Do I need a loyalty program if I am a DTC subscription business?
At Flaunt, we’ve had lots of merchants in the CPG vertical who rely on subscriptions come to us asking about how a loyalty program can help them achieve their retention, LTV, and growth goals when they have a subscription-focused business.
Even more specifically, lots of subscription platforms are launching their own perks, discounts, and offers functionality to help subscription-based CPG merchants incentivize merchants to “just stay subscribed a little bit longer.”
Some examples of these include:
- Prive’s long list of features
- Recharge’s “Retain” product
- Skio’s “Save” product
- Stay.ai’s “RetentionEngine” and “Digital Punch Cards” products
Are these enough to optimize my customer journey, cultivate deeper customer relationships, collect valuable customer data and insights, and profitably grow sales? What else can a loyalty program unlock for me?
In this article we aim to help retention and e-commerce marketers at DTC CPG brands on Shopify answer that question themselves. We will provide you with:
- The ultimate checklist to help you determine the right approach for your brand
- A recap on the origin and purpose of a loyalty program
- A summary of how loyalty programs drive incremental value for e-comm merchants
- Success stories for subscription CPG brands implementing a loyalty program
A history lesson — why do loyalty programs exist?
Loyalty programs originated with CPG and Food retailers
Loyalty programs were created as a way to profitably boost repeat sales by offering a discounted rate for returning customers in a gamified way.
Some argue that loyalty programs have their roots in ancient civilizations like Egypt. For the most comprehensive review of the history of loyalty programs, I’d refer you to the article written by our friends at Loyalty & Reward Co, called The True History of Loyalty Programs.
It turns out that the first true loyalty program ever invented was by the founder of a CPG brand, B.T. Babbitt, as a way to boost repeat sales in the 1850s for his Soap and Baking Powder brand “Babbitt’s Best Soap”. The tactics became widespread across other CPG and Food/Beverage retailers like Coffee and Tea businesses.
“Trade Marks” were found inside the wrappers of the product and could be used to unlock discounted products and a myriad of other sought after gifts.
But even in the 1800s and 1900s, food retailers were having some of the same debates that modern e-commerce and retention marketers are having today – whether or not to use a loyalty program or rely exclusively on price, service, and other competitive alternatives to retain customers.
Digital loyalty programs not only retain, but fuel personalized marketing
The digitalization of loyalty programs and marketing more broadly gave loyalty programs a new purpose.
They have become data collection tools that incentivize customers to submit more information than is utterly necessary as a customer. This additional data enables smarter, more personalized marketing campaigns which are the ultimate drivers of incremental sales.
The role of subscription perks vs. loyalty programs for DTC brands
An expert-designed loyalty program exists to support the entire customer lifecycle and funnel. That is the primary difference between “Subscribe & Save” offers.
The main “jobs” that a loyalty program does that a subscription incentives program does not are:
- Increase Customer Engagement: Loyalty programs use gamification elements like points, badges, giveaways, and leaderboards to make the shopping experience more engaging.
- Personalized Marketing: Collecting data through loyalty programs helps tailor marketing campaigns to individual customer preferences.
- Build Community: Exclusive events and forums foster a sense of community among loyal customers.
- Referral Programs: Loyalty programs can incentivize customers to refer new subscribers, expanding the customer base.
Examples of successful loyalty program implementations for DTC subscription businesses
Barefaced - A subscription business with a wildly successful loyalty program
Barefaced, a skincare brand, successfully integrated a loyalty program to enhance customer retention and engagement. Their program focuses on personalized experiences and community building, driving both retention and AOV.
They treat their subscribers extra specially within the program in order to incentivize customers to convert from ad hoc purchasers to reliable subscribers. Here are some of the main ways in which their subscription program interacts with their loyalty program.
Extra ongoing benefits for Subscribers
Subscription orders get 1.5x the points and active subscribers get extra rewards in each tier of the program.
