Customer Loyalty Program: Is It Worth the Cost?

A loyalty program is worth the cost only when it changes profitable customer behaviour enough to cover rewards, technology, administration and margin leakage.

When a program may work

• Customers have a realistic reason to purchase again.
• Purchase frequency can be influenced.
• Margins can fund a meaningful reward.
• The business can identify customers across channels.
• The experience is simple to understand and use.

When it may not work

• The product is rarely repurchased.
• The first customer experience is poor.
• Rewards merely discount purchases that would happen anyway.
• Technology and data are fragmented.
• The team cannot maintain the program.

Calculate the whole cost

Include platform fees, integrations, reward value, points liability, customer service, creative work, reporting, privacy work and unredeemed or incorrectly configured offers.

Measure incremental behaviour

Compare members and an appropriate non-member group by purchase frequency, contribution, retention and average order value. Account for the fact that naturally loyal customers are more likely to join.

Start with a defined objective

Choose one: faster second purchase, higher frequency, referrals, richer first-party data, increased basket size or reduced churn. Do not attempt to solve every retention issue through points.

Test a simpler alternative

Before installing a complex scheme, test post-purchase education, customer recognition, early access, useful service, replenishment reminders or relevant bundles.

Use the customer retention strategy, compare loyalty points and discounts, then run the Shopify loyalty program audit.

This article provides general business and marketing information. Results, platform features and legal obligations vary; use your own data and obtain appropriate advice.