Speaker 1: Did you know that it can cost between five and 25 times as much to acquire a new customer as it does to keep an existing one? If you didn't, you're not alone. Most marketing advice focuses exclusively on topics like growing your audience and expanding your reach. And while both of those things are certainly important in building your business, not enough is said about the importance of cultivating brand loyalty with your customers. In today's video, I'll be outlining the four most popular types of brand loyalty programs and sharing 10 examples of companies with innovative customer rewards options that we can all learn from. By the end of this video, you'll understand why customer loyalty programs are such an important part of growing an online business and have the tools and inspiration that you need to create one of your own. Hi everyone. And welcome back to learn with Shopify. I'm your host, Stephanie Pellett, and I'm a coach for creative entrepreneurs. If you're not already subscribed, take a second to click the button below so that you never miss an episode. Now it probably goes without saying that the most important part of creating brand loyalty is to have a quality product that solves a specific problem for your customer. After all, if you were a cafe selling terrible coffee, even the very best punch card program in the world, wouldn't be enough to keep people coming back for more, but if you're confident that your product or service delivers on its promise and is a high value for your customer, then creating an accompanying program to reward your clients for shopping with you can be a huge boost to your business. And if you're still not convinced that rewarding your customers for their purchases is a smart business strategy, consider this, according to one study cited by the Harvard Business Review, increasing your customer retention rates by just 5% can increase your profits by between 25 to 95%. Here's the bottom line. Building relationships is good for business and creating programs that reward your customers for shopping with you is just one of many ways to create loyalty that lasts. First off, let's look at why loyalty programs are such an effective strategy for deepening relationships with your customers. As I've already shared, retaining customers costs a lot less than acquiring new ones, and we now know that customer retention in general creates a huge boost in profits. Loyalty programs take this concept of retention one step further by establishing a formal system for celebrating and rewarding your existing customers through some combination of points, discounts, or other rewards. When done well, these programs will make your customers feel appreciated, help to build trust in your company, and give your audience even more reason to choose you over your competition. Not only that, but you'll also be giving people what they want. Since consumers are increasingly looking to have a meaningful connection with the brands that they buy from. One recent study from Yotpo showed that nearly 70% of customers would be interested in joining a loyalty program for a company they like. And almost 60% of those would be willing to spend more with a brand they love, even if cheaper options existed. That being said, it's important to note that in order to create a compelling loyalty program, you will have to be generous with your rewards, which may mean giving something away such as discounts on products or special bonuses. But remember that your customers are not only looking for coupons here. While saving money is obviously a motivating factor, engaged fans are also motivated by exclusive benefits and perks like behind the scenes sneak peeks, early access to products and sales, and customized recommendations tailored to them. And it's actually in your best interest to be generous because what you'll get in return is so much more valuable than anything that you're giving away. In addition to greater excitement about your business and more referrals from your customers, there is a financial incentive to reward programs too. Close to 50% of respondents in one study indicated that they spend more with a company after joining its loyalty program. While the sky's the limit in terms of ways to reward your customers, there are four major types of loyalty programs that most businesses adapt for their own audiences. Let's take a quick look at each one and some of their advantages and disadvantages. The most common option for a loyalty program is a points-based system. Customers accumulate points for their actions and trade them in for various rewards, such as discounts or merch. But while encouraging purchases is great, the best of these programs also offer points for other kinds of actions, such as signing up for a newsletter, leaving a review, or sharing about the business on social media. These programs work well if they are simple to understand and intuitive to use. When people can see their points adding up and know what they're working towards, they'll have a clear incentive to take further action. But customers can also be cynical about this kind of program. So make sure that yours delivers as promised. I for one have had far too many experiences of not receiving points. I was promised in exchange for taking an action or making a purchase. You should also make sure that the rewards you're offering are compelling to your customers. If I have to rack up thousands of points just to earn a simple 10% off coupon, I probably won't be very motivated to change my behavior. But if your point system is straightforward, generous, and reliable, this can be a great option for motivating and rewarding your customers. In a tiered loyalty program, customers are assigned ranks that net them different benefits, depending on their status with your company. These ranking systems are usually based on how much a customer spends or how engaged they are with your brand. The higher their rank, the more rewards the customer receives on an ongoing basis. Unlike in a points-based system where customers trade in their accumulated points for a one-time benefit, tiered loyalty programs are a gift to the customer that keeps on giving. Once they've earned a particular tier in your program, members will continue to get certain perks as long as they shop with you, which can be a huge incentive for your fans. The biggest pitfall with this kind of reward system is that it can feel like a money grab if your tiers are based exclusively on how much a customer spends with you. In order for your customers to feel appreciated, it's a good idea to include alternative strategies for folks to reach a higher tier. For example, taking part in surveys or focus groups, referring friends to your brand, or joining your online communities. Paid loyalty. In a paid loyalty program, customers pay a one-time or recurring fee for access to instant and ongoing perks from a brand. This kind of program is a harder sell. So the key is to offer benefits that clearly outweigh the