Competitive prices and first-rate service do not guarantee customer loyalty. Online businesses need to provide incentives, such as loyalty discounts, to retain customers in the long run.
Use loyalty discounts to motivate and reward repeat customers and show them how much you appreciate their purchases.
Find out how loyalty discounts work and why they encourage customers to spend more.
What is a Loyalty Discount?
A loyalty discount offers reduced prices and benefits to customers who regularly engage with a store or brand.
The discount acknowledges the customer's track record and persuades them to increase spending and buy products more frequently.
Merchants typically reward loyal customers with:
- Reduced prices for reaching a predefined spending threshold.
- Discounts for registered members.
- Expedited or free shipping.
- Early or exclusive access to new products.
- Gifts, vouchers, and other free services.
Loyalty discounts also help merchants to retain customers, create a vibrant community around their brand, and turn casual shoppers into store advocates.
Benefits of Loyalty Discounts
Sophisticated marketing campaigns designed to attract new customers are expensive. Convincing existing customers to make an additional purchase is much more cost-effective.
Using loyalty discounts to reward and stimulate desirable customer behavior results in:
- Increased revenue.
- Customers feeling engaged and appreciated.
- Collection of valuable customer data.
- Improved Repeat Purchase Rate and Customer Lifetime Value.
Loyalty discounts and programs enable merchants to acquire lots of data about customers and their preferences. These priceless insights are essential for creating personalized offers and unique experiences.
Note: Read our guide to loyalty fraud to learn how to protect your customers.
Examples of Loyalty Discounts
Smaller and mid-sized businesses cannot afford to attract new customers with "out of this world" discounts.
Luckily, price points are not at the heart of loyalty discounts. Successful loyalty programs and discounts focus on long-term loyalty and emphasize common values.
REI sells outdoor recreational equipment. The company offers customers a lifetime membership (lifetime of the store, not the customer) for a one-time $20 payment.
Customers instantly feel that they are part of a like-minded community and have bought into a lifestyle rather than becoming members on a website.
Members get loyalty discounts on products, but the best deals are reserved for adventure classes, renting camping equipment, and bike and ski shop services.
This approach shows customers that the store does not only sell products but promotes outdoor activities. Instead of selling a tent, they are giving a discount for the adventure of sleeping in one.
Verizon Loyalty Discount
Telecommunication companies know that customers are reluctant to switch mobile carriers. As a result, new customers often get better deals than existing users.
Prepaid plans are an exception as Telco companies need to incentivize customers to utilize them for as long as possible.
Verizon has a forthright loyalty discount for prepaid plans and discloses the benefit for long-term users. An on-screen slider shows customers exactly how much they can save for reaching predefined usage thresholds.
Regardless of which plan they use, customers get a $5 discount once they reach a 3-month threshold and an additional $5 discount for using a plan for ten months or more.
Presenting the benefits of a loyalty discount clearly and honestly is as important as the discount amount.
Dollar Shave Club
The Dollar Shave Club loyalty program is free. Registered members get free shipping, loyalty discounts, birthday gifts, and access to quirky products that are not available to unregistered users.
Shaving is a private and intimate activity. However, the Dollar Shave Club needs to collect customer data to provide a highly personalized experience across multiple channels.
The writing, content, and website design are engaging and funny. This lighthearted approach makes customers feel comfortable to share experiences they may be reluctant to talk about.
Before becoming a member, the DSC asks customers to answer a series of questions to form a personalized profile.
This is a great first step for any loyalty program. The customer feels that their personal needs are front and center from the get-go.
Note: Learn how to add quantity discounts in WooCommerce.
You know that loyalty discounts work. The examples in this guide prove that successful loyalty discounts need to be transparent, promote company values, and show customers how much you respect their judgment.
Use them to create highly personalized offers and generate real value for your business.