Sales & Conversion
Personas
Ecommerce
Time to ROI
Medium-term (3-6 months)
Last month, I had a client frantically email me at 2 AM. "We launched our loyalty program six weeks ago and sales have actually dropped 15%," she wrote. "What the hell is happening?"
This wasn't the first time I'd seen this. Over the past two years, I've watched countless Shopify store owners get seduced by the loyalty program promise: install a plugin, watch customers come back more often, profit. The reality? Most loyalty programs don't just fail to increase sales—they actively hurt conversion rates.
Here's what most people don't realize: loyalty programs aren't marketing tools. They're retention tools that often conflict with acquisition. And if you're like most e-commerce stores where 70%+ of your traffic is first-time visitors, you might be optimizing for the wrong thing entirely.
After working with dozens of Shopify stores and seeing both spectacular failures and surprising successes, I've learned that the conversation around loyalty programs is completely backwards. Instead of asking "how do I get customers to come back," we should be asking "why aren't they coming back in the first place?"
In this playbook, you'll learn:
Why most Shopify loyalty programs reduce first-time buyer conversion rates
The hidden costs that make loyalty programs unprofitable for 80% of stores
My framework for deciding when loyalty programs actually make sense
Three alternative strategies that build real loyalty without the complexity
How to measure loyalty program impact on sales correctly (spoiler: it's not what you think)
Industry Reality
What every Shopify guru preaches about loyalty
Walk into any e-commerce conference or scroll through Shopify Twitter, and you'll hear the same gospel: loyalty programs are essential for sustainable growth. The argument is seductive and simple.
The Standard Pitch Goes Like This:
Acquiring new customers costs 5-25x more than retaining existing ones
Loyalty programs increase customer lifetime value by encouraging repeat purchases
Gamification and points create emotional connections that build brand loyalty
Modern apps make implementation easy—just install and configure
Data shows loyalty program members spend 12-18% more than non-members
This conventional wisdom exists because it's partially true. Customer retention is more profitable than acquisition. Repeat customers do spend more. And yes, some loyalty programs genuinely work.
But here's where the industry gets it wrong: they're treating loyalty programs like a universal solution. Install Smile.io or LoyaltyLion, set some point values, and watch the magic happen. The problem is that most Shopify stores aren't in a position where loyalty programs help—they're in a position where loyalty programs hurt.
The Fatal Assumption: The entire loyalty program industry assumes you have a customer retention problem. But what if your real problem is conversion? What if adding complexity to your checkout process drives away more first-time buyers than you gain in repeat purchases?
What if the solution to customer loyalty isn't a points program—it's fixing why customers don't want to come back in the first place?
Consider me as your business complice.
7 years of freelance experience working with SaaS and Ecommerce brands.
Six months ago, I was working with a fashion e-commerce client who was convinced their retention problem needed a loyalty program solution. They were doing about $50K monthly revenue with a 2.8% conversion rate and 25% repeat purchase rate.
"Everyone in our Facebook group says we need loyalty points," the founder told me. "Our customers aren't coming back enough, and we're spending too much on ads."
The store sold handmade jewelry with an average order value of $180. Their target customer was women aged 28-45 buying gifts or treating themselves. Seemed like a perfect fit for loyalty programs, right? Build emotional connection, encourage repeat purchases, increase lifetime value.
We installed Smile.io with what seemed like a reasonable setup: 1 point per dollar spent, 200 points = $10 reward, bonus points for social shares and reviews. The kind of configuration every tutorial recommends.
What happened next was not what anyone expected.
Week one looked promising. Loyalty program signups were strong—about 30% of customers opted in. The client was excited seeing points being earned and some early redemptions.
But by week three, something was off. Overall conversion rate had dropped from 2.8% to 2.3%. Revenue was actually down despite having a "retention tool" in place. The founder was confused. I was concerned.
Here's what we discovered through session recordings and exit surveys: the loyalty program signup popup was interrupting the purchase flow. First-time visitors were seeing point earning potential before they'd even decided to buy, which felt presumptuous. The checkout was now cluttered with point-earning messaging that distracted from the core purchase decision.
More importantly, the customers who were most likely to join loyalty programs were already repeat buyers. We were solving for people who didn't need solving for, while creating friction for the people we most needed to convert: first-time visitors.
Here's my playbook
What I ended up doing and the results.
Instead of doubling down on loyalty program optimization, I took a step back and ran an experiment that challenged everything we thought we knew about retention.
The Real Problem Discovery
I started by analyzing why customers weren't returning in the first place. Through post-purchase surveys and customer interviews, a pattern emerged. It wasn't that people didn't want to buy again—it was that they forgot the store existed.
