Should you start a loyalty program?

Starting a loyalty program is one of the most common recommendations in DTC, but I think most of them are a waste of time.

It only works if the behavior already exists

A loyalty program works when people were already going to do the thing you're incentivizing.

Think about a supplement brand. Something consumable you replenish every month. Prenatals, daily vitamins, whatever. You take it every day and you need to keep buying it. A loyalty program here makes sense because the customer was already coming back. You made it a little easier and gave them a small reason not to shop around.

Now think about buying a mattress. You buy one very infrequently, and a loyalty program pushing repeat purchases on that product is going to be wildly underwhelming. Nobody buys multiple mattresses a year. No points system is going to change that.

The case studies you see about loyalty programs driving LTV and retention are almost always from brands selling consumables. The customer wanted to repeat, so they made a program to capitalize on it. The problem is that most brands treat this approach as copy and paste.

We overestimate our ability to change how people buy

Most tactics in DTC assume you can shift customer behavior. Loyalty programs, subscriptions, referral incentives, bundles. They all assume the customer will do something different because you built a system asking them to.

I tend to be skeptical of that view. If your product naturally drives repeat purchases, great. You definitely should build systems that make that easier. If it doesn't make sense to do something, though, no program is going to change what a consumer does over the long term. This same problem plagues most strategies people try to implement.

The real problem is copying without thinking

Every team in DTC is reading the same newsletters, listening to the same podcasts, hearing about the same strategies. Someone shares a case study about how subscriptions grew their brand 40% and suddenly every brand in the category launches a subscription.

Nobody asks whether their customer actually wants that. The supplement customer probably does. The mattress customer definitely doesn't. The strategy worked in one place because the behavior was already there.

When something doesn't work, the instinct is always to tweak the execution. Maybe the points structure is wrong. Maybe the rewards need to be better. Maybe the emails need work. Usually the problem is simpler… the strategy doesn't match how your customer actually shops.

Study the principle. Build your own version.

A case study about a supplement brand's loyalty program tells you one thing: consumable products with a natural reorder cycle benefit from making that reorder easier. If your product doesn't have that, the program won't work no matter how well you execute it.

Same with subscriptions, bundles, referral programs, whatever. Ask yourself what behavior the strategy is built on and whether your customer actually does that. If they do, find your version of it. If they don't, move on to a different initiative.

Think for yourself

Before you build anything, you should ask questions. Does my customer already do this on their own? Am I building this because it serves them or because I heard it works somewhere else?

Most of the time the best strategy is the boring one. Figure out what your customer already does and then get out of their way.