Subscribers can apply their rewards easily in their subscription portal with a seamless rewards + loyalty integration.
They also complement their unique subscription offers with a “Stay Subscribed” challenge that nudges customers over the course of the year to stay subscribed to unlock bonus points.
How Barefaced went beyond subscriptions to drive a +17% increase in sales and record engagement
More importantly, their loyalty program helps support retention and growth in other ways.
By incorporating challenges that are integrated with reviews, Instagram, unique product SKUs, and rewarded surveys, Barefaced is able to expand AOV, increase brand engagement, and boost advocacy.
Barefaced also uses their loyalty program to harness the data they collect, advanced segmentation capabilities, and data science to distribute individualized offers that help promote the right products to the right customer.
Dollar Shave Club - One of the top DTC subscription businesses with a standalone rewards program
Dollar Shave Club is one of the most well-known subscription DTC businesses in the US, and it has a rewards program -- Razor Rewards -- to help drive more engagement, data collection, sales and referrals.
Here are some of the key features:
- Personalized offers: Dollar Shave Club rewards customers for submitting their birthdate. This not only helps them develop a deeper understanding of who their customers are, but it gives them the opportunity to serve a personalized, limited-time offer in honor of customers' birthdays. This has proven to be one of the most effective features of Sephora's loyalty program.
- Rewarded referrals (made easy): Dollar Shave Club makes referring customers extremely simple and easy for its customers. In fact, customers don't even need to be logged in to their customer account in order to send a referral and receive points and rewards. This is the main call-to-action with the program.
- Experiential rewards: In addition to getting the best prices, top customers Dollar Shave Club are given early access to new product releases, invitations to IRL events, and the opportunity to help test new products.
- Rewarded receipt scans: To support Dollar Shave Club's omni-channel expansion, it offers the ability for customers to upload receipts and advance their status. This gives Dollar Shave Club a better view into where and when customers are purchasing their products.
How to evaluate whether you can benefit from a loyalty program
To determine if a loyalty program is right for your DTC subscription business, consider the following factors:
- Decreased ad spend efficiency: If your brand is beyond product / market fit, has had a subscription model for awhile and has started to tap out on paid media, you might want to consider a loyalty program to help boost LTV.
- Multiple SKUs: if your brand has multiple products that are relevant for customers, that gives the loyalty program more opportunity to drive impact. Campaigns can be designed to give customers more reasons to try new products and expand their AOV.
- Engaged community and social presence: if your brand has aligned itself with a cause and movement and a strong social presence, a loyalty program can help you activate customers to share your brand via referrals and social sharing.
- Emphasis on educational selling: if your brand and products rely on educating the market about your differentiation, a loyalty program can help you engage them with rewarded quizzes and promos that tie-in with your key marketing messages to constantly reinforce your brand message and differentiation.
- Mixed experience with subscription offers: Relying exclusively on “Subscribe and Save” and offers at specific milestones to keep people subscribed put your margin at risk. If you have had mixed results from these types of tactics, you may want to consider a dedicated loyalty program.
- You are, or plan to become, omni-channel: A loyalty program multiplies in importance once you become omni-channel, because of a loyalty programs role in collecting data. If your products are sold through third party retailers, you want to know who is buying those products so you can personalize your email and SMS marketing to them. One way to do this is enabling those customers to earn points by checking in their receipts and submitting information in order to unlock rewards and gifts.
Conclusion
For DTC subscription businesses, a well-designed loyalty program can significantly boost customer retention, increase AOV, and reduce CAC. By integrating a loyalty program with your existing subscription model, you can create a more engaging, personalized, and rewarding experience for your customers.
Implementing a loyalty program may require an investment of time and resources, but the long-term benefits make it a worthwhile strategy for any DTC subscription brand aiming to thrive in today's competitive market.
If you want to learn how about how Flaunt’s full-service approach can help Shopify merchants get a custom-tailored loyalty program that drives incremental profits in record time, reach out to book office hours.
