It's one of the most repeated stats in ecommerce, and yet one of the least acted upon in practice: acquiring a new customer costs, on average, five to seven times more than getting someone who already bought from you to do so again. Despite that, most of an online store's marketing budget usually goes to acquisition (ads, SEO, social), with very little left for retention, which is often where the cheapest margin sits.
What a loyalty programme actually is
It doesn't have to be a complex points-and-tiers system: in its simplest form, it's any mechanism that gives a customer a concrete reason to buy from you again instead of shopping around next time they need something similar. It can be a redeemable points system, progressive discounts based on cumulative spend, early access to new arrivals or sales, or simply well thought-out post-purchase communication that keeps the brand present without being intrusive.
The formats that work best for small and medium businesses
A simple points system (for example, one pound spent equals one point, and a certain number of points converts into a discount) is easy to understand and communicate, and doesn't require heavy tech investment thanks to the plugins available on most ecommerce platforms. Repurchase discounts (a specific code sent by email a few weeks after purchase, right as the product starts running low or the customer has had time to try it) tend to deliver a very high return for very little setup effort.
The mistake of only rewarding with discounts
A programme built purely around cutting price teaches the customer to always expect a discount before buying, which erodes margin over the long run and trains exactly the opposite behaviour to the one you're after. Combining the financial incentive with non-monetary value (exclusive content, priority support, early access) helps build loyalty without giving away margin on every single purchase.
Measuring whether the programme actually works
The key metric isn't how many people sign up for the programme, but whether repurchase rate and customer lifetime value (how much they spend in total over time, not just on their first order) improve among participants compared to non-participants. A programme with lots of sign-ups but no real effect on repurchase is, in practice, a cost with no return, however nice it looks in the admin dashboard.
Frequently asked questions
Is a loyalty programme worth it for a small store?
Yes, proportionally even more so than for a large one, because the relative acquisition cost per customer tends to be higher for small stores, which makes any mechanism that avoids having to win them back from scratch each time even more profitable.
How many points should a typical discount cost?
There's no universal figure, but it's worth calculating each product's real margin before setting the points-to-discount conversion, so the incentive stays profitable even when redeemed at scale.
Is email marketing part of loyalty or something separate?
It's part of it, and it's usually the main channel for communicating the programme: reminders of available points, alerts that a discount is about to expire, or recommendations based on past purchases are a natural part of any well thought-out retention strategy.