Loyalty Guide: Fashion Industry

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With 1500+ customers in 65 countries and over $59m worth of points processed, we've gained insight into world-class retention strategies and what it means to create strong and sustainable brand loyalty.

While you build your program, our team is equipped with loyalty experts to ensure you have an exceptional program set up to scale. You can always book a time here to speak with one of our experts about your strategy or get any questions answered. Enjoy the guide, and happy Gameballing!

What's Happening in the Fashion Industry?

The fashion e-commerce industry has always been fast-paced and competitive. This could not be more true as the industry rapidly grows to a whopping $672.71 billion in 2023. At the core of this growth and competition is personalization. The industry is centered around personalization and creating unique shopping experiences. Brands are faced with access to new markets, increased disposable income globally, broader online access, and the rise of influencer culture.

Global revenue and average revenue per user (ARPU) are projected to grow at a rapid rate, largely due to the expansion of worldwide access to digital channels. This accounts for global markets outside of North America, increased online access, lower barriers to mobile phones, and higher disposable income on a global scale. While this is a crucial indicator of the growth that the industry will experience, this also clearly shows us the need for personalized experiences to cater to each unique user that a brand interacts with.

Lower digital barriers to entry for all clothing merchants offer the opportunity to market, sell, and fulfill orders globally and automatically. As a result, worldwide revenue and ARPU are projected to grow. While a global expansion occurs, there is exponential growth in influencer marketing and celebrity influence. Brands were estimated to have spent a total of $15 billion on influencer marketing this year. This shows a large opportunity for brands to change their strategies for 2023 to stay ahead of the competition, get creative, and provide their users with unique shopping experiences to win.

While new growth drivers dominate the fashion industry, there are also new threats affecting this industry. For one, market saturation is at an all-time high, causing brand loyalty to become increasingly more difficult to capture and retain. This is paired with shifting consumer demands, with a strong focus on ethical sourcing and green manufacturing in materials and textiles. At the same time, there is a huge technological shift in areas such as AR (augmented reality), the metaverse, and NFTs. It is critical that brands are transparent in their sourcing and production processes, adapt to new technologies, and implement unique strategies to keep brand loyalty among their customers.

Current Industry Trends

71% of global consumers want companies to deliver personalized communications and products, which signals a strong demand for hyper-personalization and an intense focus on creating unique purchasing journeys.

Since consumers are more concerned about their data privacy, the CPC (cost-per-click) for ads will steadily increase, and there will be less real estate for brands to take in front of the customer.

The way to overcome this hurdle is to focus intensely on brand building. According to Investopedia, "companies that invest in branding see the more organic acquisition and customer retention rates."

Getting Set Up with Your Loyalty Strategy

Understanding your metrics before setting up a retention strategy is crucial to the success of your program and business growth. There are two sets of metrics that you should prepare: pre-program metrics to help set up a well-performing program and performance metrics to understand how your program is performing. Check Gameball's webinar on business metrics.

Let's get both sets of metrics set up: 

Pre-program Creation Metrics

When crafting your loyalty program, it is important to know certain metrics so you know exactly what rewards you should be offering and can ensure a profitable program. 

1. Profit margin

Your profit margin is a great indicator of profitability in your business which can also be used to determine how much cashback you should offer to your clients. Keeping your net profit margin in mind can help set a benchmark for how much cashback you want to offer your customers. 

For example, if your net profit margin is between 1-10%, the cashback value shouldn't be high (usually 1-3%); if the net profit margin is between 11%-20%, the Cashback value could be between 3%-5%.

Important Note: this varies across product margins and industries, so keep in mind this is a general suggestion.

2. Average Order Value (AOV)

When creating challenges, deciding level amounts, and deciding on new rewards to implement in your program, your AOV is an extremely helpful indicator in setting up your program. For example, if you wanted to know how to advance customers through each level, you could set the threshold based on 2x AOV, 3x AOV, and 5x AOV. 

3. Average Basket Size (ABS)

Since this metric focuses solely on the number of products a customer buys in a single transaction, this will be very useful for deciding on specific challenges and pushing an increase in ABS. For example, if you wanted to increase your ABS from 2.4 to 5, you may create a challenge that awards points to a customer who buys 5 or more t-shirts from a specific collection.

