Basics

What Is a Loyalty Program? A Beginner's Guide for Shopify Merchants

If you're new to e-commerce, you've probably heard people talk about loyalty programs—but what are they exactly? And more importantly, do you need one?

Let’s break it down in plain English.

What Is a Loyalty Program?

A loyalty program is a system that rewards your customers for doing business with you—again and again.

Common examples:

  • Earning points for purchases
  • Getting perks for referrals
  • Unlocking benefits as a VIP
  • Subscribing to a paid membership with exclusive perks

The goal? To increase repeat purchases and make your brand stickier.

Why Do Loyalty Programs Matter?

Because retention = growth.

  • It costs 5–7x more to acquire a new customer than to keep an existing one
  • Repeat customers spend more and refer more
  • Loyalty boosts LTV (lifetime value), margins, and word-of-mouth

If you don’t have a system to keep customers, you're always stuck finding new ones.

Types of Loyalty Programs

1. Points-Based

Customers earn points for actions (purchases, reviews, birthdays), then redeem them for rewards.

2. Tiered Programs

The more a customer spends, the higher their level—and the better their perks.

3. Referrals

Customers share your brand with friends and get rewarded when those friends buy.

4. Paid Memberships

Customers pay for exclusive access, discounts, or perks (think: Prime, but for your store).

You can also combine these—for example, points + referrals + VIP tiers.

What Do You Need to Launch One?

If you're on Shopify, you can launch a loyalty program in under 10 minutes using apps like:

  • Toki – Combines rewards, referrals, memberships, and affiliate tools in one app
  • Smile.io – Great for starter programs
  • LoyaltyLion – Strong analytics and customization

These tools handle the logic, tracking, and UI so you can focus on growth.

When Should You Add Loyalty?

Honestly? As early as possible.

Even small loyalty programs help:

  • Turn first-time buyers into repeat customers
  • Collect emails and build your CRM
  • Incentivize behavior that grows your brand (reviews, referrals, etc.)

You don’t need to wait until you're a "big" brand. You just need to start.

Final Thoughts

Loyalty programs are one of the smartest growth levers in e-commerce—and they’re easier to launch than ever before.

If you’re building a brand with Shopify, this is one of the best moves you can make to turn one-time buyers into long-term fans.