cost of the membership. In particular, customers are likely to be motivated by features like early access to products or events, customized rewards tailored to them, or the chance to be part of an exclusive community. Paid programs are also typically easier for a customer to understand and engage with rather than worrying about how many points they've earned or figuring out which tier they're in, a paid loyalty program offers specific benefits in exchange for a simple fee. And if you're able to convince your customer to join your paid program, it's also likely to be more lucrative for your business. One recent report by McKinsey showed that consumers were 62% more likely to spend more on a brand after joining their paid loyalty program. Value loyalty. The last type of loyalty program takes a different approach. A value loyalty program doesn't directly reward your customers, but it does allow them to make a greater impact to causes they care about by financially supporting specific charities or nonprofits. This type of program is often offered on a broad scale, such as when companies donate a portion of every sale to a particular organization, but it can also be set up as a hybrid with another type of loyalty program, such as a point based system. In this model, customers get the option of trading in some of their points for donations to an organization they support. Either way, this kind of program builds deeper trust with your customers, especially if they feel aligned with the causes you're supporting. On the other hand, depending on the type of business you run, this approach may not motivate your specific audience. A value loyalty program will work best for companies with a strongly values-based approach and a clear commitment to social responsibility. If you're not sure which type of loyalty program to choose for your business, consider doing a survey of your existing audience. Start by getting really clear on what your customers would value most, and then design your program to suit their specific needs. You can't really go wrong if you're creating a program that intentionally appreciates and rewards your ideal customer. And when you're ready to set up your own customer loyalty program, we hope you'll come check out Shopify. Our platform makes it easy to create your online store by integrating with lots of cool apps to help you build anything from a points program to a referral reward system for your customers. We also offer a free, no commitment, two week trial so that you can be sure that you're making the right choice for your business. When you're ready to get started, click the link in our description box below to try building your business on Shopify. Now that we've covered some of the reasons why loyalty programs can be so beneficial to your business, let's take a look at some real world examples. These 10 companies have built intentional loyalty programs that stand out from the crowd. While they're all a bit different, their goals are the same to build trust and rapport with their customers and encourage repeat purchases. Number one, Bloom. The self-care brand Bloom has put a lot of thought and effort into designing their loyalty program, which is called Bloomtopia. They use a hybrid model, which combines points and tiers into one system. Customers rack up points for placing orders, leaving reviews, and even celebrating a birthday, which they can then trade in for special prizes and gift cards, but their overall number of points will also help them to reach BFF or soulmate status with the brand, where they'll get access to perks like a private Facebook group and exclusive close friends list on Instagram, as well as birthday gifts, insider access to products and free shipping. More than anything, Bloomtopia is designed to feel fun and accessible since customers can earn Bloom points for actions besides purchases and Bloom advertises their program prominently. Unlike some companies whose loyalty programs are difficult to find, Bloomtopia is linked right in the main menu on every page. The company clearly wants customers to take part and be rewarded for their engagement. Number two, ThirdLove. ThirdLove's loyalty program, Hooked Rewards, is a tiered system based primarily on a customer's lifetime spend with the company. They offer three levels of membership from admirer to enthusiast, to devotee with different benefits offered at each tier. One key feature that makes this program work well is that it is free to join for new customers. Members start receiving perks like free shipping options and bundling discounts as soon as they join before they've even spent a dollar with the company. Another bonus of the Hooked Rewards system is that it is very easy for customers to use and understand. There's no need to worry about their points balance or waste time figuring out how to redeem them. As they spend more with the company, they simply receive more perks, including a free gift with every purchase and exclusive seasonal offers. This simplicity seems to have worked well since ThirdLove reported a 400% increase in account creation after only three months of implementing their loyalty program. Number three, Sephora. Sephora's Beauty Insider program is notoriously popular. And for good reason, their tiered point-based system is free to join and offers generous rewards to customers at all levels of membership. Members can choose to redeem the points they earn for gift cards and discounts on products or exclusive in-store beauty tutorials and limited edition items. As a customer's lifetime spend increases, the rewards keep racking up. So it's easy to see how the Beauty Insider program encourages engagement and repeat shopping, especially for beauty enthusiasts. Number four, DSW. Designer Shoe Warehouse has elevated their traditional tiered points program in a few different ways. In addition to receiving traditional membership perks, like free shipping and birthday gifts, customers can also earn bonus points for donating their gently used shoes or choose to donate all of their rewards to those in need. It's also easy for customers to take part without remembering a loyalty number or keeping a card in their wallet. DSW system recognizes customers based on their name, contact information, or payment method, and applies the rewards automatically to the customer's account. And to keep customers from forgetting about these points, DSW boosts engagement by sending personalized marketing emails targeted to each member. These emails remind a customer how close they are to a specific reward and shows them deals that they currently qualify for. This combination of simplicity and personalization has been a winning strategy for both DSW and its customers. Number five, Starbucks Rewards. The Starbucks Rewards program is a very simple system that brings huge benefits to both the company and its customers. Using the Starbucks app, customers earn points for all their purchases, which they can then redeem for special drink customizations