4. Purchase Frequency

Use this purchase rate to understand typical purchasing behavior and to decide the increment of purchases you will reward in. Purchasing frequency can also help you set a goal of what you want that number to look like, giving you a solid number to work with when crafting rewards.

You're all set! Now that you have these metrics ready to go, you can start crafting your program. As you go through each segment of setting up your program, utilize these metrics to help you make sure that you are providing the right amount of rewards that are engaging for your customer's typical behaviors. As you get set up, use our Rewards Strategy Template to assist you in crafting the perfect program.

Program Performance Metrics 

1. Life Time Value (LTV) : Customer Acquisition Cost (CAC)

This is a very important yet sometimes daunting metric to calculate. However, your LTV:CAC ratio is crucial to understanding your business' performance, as it is the amount of profit your company can expect from a customer for the time the person remains a customer. This can also allow you to determine which customer segments are more and less profitable and craft specific retention strategies for each segment. 

Follow these steps to get your metric:

A. Calculate your LTV

• Step 1: calculate the churn rate, which is (# of Customers who purchase < or equal to 1 time)/Total Customer Base
• Step 2: calculate LTV, which is (AOV * Purchase Frequency) * Churn Rate

B. Calculate your CAC:

Total Marketing Spend (All Costs Spent on Acquiring more customers) / Number of Customers Acquired (on an annual basis) 

Typically, broad retail CAC is 10%

The typical benchmark for LTV: CAC is 3:1. This means that each customer is generating 3 times the value that it costs to obtain them. If your LTV: CAC is below this, you will reach a point of losing profit per customer. If your LTV: CAC is much higher than this, you may not be leveraging your marketing spend enough and may be leaving growth on the table.

2. Revenue generated from Gameball

Where do I find this? We've got you covered! On the Gameball homepage, you can see revenue generated, in total, and by each program. This gives you a clear picture of Gameball-generated revenue and insight into which programs are performing well and the areas where some adjustments need to be made. In this blog post, you can better understand the revenue metrics on the Gameball homepage.

3. Repeat customer rate (on an annual basis)

Note the starting number and track the 6-12 months after launching Gameball to see the improvement. If you find that the repeat customer rate has not improved, you may need to adjust your program to make it easier for customers to redeem points or more engaging challenges based on their shopping behavior. If you'd like some extra help with this from our team of loyalty experts, you can always book a consultation call here! 

4. Redemption Rate

This metric determines the rate at which your customers redeem their earned points. The average redemption rate of loyalty programs is approximately 13-15%. If this is much below this, you need to adjust your challenges and earning rules to ensure that it's not too hard to earn a reward and that challenges are engaging enough.

Setting up a Profitable and Engaging Loyalty Program

Building a new Loyalty program could be confusing, especially if you want to include different loyalty elements and programs under one umbrella. The best way to think when you're creating a loyalty plan is to define your business objectives and then choose and design your sub-loyalty programs based on how well they would serve these objectives.

In this section, we'll cover some common goals and how you can use Gameball to accomplish them. 

Goal 1: Lower the Cost to Acquire Customers & First-Time Conversions

Customer acquisition is gaining a new customer by completing their first purchase from a product or service you offer.

Here are some strategies that will help you achieve a lower CAC and increase the conversion rates of new customers: 

Tactic #1: Leverage Word-Of-Mouth with a Referral Program

Utilizing the referral program will have your current customers sharing the love and inviting their friends. Give your customers a reason to refer in 3 steps: 

1- Decide which parties to reward and when

For the referrer: the referrer should have a good incentive to get the referral done, but make sure they don't get rewarded just by sharing your link. To avoid fraud cases, reward them when their friend completes their first purchase.

For the referred friend: for the referral to be successful, the referred friend must complete their first purchase. Incentivize this action by offering a coupon reward that could be applied to their first purchase.

2- Make the referral journey clear and easy to complete for your customer

Make sure to clearly explain how the referral is done, when the referral is successful, and what the reward is. This makes it easy for your customers to share instantly.

3- Give a convenient reward

For your current customer: offer them points so they can choose how they want to spend it. This will also encourage more ways to engage with your program! When deciding how many points to reward, consider how important referrals are to you and weigh this amount against your challenges. For example, if referrals are going to be the most important driver for your business, make this reward the most enticing in your entire program.  

You can give a fixed amount coupon that can be applied to their next order. For example, a $15 voucher.

