E-commerce Loyalty Programs: A Comprehensive Handbook

Have you ever picked Starbucks over another coffee shop because their Rewards program offers free drinks or exclusive app deals just for being a loyal customer? That’s the brilliance of e-commerce loyalty programs - smart strategies that turn casual shoppers into devoted brand fans.

By rewarding repeat purchases with points, personalized discounts, or VIP perks, these programs create a sense of value and exclusivity that keeps customers hooked. However, it is difficult to start if you do not get the overall idea of what it is and how everything works.

In this blog post, you can find all details of rewards programs in e-commerce, from statistics, trends, types, as well as tips and takeaways to consider when creating a loyalty program.

What is an e-commerce loyalty program?

An e-commerce loyalty program is a structured customer retention strategy that online stores use to increase repeat purchases and strengthen long-term customer relationships. Similar to traditional in-store loyalty cards, these programs reward shoppers for their continued engagement, whether that’s making purchases, leaving reviews, referring friends, or following a brand on social media.

Well-designed rewards programs go beyond discounts, fostering long-term relationships and brand advocacy while driving sustainable e-commerce growth. For businesses, it becomes a proven tool to boost customer lifetime value (CLV), reduce churn, and build brand advocacy. For customers, it provides extra motivation to stay connected and return to the same store instead of switching to competitors. This makes loyalty schemes not just an add-on, but a core driver of sustainable online growth.

How does a loyalty program works

• Enrollment: Customers join the loyalty program, often via a simple sign-up process on the e-commerce website, mobile app, or during checkout.

• Earn Rewards: Customers accumulate rewards (e.g., points, credits) or reach tiers by completing specific actions:
  • Complete purchases
  • Subscribe to newsletters
  • Write product/services reviews
  • Refer friends
  • Interact with brands on social media (share, comment, join in games)
  • In some cases, customers can pay upfront to receive certain rewards

• Track Progress: Customers monitor their rewards through a user-friendly interface, typically via a mobile app or account dashboard.

• Redeem Rewards: Customers exchange earned rewards for benefits, such as:
  • Discounts
  • Free gifts
  • Early access to sales or new collection
  • Special experiences invitation
  • Cashback
  • Donate to charities
• Engage and Retain: The program encourages ongoing interaction and persuades customers to come back through:
  • Personalized offers
  • Gamified challenges
  • Tiered benefits
• Analyze and Optimize: Businesses use program data to analyze customer behavior, segment high-value customers, and refine rewards. Tools like Mageplaza Magento 2 Reports help tailor promotions, ensuring the program remains effective and aligned with trends like personalization and omnichannel integration.

Why loyalty matters: Key Statistics in 2025

Customer loyalty isn’t just a “nice-to-have” in e-commerce, it’s one of the strongest drivers of profitability. A well-structured e-commerce rewards program helps businesses keep existing customers engaged while reducing acquisition costs for new ones. To show just how powerful loyalty can be, let’s look at the latest data and industry insights:

Customer preferences & Expectations

• A significant majority across generations prefer brands with loyalty programs: 71% of Gen X, 70% of Millennials, 63% of Baby Boomers, and 62% of Gen Z choose brands offering loyalty systems over those without (Oracle).
• 83% of survey respondents will come back to purchase from a brand if they belong to its loyalty program (Yotpo).
• 62% of Gen Z and Millennials expect digital loyalty programs with mobile-friendly features and gamified elements (Deloitte).
• 52% of consumers say personalized rewards are expected from any brand (Forbes).

Business impact & Profitability

• Companies with strong loyalty offers grow revenue approximately 2.5 times faster than their industry peers (Harvard Business Review)
• If customer retention rates increase by 5%, profits can go up by 25 - 95% (CapitalOne Research).
• According to Mageplaza, Magento 2 merchants using the Mageplaza Reward Points extension report a 37% increase in repeat order rates, highlighting the effectiveness of points-based loyalty systems.

Shopping behavior & Engagement

• 57% of rewards program members increase spending with brands they love (Accenture).
• Implementing a loyalty program on an e-commerce platform can boost average order quantity by up to 319% (Incentive Solutions).
• 86% of consumers are more likely to recommend brands with good loyalty programs to friends and family (KPMG).

