalty program should also be easy to understand—consider creating a landing page on your site that highlights what shoppers can redeem their points for and how they reach new tiers, if you’ve opted for a tier-based loyalty program.
Customers should know exactly how they earn points and how they can redeem them, and regular communication will help keep customers engaged and motivated to participate in the program.
3. Offer personalized experiences
The customer experience is always made better when it’s personalized, and the same goes for your customer loyalty program. Use customer data to personalize the loyalty program to each individual consumer—ensuring it meets their specific interests and needs.
Ecommerce personalization is one of the best ways to retain customers, as it adds value beyond just your products or services that can lead to higher LTV. Within your loyalty program, you can tailor recommendations, special promotions, and exclusive content so that repeat customers feel like your brand knows them well. This in turn will also boost customer loyalty and trust.
4. Encourage positive reviews & reward referrals
Your ecommerce store can turn your most loyal customers into important brand advocates, and reward them for their work within the loyalty program. Start offering points for leaving positive reviews or referring customers and watch how customer lifetime value increases.
Not only will this loyalty program strategy help you strengthen brand trust and improve your reputation, it can also lead to higher customer satisfaction by making your loyal customer feel valued and important to your brand.
5. Make it social
Much like leaving positive reviews and sharing your products with friends, encouraging customers to share on social media is another way to boost LTV and retention. When you offer special discounts or exclusive offers to those that share or follow you on social media, you will create natural brand ambassadors, organic marketing opportunities with user-generated content, and gain new customers.
Successful customer loyalty program examples
Building customer loyalty through your loyalty program requires a thoughtful strategy, as we’ve outlined above. So, how are real ecommerce merchants rewarding customers and encouraging higher customer loyalty? Let’s look at a couple examples of Recharge merchants with successful loyalty programs.
Bokksu uses a number of effective customer loyalty program strategies to make the most of their program. Customers can earn points through social media engagement, by writing a review, simply creating an account, and of course, by shopping. When customers spend money, they earn—leading to higher LTV as shoppers are motivated to keep making purchases and earning rewards.
Bokksu breaks down on their website how loyalty program members can earn points.
Not only does LoveRaw have an effective loyalty program that encourages customer engagement, but they also offer a bonus for referring friends. This is a highly effective customer loyalty strategy for a number of reasons:
- Customers trust their friends’ recommendations
- Offering a discount on their first purchase will encourage new customers to try your brand
- Existing customers will be motivated to continue referring friends, since it benefits them as well
LoveRaw makes it easy for customers to refer a friend by giving them a discount, while earning points in return.
Reap the benefits of loyal customers with your loyalty program
Ecommerce brands can drive customer lifetime value with an effective loyalty program. Using the strategies outlined in this blog post, online stores can boost customer engagement and loyalty, encourage customers to spend more with their brand, and utilize loyalty marketing, like through customer referrals.