The handmade jewelry wasn't something people needed regularly. Unlike consumables or fashion basics, these were occasion-based purchases. The gap between purchases was naturally 6-12 months, not 30-60 days like the loyalty program assumed.
My Three-Part Alternative Strategy
Phase 1: Remove Friction for New Customers
First, we completely removed the loyalty program for 30 days. No popups, no point messaging, no checkout complexity. Just focus on converting first-time visitors. Conversion rate immediately jumped back to 2.9%—actually higher than before.
Phase 2: Build Memory, Not Points
Instead of points, we created a simple email sequence focused on styling tips and gift occasions. No discounts, no pressure—just helpful content that kept the brand top of mind. We sent one email monthly with jewelry styling ideas for upcoming seasons, holidays, or life events.
Phase 3: Reward Behavior, Not Transactions
Rather than rewarding spending with points, we rewarded engagement with access. Customers who opened emails or clicked links got early access to new collections. Customers who shared photos got featured in our newsletter. We turned loyalty into social proof instead of discounts.
The Measurement Framework
Here's the critical part most people get wrong: we measured loyalty program impact differently. Instead of just tracking repeat purchase rate and customer lifetime value, we tracked:
First-time visitor conversion rate
Total monthly revenue (not just repeat customer revenue)
Customer acquisition cost impact
Time between purchases (to understand natural buying cycles)
The results changed everything we thought about loyalty programs and retention marketing.
Friction Analysis
Most loyalty programs add conversion friction for first-time visitors, who typically represent 70-80% of e-commerce traffic
Natural Buying Cycles
Understanding your product's natural repurchase timeline is critical—loyalty programs fail when they fight against natural customer behavior
Memory vs. Points
Staying top-of-mind through valuable content often drives more repeat purchases than discount-based point systems
Total Revenue Impact
Measuring only repeat customer metrics misses the bigger picture of how loyalty programs affect overall conversion and acquisition
After removing the traditional loyalty program and implementing our alternative approach, the results were dramatic:
Immediate Conversion Impact: First-time visitor conversion rate increased from 2.3% to 3.1% within 30 days. This alone drove an additional $8,000 in monthly revenue from improved acquisition.
Retention Without Friction: Six months later, repeat purchase rate had actually improved to 32%—higher than with the traditional loyalty program. The difference was that we weren't sacrificing new customer acquisition to achieve it.
Memory-Based Marketing Results: Our monthly styling email had a 28% open rate and drove an average of $3,200 in revenue per send. Customers specifically mentioned the emails when making repeat purchases, saying things like "I saw your autumn styling guide and remembered I needed earrings for my wedding season."
The Real Surprise: Customer lifetime value increased not because of discounts or points, but because customers were making more thoughtful, higher-value purchases. When they returned, they bought more expensive pieces because they trusted our styling advice and felt connected to the brand story.
Total impact: 24% increase in monthly revenue without any loyalty program technology, monthly fees, or discount-driven margin erosion.
What I've learned and the mistakes I've made.
Sharing so you don't make them.
This experience taught me seven critical lessons about loyalty programs and retention that completely changed how I approach e-commerce growth:
Loyalty programs optimize for the wrong metric. Most programs focus on repeat purchase rate instead of total revenue impact. A program that increases repeat purchases by 20% but decreases new customer conversion by 15% is actually losing money.
Product purchase cycles matter more than program mechanics. If your product naturally has a 6-month repurchase cycle, a 30-day point expiration system fights against customer behavior instead of working with it.
First-time visitor experience always wins. In most e-commerce stores, 70-80% of traffic is first-time visitors. Any system that adds friction for this majority to optimize for the minority is backwards.
Memory beats discounts for high-value products. Customers don't need cheaper jewelry—they need to remember your jewelry exists when they're getting dressed for their sister's wedding in 8 months.
Complexity is the enemy of conversion. Every popup, point calculation, and reward tier adds cognitive load that can break the purchase decision for impulse or emotional purchases.
Most retention problems are actually experience problems. If customers aren't coming back, ask why they should come back before asking how to incentivize them to come back.
Measure the whole funnel, not just retention metrics. A successful loyalty program should increase total revenue, not just repeat customer revenue. Too many store owners optimize one metric while accidentally breaking another.
How you can adapt this to your Business
My playbook, condensed for your use case.
For your SaaS / Startup
For SaaS companies, the lesson is similar but different: focus on product value delivery before gamification. If customers aren't renewing, it's usually because they're not getting value from your core features. Build retention through better onboarding and feature adoption, not point systems.
For your Ecommerce store
For e-commerce stores: audit your natural purchase cycles first. If your average customer buys every 90+ days, loyalty programs might hurt more than help. Focus on memorable brand experiences and staying top-of-mind instead of discount-driven repeat purchases.