In short, why is building a loyalty program for customers essential?

• Boost sales: Loyalty programs enhance customer retention and incentivize purchases, significantly increasing revenue for e-commerce businesses.
• Increase customer loyalty: Encourage new customers to stay and make existing customers feel valued, fostering long-term loyalty.
• Enhance customer experience: Show customers that the business values relationships, not just profits, improving their shopping experience.
• Support market research: Test various loyalty programs to identify appealing rewards, enabling targeted product promotions or new product development.
• Aid customer segmentation: Identify profitable versus unprofitable customers, allowing businesses to tailor programs for high-value segments.

Instead of chasing new buyers with expensive ads, investing in an e-commerce loyalty program ensures your existing customers return, spend more, and become brand advocates. You can explore 6 case studies of loyalty programs that drive results for more inspiration.

Types of E-commerce Loyalty Programs

There are several types of loyalty programs in eCommerce, and each comes with unique benefits and trade-offs. From straightforward points-based systems to tiered or subscription models, these programs give merchants different ways to drive repeat purchases and build long-term relationships. Below, we’ll explore the main types of loyalty programs with examples, pros, and cons so you can choose the model that best fits your online store.

Point-Based Systems

In this model, customers earn points for purchases or specific actions like signing up for an account, leaving a review, or referring a friend. These points accumulate over time and can be redeemed for discounts, free items, or other rewards. It’s the most familiar type of program and easy to integrate into almost any store.

Example: Spend $500/year to be in Silver level (5% off), $1,000/year to be in Gold level (10% off + free shipping).

Pros:

• Easy to understand and widely adopted.
• Flexible: can reward purchases, reviews, or sign-ups.
• Encourages repeat shopping.

Cons:

• Rewards may feel “small” if not valued properly.
• Requires tracking system to manage balances.

Tiered Rewards

Tiered loyalty programs divide customers into levels based on their spending or engagement. As shoppers move up tiers, they unlock bigger rewards, which motivates them to spend more. This structure creates a sense of exclusivity and long-term achievement.

Example: Spend $500/year to be in Silver level (5% off), $1,000/year to be in Gold level (10% off + free shipping).

Pros:

• Motivates customers to spend more to “unlock” tiers.
• Builds loyalty over the long term.

Cons:

• Can discourage casual buyers if tiers feel unreachable.
• Requires clear communication to avoid confusion.

Discount-based Programs

Discount-based programs focus on providing immediate savings to shoppers. Customers receive a coupon or percentage off after completing a specific action, like signing up for a newsletter or making their first purchase. These programs are simple, fast, and effective for driving conversions.

Example: Get 10% off your first order after signing up for the newsletter.

Pros:

• Provides immediate gratification.
• Boosts conversions, especially for first-time buyers.

Cons:

• Trains customers to wait for discounts.
• Can reduce profit margins if overused.

Subscription-Based Memberships

With subscription programs, customers pay a recurring fee in exchange for exclusive benefits. This might include perks like free shipping, faster delivery, or VIP-only discounts. It builds loyalty by making members feel special while generating steady revenue for the store.

Example: Pay $9.99/month forward for free shipping, 2-day delivery, and exclusive offers.

Pros:

• Creates recurring revenue streams.
• Encourages frequent purchases to “make the subscription worth it.”

Cons:

• Upfront cost may deter new customers.
• Risk of churn if benefits don’t feel valuable.

Value-Based Programs

Value-based loyalty programs reward customers by aligning with causes they care about. Instead of discounts or points, part of their spending goes to charity or social initiatives. This approach strengthens emotional connections and shows the brand’s values.

Example: For every $50 spent, the store donates $1 to charity.

Pros:

• Builds emotional connection with socially conscious shoppers.
• Differentiates your brand from price-focused competitors.

Cons:

• Less appealing to bargain-driven customers.
• Benefits are less tangible to the shopper.

Cashback Offers

Cashback programs reward customers with a percentage of their purchase returned as cash or store credit. The value is clear and easy to understand, which makes this model very appealing. Cashback is especially effective at encouraging customers to come back for future purchases. Example: Spend $100, receive $5 store credit to use on the next purchase.

