How to set up a Shopify loyalty program that protects your margin
Points that customers love can quietly become a discount you cannot afford. Here is how to price a Shopify loyalty program, when to release points, and which rules are worth adding.
A Shopify loyalty program is one of the cheapest ways to bring a customer back: points give them a reason to buy from you again instead of a marketplace. Set up carelessly, though, points turn into a permanent discount on every order. The fix is to decide what a point costs you before you decide how many to give away.
This guide covers the one number that matters, when points should become spendable, which earn rules are worth adding, and how VIP tiers reward your best customers. The examples use AlliDesk's loyalty module.
Start with the effective reward rate
Two settings decide how generous your program is: how many points a customer earns per ₹1 and what one point is worth when spent. Multiply them and you get the effective reward rate, the share of each sale you are giving back.
1 point per ₹1 spent, and 1 point is worth ₹0.02: 2% back.
1 point per ₹1 spent, and 1 point is worth ₹0.05: 5% back.
1 point per ₹1 spent, and 1 point is worth ₹0.25: 25% back, which few stores can afford.
Pick a rate your gross margin can carry on every order, not just on your best products. Then add limits that keep redemptions sensible:
Minimum points to redeem, so tiny balances are not spent one rupee at a time.
Maximum share of an order paid with points, for example 30%, so points top up a purchase rather than replace it.
Minimum order value to redeem, so points encourage a bigger basket.
Points expiry, with a reminder before they lapse, so old balances do not sit on your books forever.
Tip: Points that expire with a reminder are not stingy. The reminder is one of the best reasons a quiet customer has to come back and shop.
Release points only when the sale is safe
If points can be spent the moment an order is placed, a customer can earn on an order, spend the points, and then cancel or return the first one. Block new points until the order reaches a stage you trust:
Paid, for prepaid stores with few returns.
Fulfilled, a sensible default for most.
Delivered, for stores with high return or cash-on-delivery rates.
Until then they show as pending in the customer's account, and cancellations and refunds take them back automatically.
Earn rules worth adding to your Shopify loyalty program
Points on every order are the base. A few extra rules reward the behaviour that actually helps your store:
First order bonus, to turn a first-time visitor into a customer.
Prepaid order bonus, which nudges cash-on-delivery buyers towards paying online.
Order milestones, such as a bonus on the fifth order.
Extra points on specific products or collections, to move stock you want to sell.
Account and birthday points, for creating an account, completing a profile, and once a year on a birthday.
Reviews and referrals, when you run those modules too.
VIP tiers for your best customers
Tiers give customers a goal. Each level is reached by earning, can carry a better earn rate and its own perks, and customers see their tier and how far they are from the next one. Keep it to three or four levels with clear names; a tier nobody can reach does not motivate anyone.
Where customers spend their points
Customers can redeem a fixed reward from their account, or choose how many points to use in the cart. On Shopify's own checkout the discount then comes off automatically. Stores on checkouts such as GoKwik or Shiprocket can let that checkout read and spend points through AlliDesk's loyalty API.
Common questions
How much should a loyalty point be worth?
Work backwards from your margin. Decide what share of a sale you can give back, commonly a few percent, and set points earned per ₹1 and the value of a point so they multiply to that rate.
When should points become usable?
After the order is fulfilled or delivered, so a cancelled or returned order cannot be used to earn points that are then spent.
Do customers need an account to earn points?
Yes. Points belong to a customer account, which is why an easy sign-in such as phone OTP makes a loyalty program work better.
Launch a loyalty program you can afford Points, earn rules, VIP tiers and checkout redemption, all set from one Shopify app. Install AlliDesk →
Put this to work on your store
AlliDesk brings sign-in, loyalty, returns and GST invoices into one Shopify app, on any theme.
