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How to Tell if Your Loyalty Program is Working for Your Shopify Store

May 07, 2024

In the bustling marketplace of eCommerce, making deep connections with your customers is not just important—it's essential. For Shopify store owners, this often means creating a unique loyalty program. A report by Forbes shows that increasing the customer retention rate by 5% can boost profit from 25% to 95%.

Loyalty programs are a strategic part of building brand loyalty by offering specific rewards and benefits, but true brand loyalty goes beyond these perks. It's about consistently delivering value in every interaction, ensuring that customers feel appreciated and understood. While loyalty programs can enhance this relationship by providing tangible incentives for continued engagement, the core of brand loyalty rests on the overall experience and satisfaction that a brand delivers. Loyalty programs thus serve as one of the many tools that contribute to the broader goal of cultivating deep, enduring customer loyalty.

But how can you determine if your loyalty program is truly delivering results? More than just setting up a program is required. Monitoring its performance to verify that it enhances your store’s profitability is crucial. This article will guide you through the essential key performance indicators (KPIs) to keep an eye on, suggest strategic ways to amplify the impact of your program, and help you evaluate the effects of your efforts on customer behavior and overall business profitability. 

Understanding the Basics of Loyalty Programs

At their heart, loyalty programs are a pact between a brand and its customer—a promise that loyalty brings rewards. At their core, loyalty programs are simple yet powerful: offering points, discounts, or exclusive perks as tokens of gratitude. They are not merely transactional but are designed to foster a deeper emotional connection with the brand. Let’s imagine that you run into a coffee shop that offers your tenth cup for free. This offer will motivate you to return and become a repeat customer!

With the growing number of Shopify stores, a well-crafted loyalty program can turn casual shoppers into committed buyers. The secret lies in understanding what our customers truly want—through a VIP membership system that elevates the shopping experience with each level achieved or a simple yet impactful point-per-purchase reward. Such strategies amplify the joy of buying and give them a push of anticipation. With every swipe or click that edges them closer to a reward, customers find a reason to return, weaving their stories into your brand. The goal is to make customers feel valued with every transaction, enhancing their overall satisfaction and connection to your brand. This strategy has proven effective, with businesses seeing as much as a 31% increase in customer lifetime value when they engage with a loyalty program.

Retargeting can play a key role in a customer loyalty program by using past purchase data to send personalized ads that keep customers engaged. By offering special deals and promotions through these ads, brands can show appreciation and encourage repeat business, which strengthens customer loyalty.

How to Evaluate the Effectiveness of Your Loyalty Programs

When crafting a loyalty program for your customers, you are creating a program that reflects connection, reward, and growth. To understand the effectiveness of these programs, merchants can analyze the patterns formed by customer behaviors. By using Ako Marketing: Retargeting & Loyalty, you can evaluate the effectiveness of your loyalty program with these metrics:

1. Revenue

This metric is straightforward but vital. It measures the total income generated from the loyalty program, indicating its effectiveness in monetary terms. To evaluate this, compare the revenue from customers enrolled in the loyalty program versus those not. An effective loyalty program should show a significant increase in revenue from its members, highlighting higher spending per customer due to the perceived value of the rewards offered.

How to Evaluate: 

To assess the revenue impact of a loyalty program, conduct a pre and post-analysis. Before customers join, track their spending habits and calculate the average revenue per customer. After enrollment, monitor their spending within the program and compare the average revenue per customer before and after joining. Segment customers into program members and non-members, analyzing revenue trends and differences. Consider external factors and gather feedback to understand program influence. Monitor long-term revenue trends for sustained impact assessment.


 2. ROAS (Return on Ad Spend)

ROAS measures the total revenue generated for every dollar spent on advertising within the loyalty program. It helps you understand the effectiveness of your advertising expenditures related to the program.

Using benchmark comparison, you can evaluate and compare the ROAS of your loyalty program ads to other marketing campaigns to gauge relative efficiency. This comparative analysis helps in understanding whether the ads for your loyalty program are performing up to industry standards, optimizing your marketing spend, and adjusting strategies to maximize the return on investment. 


Effective Strategies for Your Loyalty Program:

To elevate the effectiveness of your loyalty program, mastering a suite of strategic strategies can transform casual shoppers into devoted customers. Here’s how: 

  • Start with Personalized Rewards: Craft rewards catering to your customers’ tastes and purchasing patterns. This approach heightens the appeal of each reward and reinforces the customer’s connection to your brand, making every interaction feel uniquely appreciated. 
  • Introduce a VIP Tiered Rewards System: Creating a VIP Tier Membership system can nurture a progressive relationship with your customers. Like a journey marked with exciting milestones, this system rewards initial loyalty and fuels ongoing engagement by enriching the rewards as customers ascend to higher tiers. Complement this with exclusive offers such as members-only sales, sneak peeks at new products, or special event invitations that enhance the perceived value and exclusivity of being a loyal customer.
  • Engage Customers With Rewards: Recognize and appreciate your customer’s broader interactions with your brand, whether they are writing reviews, referring friends, or participating in social media activities. This diversifies the engagement opportunities and fosters a stronger community feel around your brand. One way of achieving this is to activate Akohub’s Instagram DM automation. With our feature, you will get to promote your Instagram Reels by directly messaging special coupons to people who commented on your posts. It helps you boost exposures of your Instagram profile and gain more additional sales. 
  • Communication is key: Maintain a Regular Communication channel with your customers. Keep them updated about their rewards progress, upcoming perks, and new ways to earn points through consistent, clear email messages or a mobile app interface. This ongoing dialogue keeps customers informed and eager to participate more deeply in your program. 
  • Establish a Feedback Loop: Utilize surveys and other feedback mechanisms to listen to your customers’ experiences and suggestions. This direct line of communication allows you to evolve your loyalty program effectively, ensuring it remains relevant and valued by your audience. 

Measuring Long-Term Effects

To truly gauge the effectiveness of your loyalty program, it's essential to look beyond the immediate benefits and consider the long-term impacts on your Shopify store. This involves monitoring sustained changes in customer behavior and overall business outcomes directly resulting from loyalty-driven relationships. Key areas to focus on include brand advocacy, customer satisfaction, and acquisition costs.

  • Brand Advocacy: Are loyalty program members more likely to advocate for your brand? Monitor social shares, referral rates, and customer reviews.
  • Customer Satisfaction: Over time, has there been an improvement in customer satisfaction scores from loyalty program members?
  • Customer Acquisition Costs: Monitor if customer acquisition costs (CAC) decrease as more loyal customers promote your brand naturally.

Conclusion:

Your loyalty program can be a powerful tool for your Shopify store if monitored and managed correctly. By focusing on the right KPIs, implementing creative and personalized strategies, and continuously adapting based on customer feedback, you can ensure that your loyalty program is operational and driving real, sustainable growth. Remember, the goal is to create a rewarding system that keeps customers returning, not just once, but as loyal advocates of your brand for a long time. Start optimizing your customer retention strategy by installing  Ako Marketing: Retargeting & Loyalty today and get a 14-day free trial! 


About Akohub:

Akohub provides an all-in-one Shopify loyalty retargeting app - Ako Marketing: Retargeting & Loyalty, to foster the growth of Shopify stores. The Ako Loyalty Program enhances customer retention with VIP Tiers and various points-earning opportunities like Referrals, Signups, Reviews, Birthdays, and 1-Click Social Login. Key features include seamless points redemption at checkout, Instagram Automation for shoppable messages, a CRM Dashboard for deeper insights, and the Ako Marketing Funnel to boost retargeting conversions while reducing ad costs. Feel free to try it from the Shopify App Store!