How To Start a Loyalty Program for Small Businesses

Loyalty programs aren’t just for big-box stores with branded credit cards. Creating a loyalty program for your small business starts with thinking through what you hope to achieve. 

Fundamentally, loyalty programs aim to boost customer retention and drive repeat sales. In a 2025 report from the marketing research and engagement platform Bond, 79% of survey respondents say they are more likely to recommend brands with good loyalty programs, and 85% say that loyalty programs make them more likely to continue shopping with those brands. If you’re looking to reward your loyal customers and give new shoppers a reason to stick around, a formal program can help you get there. 

Read on to find out more about how loyalty programs work, their benefits, and how to start one for your small business.

What is a loyalty program?

A loyalty program is a customer engagement method that rewards customers for actions such as making purchases, successfully referring others to a brand, reaching a certain spending threshold, and completing surveys. One of the most common loyalty program strategies is awarding points to customers per purchase or dollar spent, which they can redeem for goods and experiences. Program perks may also include free shipping and returns or early access to upcoming sales and new products. 

Why loyalty programs matter for a small business

At a time when customer acquisition continues to become more expensive, starting a loyalty program can help you shift your focus to maintaining relationships and learning about existing customers’ preferences. Loyalty programs are a relationship-building and sales tactic, but they also offer you an inroad into understanding customer behavior and gathering data and insights that you can use to improve customer satisfaction across your sales funnel.

For example, when a loyalty program member purchases something with points, you learn whether they’re more interested in using rewards to stock up on favorites or trying something new. Over time, small details like that can tell you which incentives motivate customers to buy. And offering points or rewards in exchange for completed surveys or quizzes helps you acquire this data directly from your most engaged customers. 

Types of loyalty programs for small businesses

• Points-based
• Tiered
• Paid

All customer loyalty programs offer customers some form of benefit, but they don’t all follow the same structure:

Points-based

In this common loyalty program format, customers earn points for various actions, such as making purchases, referring friends, and reviewing your business online. Once customers earn a sufficient number of points, they exchange those points for discount vouchers, special gifts, and perks like free shipping.

Wellness brand MoonJuice has a points-based program where customers earn points for actions like adding their birthdate, following the brand on social media, and making purchases. Similarly, the skin care brand Jaxon Lane has a points-based program. “Acquisition costs have risen exponentially over the last few years, so we launched a loyalty program earlier this year where you can accrue points to make purchases and refer friends,” cofounder Alex Penfold says on the Shopify Masters podcast. 

Points-based programs offer the benefit of being very straightforward, which can make them simple to manage. The main drawback is that customers will be less likely to participate if the perceived value is too low. If it takes too long to earn rewards or if the rewards that they can earn don’t feel substantial enough, they can quickly lose interest.

Tiered

In a tiered loyalty program, customers earn access to different reward tiers based on their spending habits or point accumulation. Each tier increase comes with more substantial rewards. For example, a base tier might earn customers a 10% monthly discount while top-tier members get a 15% discount year-round. These programs are not inherently points-based but can use elements of that format, such as customers reaching the next tier after collecting a certain number of points. 

Clothing brand CUE offers a higher rewards tier for customers who spend a minimum dollar amount ($2,000) in a given time period (12 months). Beauty brand Kitsch has a similar rewards program with four tiers of ascending status and value that offer higher-level members better customer support and access to product testing.

While tiered systems encourage sales by motivating customers to ascend to higher rankings, they pose the challenge of maintaining customer participation interest across all tiers. Your base-tier customers need to feel just as engaged as your top-tier customers without having all of the benefits. 

Paid

Paid membership or subscription-based loyalty programs charge customers a flat fee, typically annually or monthly, in exchange for member benefits. Benefits can include perks like free shipping, special pricing, and early access to new products. 

Crochet brand Crochet by Genna uses this model to offer discounts to Patreon subscribers. In exchange for paid monthly support on that platform, subscribers receive discount codes to enter at checkout on Genna’s Shopify store.

Aside from artists, specialty beverage businesses like nonalcoholic beverage labels Years and Bero have also launched paid loyalty programs. With benefits like free shipping, the cost of membership becomes worth it after two orders of six packs from either brand. The main challenge of paid membership loyalty programs is establishing benefits that are worth the cost of signing up.

How to start a small business loyalty program with Shopify

For small businesses using Shopify, starting a loyalty program is straightforward. Hiyo cofounder Even Quinn says on Shopify Masters that the platform’s ease of use helped start the brand’s loyalty and rewards program. 

Browse the Shopify App Store for loyalty apps like Yotpo, Rivo, and Smile.io. While these options share similar features like POS integration, compatibility with Shopify Flow, customizable reward settings, and tiered loyalty structures, they also have unique functions. Each app has limited free versions with paid upgrades that include more extensive capabilities and accommodate larger monthly order volumes.

Yotpo offers omnichannel accessibility, including receipt scanning to reward customers no matter where they purchase your product. Smile.io lets customers earn and redeem points as guests, reducing the barrier to entry. Rivo allows customers to claim points on previous purchases using passwordless account activation. Compare and demo a few apps to figure out which will be the best fit for your business.

Once you’ve chosen your loyalty benefits and back-end app, you can use Shopify’s built-in messaging features to promote it to your customers. For example, you can use Shopify Messaging to send an email promoting your program. Use Shopify Flow to set up automated triggers that place customers in different tiers upon fulfilling established requirements. Promote your loyalty program on your homepage and key landing pages, or add a pop-up on your website.