Loyalty and subscription platforms for ecommerce
What do loyalty and subscription platforms do?
They are two categories, often sold apart.
A loyalty platform runs a loyalty programme. That is a scheme that rewards repeat purchases with points, tiers or benefits. The software tracks who earned what, shows it in the shop and applies the reward at checkout.
A subscription platform lets a customer order a product on a schedule. It handles the recurring order, the recurring payment and the customer's changes to both.
Subscriptions bring one extra problem. Cards fail. A subscription-software vendor describes involuntary churn as a payment failure that ends a subscription without the customer meaning to leave, and dunning as the automated recovery of failed payments through retries1. In a subscription business, that is a separate leak from people choosing to cancel.
Why do ecommerce brands use them?
The aim is simple: more customers buying again. Brands watch their repeat purchase rate, the share of customers with two or more orders, and their LTV (customer lifetime value).
A programme or a subscription is one way to move both. It is not the only way. For consumables, a replenishment email timed from real purchase intervals does part of the job with no points and no billing system.
How do we implement it?
Check the conditions
Is there a repeat cycle, margin to fund rewards and enough repeat customers to compare? If not, stop here.
Decide the programme first
Write the rules and count the cost of rewards in contribution margin. Only then choose a tool.
Set up and own it
Connect it to your shop, email and checkout. Someone owns the rules, the reports and, for subscriptions, failed payments.
Compare with non-members
Measure members against a comparable group of non-members, or a holdout, before crediting the programme.
When should you not use one?
What does it cost, in effort?
We do not give prices. In effort terms, expect this:
- Platform fees. Pricing models vary by vendor.
- Reward cost. Discounts, points and free gifts come out of your margin. In our view, this is often the biggest cost, and the easiest one to leave out of the business case.
- Set-up. Connecting the tool to your shop, email and checkout, and designing the rules.
- Running it. Someone owns the rules, the reports and the customer questions.
- Customer data and consent. What you store and send is set in your consent set-up. Your counsel decides the rules.
What are the pitfalls?
Selection effect
Loyal customers are more likely to join. Members can spend more than non-members even if the programme did nothing. Measure the effect against a comparable group of non-members, or a holdout.
Rewards that discount orders you would have won anyway
The related question is covered in loyalty programme vs discount repeat customers margin.
Tool before decision
Buying the platform feels like progress. The decision about rules and cost is the progress.
Failed payments left unmanaged
In a subscription, a failed card can end a customer as surely as a cancellation.
Our take: Selective
This is our view, not a market fact. We rate loyalty and subscription platforms Selective.
Why:
- The tool is the easy part. The hard part is the decision to run a programme at all, and what it costs per order.
- Independent evidence is thin in our research. Academic work asks whether loyalty programmes change repeat-purchase patterns at all2. We did not find a general answer we could quote, so we ask for proof in your own data before assuming a programme adds orders.
- The success stories are self-reported. A loyalty vendor's customer case-study pages are a typical example3. Each result is one brand's, told by the seller.
Selective means: yes, where the category has a repeat cycle and the margin can fund rewards. Otherwise, no.
For ZFD: We count the cost of rewards in contribution margin before judging a programme. Our retention work covers audit, strategy and tool set-up, with no promised uplift. The pillar piece, customer retention strategy ecommerce, explains the margin logic.
FAQ
What is the difference between a loyalty platform and a subscription platform?
A loyalty platform rewards repeat purchases. A subscription platform sets up recurring orders and payments. Some vendors offer both.
Do loyalty programmes increase repeat purchases?
Sometimes. Members buy more, but members are also the customers most likely to buy anyway. Compare them with non-members before crediting the programme.
What is involuntary churn?
A subscription-software vendor defines it as a payment failure that ends a subscription without the customer meaning to leave. Dunning is the automated retrying of failed payments meant to recover them1.
Do I need a platform to start?
Not always. Start with the rules and the margin. A replenishment email may be enough for a consumable product.
Can ZFD choose the platform for us?
We can help you compare options against your margin and repeat cycle. We do not rank vendors.
Let’s find what’s actually working.
Next step. Not sure a programme pays back on your margin? Talk to us about your setup.