Pros:

• Strong perceived value.
• Simple and transparent.
• Incentivizes repeat purchases.

Cons:

• Can impact profit margins.
• Does not create excitement as in gamified points or tiers.

Referral Programs

Referral programs reward customers for bringing in new buyers. When someone refers a friend who makes a purchase, both the existing customer and the new one get rewarded. This approach leverages trust and word-of-mouth marketing.

Example: Refer a friend, and both of you get a $10 voucher when the friend makes their first purchase.

Pros:

• Low-cost customer acquisition.
• Leverages word-of-mouth trust.

Cons:

• Limited once customers run out of friends to refer.
• Needs monitoring to avoid abuse.

All-in-One Programs

An all-in-one program combines multiple approaches—such as points, tiers, cashback, and referrals into one system. This gives customers multiple ways to engage, redeem rewards, and stay loyal. While powerful, it also requires strong management and technology support.

Example: Earn 1 point per $1, reach Gold tier for 10% off, plus $10 bonus for each referral.

Pros:

• Appeals to a wide range of customer types.
• Maximizes engagement opportunities.

Cons:

• Complex to manage.
• Requires strong technology to track all elements.

Create your own loyalty program vs. Use a tool

So, in which way can you create your own rewards program? Build your own or use an existing tool - all based on your business strategies and resources. Take a look at the table below and choose your path:

Learn more: How to build a loyalty program for your e-commerce store

Upcoming loyalty trends in e-commerce

As e-commerce continues to evolve, customer loyalty programs in 2025 are shifting toward more personalized, engaging, and tech-driven strategies to boost customer retention and engagement. Below is a concise overview of the key trends shaping e-commerce loyalty strategies in 2025:

Hyper-Personalization with AI

Instead of offering customers what brands think they need, now AI will decide. AI is revolutionizing loyalty programs by analyzing customer data (purchases, browsing habits, preferences) to deliver hyper-personalized rewards. In Vietnam, where digital adoption is surging, AI helps brands like Shopee and Lazada offer tailored promotions, boosting engagement.

Gamification for engagement

Gamified loyalty programs are on the rise, incorporating game-like elements such as challenges, quizzes, and leaderboards to boost engagement. Not only does it increase customer engagement rate, but it also reminds customers of the brand and delivers new messages in a fun way. It keeps customers come back for day challenges, and encourages them to share data with the brand.

Focus on emotional and value-driven connections

When there are too many rewards programs out there, to be on top of customers’ minds, those programs should focus on emotional connections. As customers increasingly seek brands that align with their values, such as sustainability and ethical practices, loyalty programs are emphasizing emotional bonds through community-building, exclusive experiences, and rewards tied to social impact.

Seamless omnichannel experiences

After the Covid-19 period, it is undeniable that online commerce became popular; however, that is also the reason why brands want to attract shoppers back to their offline stores as well. Loyalty programs are integrating online and offline touchpoints for a unified customer journey. Starbucks Rewards, for example, allows users to earn and redeem points seamlessly via its mobile app, enhancing convenience.

Mobile optimization and App integration

With mobile commerce projected to account for 59% of global e-commerce sales in 2025, loyalty programs are prioritizing mobile-friendly experiences. Apps like Starbucks’ allow users to track rewards and receive personalized offers, with 42% of consumers showing loyalty through app installations, based on a SAP Emarsys research. A seamless mobile experience is critical, as customers will abandon non-mobile-friendly sites.

Loyalty integrated with NFT/Blockchain

Blockchain and NFTs are transforming loyalty programs by offering secure, transparent reward systems and unique digital assets. While blockchain ensures transparent point tracking and secure data management, NFTs enable exclusive rewards, where users collect digital assets for unique experiences

Unlocking success through e-commerce loyalty programs

Creating loyalty programs is a vital approach for sustainable e-commerce growth, driving repeat purchases through diverse types like points-based, tiered, subscription, or value-driven models. Businesses can build custom programs for unique needs or use tools like Mageplaza’s Reward Points for fast, scalable solutions. As more trends such as personalization and omnichannel integration are coming in 2025, brands should consider updating suitable strategies for their rewards system, in order to stay competitive in the online marketplace.