Ecommerce Loyalty Program: Types, Shopify Setup and Metrics

An ecommerce loyalty program is a set of rules that gives customers something back for coming back: points per order, a higher tier after a spend threshold, a discount when a friend buys. Its job is to turn a one-time buyer into a second and third order.

That second order is where most of the value is. Bain's Fred Reichheld found that in financial services a 5% increase in customer retention produces more than a 25% increase in profit, because returning customers buy more over time and cost less to serve. Retail margins differ, but the mechanics are the same.

Before you design anything, measure where you start. The retention rate calculator gives you your repeat rate, which is the number your program has to move.

Not on its own. Shopify has no built-in points, tiers or rewards. You add them with a loyalty app from the Shopify App Store, and the app plugs into your store, checkout and customer accounts.

A Shopify loyalty app typically does four things:

• Tracks points or spend per customer from Shopify orders.
• Issues rewards as Shopify discount codes: a fixed amount, a percentage, free shipping or buy X get Y.
• Shows the program to shoppers in a storefront widget, the customer account or a phone wallet card.
• Sends loyalty data to your email and automation tools.

Most loyalty apps also connect to Shopify Flow, Shopify POS and email platforms such as Klaviyo, so the program can reach every channel you already sell in.

Most programs combine two of these. Pick by what you want customers to do more of.

• Points. Customers earn points per order and for actions such as creating an account or completing their profile, then spend them on rewards. Simple to explain and the best starting point for most stores.
• Tiers (VIP). Customers move up levels such as Bronze, Silver and Gold as they spend, and each level unlocks better perks. Sephora's Beauty Insider works this way. Tiers reward your best customers and raise order value; see the tiered loyalty program guide.
• Referral. Customers get a reward when a friend they invite buys. It turns loyal customers into an acquisition channel; see the Shopify referral program guide.
• Points as cash. Points work like store credit: customers choose how many to spend at checkout. Works well for high-frequency, lower-price products.
• Paid membership. Customers pay a fee for ongoing benefits such as free shipping, as with Amazon Prime. Only fits stores with frequent orders and a clear perk worth paying for.

A common combination for Shopify stores is points plus tiers, with referrals added once the program has members.

The app installs in minutes. The decisions take longer, so make them in this order:

• Earn rate. Decide how much a customer gets back per order. A common pattern is 1 point per dollar with 100 points worth $5, which returns 5% of spend. Check the cost against your margin before you launch.
• Rewards. Start with two or three: a small reward customers can reach by their second order, and a bigger one for regulars. A first reward that takes five orders to reach will not change behaviour.
• Extra earning actions. Points for creating an account or completing a profile give you data and an early reason to engage. Keep the list short.
• Tiers, if you use them. Set thresholds from your real spend distribution, so your top 10 to 20% of customers land in the top tier, and decide whether status resets each year.
• Launch to existing customers. Import past orders or give a welcome balance, then announce the program by email so it starts with members, not at zero.

To sanity-check the economics, run your numbers through the points value calculator.

Most programs fail quietly: customers join, forget their balance and never redeem. The fix is to show the program where customers already look.

• Email and SMS. Send the balance, a "reward ready" message and tier changes from your email platform. The Klaviyo loyalty program guide lists the flows worth building.
• Phone wallet. A loyalty card in Apple Wallet or Google Wallet shows the balance on the customer's phone without an app download, and can send push notifications to the lock screen. See how to create a wallet loyalty card on Shopify.
• Storefront and account. Show the balance and available rewards in the header widget, the customer account and the cart, so customers see what they can redeem before they pay.

If you have physical stores, run one program across both channels. A customer who earns online and cannot redeem at the till sees two programs, and you lose the in-store purchases from your data.

With Shopify POS, staff identify the customer by scanning their loyalty card or looking them up by email or phone, add the points to the same balance and redeem rewards at checkout. The omnichannel loyalty program guide covers the in-store setup in detail.

Compare members with non-members over the same period, and check these monthly:

• Repeat purchase rate. The share of customers who order more than once. This is the main number the program should move.
• Redemption rate. The share of earned points that customers spend. A low rate means rewards are too far away or customers forget they have points.
• Average order value. Members, and especially top-tier members, should spend more per order.
• Customer lifetime value. The combined effect of the three above. Estimate it with the Shopify CLV calculator, then weigh it against reward costs and app fees in the loyalty ROI calculator.

JeriCommerce is a Shopify loyalty app built around the phone wallet. Each member gets a loyalty card in Apple Wallet or Google Wallet that shows their points and tier, without downloading an app.

• Program. Points for purchases (a percentage of the order), points for actions such as account verification, profile completion, social follows, adding the card or checking in at a store, plus custom earning flows from Shopify Flow. Tiers with a different card design per tier, and rewards as Shopify discount codes or points as cash.
• Visibility. Automatic push notifications to the wallet card when the balance changes, a tier changes or a reward unlocks, plus scheduled campaigns and location-based notifications near your stores. Loyalty events and profile properties sync to Klaviyo.
• In store. Shopify POS tiles let staff scan the card, add points and redeem rewards, so online and in-store purchases count toward the same balance.
• Analytics. Members versus sales, repeat rate, average order value, purchase frequency, cohorts and redemption rate in one dashboard.

It installs in about five minutes on any Shopify plan from Basic up, and there is a free plan to start. Setup steps are in the JeriCommerce help center.