It is well known that it costs businesses around six to seven times more to acquire new customers than it does to sell to an existing one, that existing customers spend on average 67% more per purchase than new ones, and that the possibility of converting an existing customer to a sale is around 60-70% compared to 5-20% for a new customer.

So customer retention is important. But customers can be fickle. They can switch brands at a moment’s notice. They can change from one product to another despite a lifetime of prior use. And they can be enticed away from one shop to another by any number of tempting offers.

Faced with this, merchants may be forgiven for throwing their hands up in the air – and then getting down to the business of making sure that they retain customers, win new ones and tempt back those who had gone elsewhere.


“Loyalty and friendship, which is to me the same, created all the wealth that I’ve ever thought I’d have.” — Ernie Banks, an American professional baseball player (Chicago Cubs, 1953-1971)

For all sorts of businesses, loyalty programs have been proven to be one of the best ways of ensuring that customers return to the same merchant for future purchases (be it of products or services). There are many types of loyalty programs that can be used; for example, ones that offer free merchandise, reward points and store credit, ‘cash back’, coupons, exclusive opportunities, advanced sales of product releases and so on.

These programs are not just for ‘general public’ loyalty though. Business-to-Business (B2B) loyalty programs also exist for the purchase of sales from suppliers.

  • REWARD POINTSThis model operates by offering a number of points according to certain criteria – such as per shopping cart rules (for example, amount spent or quantity of purchased goods), catalogue rules (relating to the purchase of specific products, or items from selected categories or brands), or behavioural rules (such as registration for a newsletter).The points can be accumulated and then redeemed for an amount off a future purchase (the redemption rate set as x points per y unit of currency). Minimum redemption values can be set, as can points expiry dates etc.
  • STORE CREDITStore credit exists where the customer has ‘virtual money’ that can only be spent in the merchant’s store – for example, the result of when a customer decides to return a purchase and the merchant refunds the cost with store credit rather than with money back to the customer’s bank account.Store credit accounts can be used as reward points, as additional credit can be added to accounts via the backend by the merchant – for example, on a birthday or other occasion.
  • CASH BACKThese schemes offer money off at the point of purchase (usually set as a percentage of the purchase amount), with the schemes also being able to adjust for purchases of specific items that generate a higher level of cash back.
  • EXCLUSIVE OPPORTUNITIESLoyalty programs here offer their customers exclusive opportunities; first access to new products, entry into competitions, exclusive sales events or discounts and so on.

Loyalty programs can have a beneficial impact for the retailer or merchant. They can provide an important added value for the customer to entice them to come back and are a valuable part of brand reputation, something that over 70% of customers say reputation impacts their purchasing decisions.

Some 76% of customers believe that loyalty programs form part of their relationship with brands, while 83% of customers agree that loyalty programs make them more likely to continue doing business with the merchant in question. They form an additional tool that the merchant can use to entice customers back and generate greater sales.

With the volume of competitiveness in the market place, loyalty programs have a role still as a selling point, in particular with online and ecommerce markets.


The scale of loyalty programs has become immense. According to the 2015 Colloquy Customer Loyalty Census, American households hold memberships in an average of 29 loyalty programs, for a total of 3.3 billion memberships. While some programs are run by just one retailer, other programs cover many: in the UK, the Nectar loyalty card program covers 14 retailers and over 400 online stores.

The 2015 Colloquy research illustrated that while American households may have memberships in 29 loyalty programs, they are normally active (meaning earning or redeeming at least once per year) in only 12 of them. Clearly, with so many loyalty programs, ensuring that your loyalty program is effective is important.

Indeed, it has been argued that the size of the membership base isn’t the best indicator of success; in fact, programs whose members aren’t engaged, no matter how many there are, waste resources – of both the loyalty operators and their customers.


For ecommerce retailers some of the key elements that a loyalty program needs to encompass include:

  • using a simple system that customers can understand, making the link between expenditure, points and rewards clear; being able to be tailored by the merchant to enable promotion of particular goods or at particular times;
  • being low on required levels of investment and maintenance, recognizing that many ecommerce merchants do not have the resources to manage large-scale, intensive loyalty brands that some bricks-and-mortar retailers do;
  • being simple and easy to integrate with their existing operations and structure.

For ecommerce, loyalty programs can also take advantage of the online environment – for example giving customers rewards when they undertake social media sharing related to the company or take other action to drive customers to the website. The use of reward points programs is one of the most flexible in this regard: it gives tangible value for the consumer, it can be flexible and easy tailored for the particular merchant, it avoids the need for price discounting, and is simple and easy to understand.

There are a number of extensions that work for a variety of systems, for example for Magento 2 store operators these can be reward points and store credit. Regardless of the size of the ecommerce business though or its particular market segment or geographical-base, such systems are ideal.