and other treats. The app is extremely convenient for customers who can set up different payment methods, order ahead for pickup, and save their favorite menu items to purchase again. But the app is also useful for the company more broadly, since it generates a lot of helpful information about Starbucks customers and their habits. The company can then use this data to offer shoppers perks and offers that match their preferences. These specialized communications offer even more incentive for customers to come back and continue to earn points, which creates a positive cycle of engagement. Number six, Amazon Prime. As I mentioned before, paid loyalty programs can be a tougher sell for customers, but Amazon Prime is a great example of a paid program done right. Customers pay a flat annual fee and get access to tons of perks, like free two-day shipping with no minimum purchase, access to Prime video and special Prime day sales. For most shoppers, the price of the membership pays for itself many times over each year in the savings they receive, which makes the fee a worthwhile trade-off. But it's also great for Amazon's business, since Prime members spend an average of four times more than other Amazon customers. The key to Amazon's success with Prime has been to offer truly valuable rewards to members that go above and beyond what most other loyalty programs can offer. The takeaway is that by charging a fee for your membership program, you're able to be a lot more generous with your customers. Number seven, the North Face. The North Face's Explore Pass program is a great example of a loyalty program designed with its ideal customer and company values in mind. While customers do earn points for each of their purchases, they're also rewarded for values-based actions, like bringing their own reusable bag to the store or going out and exploring national parks. The Explore Pass also offers cool perks that appeal to their adventurous target audience, such as being able to field test new products before they're publicly available or getting to trade in their used gear for gift cards. A previous version of this loyalty program even offered members the chance to redeem their points for special travel experiences, like hiking and climbing trips. It is pretty inspiring to see how the North Face is using their customer insights to create a program that is specifically tailored to their fans. Number eight, Nike. Nike's mission is to bring inspiration and innovation to every athlete in the world, with the caveat that anyone with a body is an athlete. Their free membership program embodies that mission by providing benefits that encourage customers to stay active, positive, and healthy. After signing up, members receive cool perks like free shipping, 60-day wear tests, and access to exclusive collections. But even better, all new members also get instant access to the Nike Run Club and Training Club apps, which offer free workouts for all fitness levels and invitations to exclusive local Nike experiences. This program doesn't use traditional points to monitor a customer's status, but the more that members spend and engage with the brand, the more perks they'll unlock inside their membership. By aligning their member benefits with their company values and their customer's goals, Nike has created a virtuous cycle that encourages greater loyalty and engagement from their members. Number nine, REI Co-op. The outdoor goods company REI is a member owned cooperative, which means that their customer loyalty program is baked right into their business model. Every year, more than 70% of their profits are invested back into the outdoor community through dividends to their members, employee profit sharing, and other investments. For a one-time fee of $20, customers become part of this global community of more than 20 million lifetime members. REI believes that a life outdoors is a life well lived, and their member rewards reflect those beliefs. In exchange for their co-op fee, members get tons of benefits like cheaper rentals on camping equipment, limited edition gear created exclusively for members, and special member pricing on REI adventure trips around the world. REI's mission is to protect and share life outdoors, and their loyalty program reflects that goal at every level. Number 10, Apple. I'm including Apple on the list to illustrate a specific point because Apple actually doesn't have a loyalty program. And yet we all know that this company has a hugely loyal following of devoted customers. They achieve this by, in a sense, treating all of their customers as if they were members. Instead of enrolling shoppers into a formal program, the company extends the same benefits to everyone. High quality, beautiful products, constant innovation and new features, and excellent customer service. Everyone can also access perks such as free engraving or trade-in programs, and they'll often bundle certain products together, such as including an Apple TV subscription with an iPhone purchase. By making all these benefits an integrated part of the company at every level, Apple creates intense engagement with customers without the need for a traditional loyalty program at all. So there you have it, 10 examples of companies with innovative customer loyalty programs. While you may not be able to offer all of these kinds of benefits in your own business right away, the key thing to note with these examples is that the best loyalty programs draw inspiration directly from each company's mission statement. Instead of offering boring discounts or stingy perks, the best brands ensure that their rewards align with both their own values as a company and their customers' goals. If you want even more guidance in building trust with your audience, you'll want to check out the Shopify store trust checklist using the link in our description box below. This free checklist is based on in-depth interview research done by our team to learn the essential trust building elements of an online store experience. In your free checklist, you'll find a summary of our findings so you can easily apply these lessons and avoid some big trust busting mistakes. Download your free checklist using the link below. While we love these 10 examples of innovative loyalty programs, the truth is that there are endless ways to connect with your customers and create more brand loyalty. So instead of seeing these examples as exact recipes to follow, I hope you'll use them as a jumping off point to create a program that is perfectly suited for your customers. I'd love to hear in the comments below how you plan to reward your audience and continue to build up those relationships over time. And if you're looking for even more inspiration, be sure to check out the other videos on our channel, including Customer Retention 101, which will teach you how to increase the lifetime value of your customers. Until then, I want to thank you so much for watching. I'm your host, Stephanie Pellett, and I'll see you next time.