For new customers: offer them something they can easily understand the value of, like dollars off or a free product. This way, they know the value of what they're getting and are more likely to complete the referral. Whatever you decide to offer your new customer, ensure that it is lower than your current CAC.

The reward for the new friend should be lower than CAC, and the reward for referrer should be weighed against their other challenge offerings.

Tactic #2: Excite the Customer Right Away with a Sign-up Reward

Getting your guest customers to create accounts is the first step toward a higher conversion rate. When they sign up, they access the gates of rewards and possibilities. That's why giving them an instant boost of points, and an encouraging message says how they can engage in other ways would, ultimately, convert guests into new customers.

Who is the signup reward made for?

• Hesitant guests (who are uncertain about placing an order)
• For "just passing by" guests
• Encouraging your customer base to join your exclusive community where they will be rewarded for their loyalty

How should I reward them for signing up?

1- A visible challenge on the widget

2- A message that tells them what they're missing out on.

What should I reward them with?

The most common rewards for this type of action are:

1- percentage-based discount on the first order.

2- Fixed amount voucher

How much to reward?

Since the Signup reward is given only once, the reward could be relatively more generous than rewards for other accomplishments.

Goal 2: Increase Customer Retention Rate and Engagement

According to data from Forrest Research, it costs five times as much to acquire new customers than it does to keep current ones (how to lower your customer acquisition costs here!).

Tactic #1: Setup an Engaging Cashback and Redemption Engine for Customers to Repeatedly Interact With

1- Set points redemption rate

Everyone values different things, so you want to set up your redemption arcade style where customers can have fun choosing how they want to spend their points. They may use different coupons each time, keeping them engaged and intrigued with the program.

You can let customers redeem and exchange them with any type of gift, such as:

• Fixed-amount coupon
• Percentage-based coupon
• Free shipping
• Free product

To be able to reward proceed with points, you need to set a monetary value to one point. This will allow you to decide the point reward value for every purchase (cashback), challenge achieved, successful referral..etc.

How to set points value

We typically recommend that you set one point to be equivalent to 1% per 1 currency unit. Customers like to see large quantities, so you can award them many points and have them redeemed at an affordable rate. 

For example, if your currency is US dollars, then 1 point should be equal to 1 cent, or in other words, 1 point is 0.01% US dollars. This applies to most other currencies.

2- Cashback

Cashback rewards are probably one of the most used types of rewards by retailers in all industries as it's easy to understand and calculate by customers.

Why Cashback?

Cashback rewards help retailers, including fashion and beauty brands, increase store traffic, sales, and customer lifetime value (CLV). Customers like to feel that they are recognized for spending their hard-earned money, which is why cashback is the perfect way to show a new form of value to the customer and keep them coming back for more. Forbes did a study on this and found, "We just surveyed 19,000 of our users about their shopping behavior, and 82% said they prioritize special promotions, discounts or cash back when choosing where they'll shop. That's a powerful loyalty stat."

What are some of the best practices for creating a cashback program?

• Offer extra cashback on slow days to boost sales
• Offer extra cashback on special occasions through a cashback campaign
• Offer Cashback reward value for every player level
• Create different cashback values for different collections

Tactic #2: Reward Customer Actions through Unique & On-Brand Challenges

What kind of actions can I reward my customers for?

Here is a list of actions you can reward your customers for when doing:

• Adding more than the basic information in their profile (such as adding their birth date, their gender, if they have children. Just don't overdo it with the questions)
• Completing a purchase/paying for an order
• Rating your platform
• Leaving a review on a product they bought
• Buying by more than X amount

Learn more about our email marketing integrations.

What to reward them with?

• Points with monetary value

Or a direct reward: (no need to go through the redemption and exchange process)

• Percentage based discounts
• A fixed amount voucher (ex. $15 coupon)
• Free shipping
• Free product

Tactic #3: Create a VIP Program

Creating a tiered program could be tricky. You do not want the tiers to be too easy to travel through or too hard to reach. You also want to ensure that there are some good motives for players to want to level up. 

Having an extremely unique and engaging top tier can drive a strong sense of achievement among your customers. 

Here are some points you need answers for before you create a levels program:

How many levels should I create?

When creating levels, we typically recommend anywhere between 3-5 levels, which typically have the perfect balance of ease to level up and exhilarate customers to strive for more.

If you find that customers tend to come back and are eager to achieve more, you can always create more levels.

How do I set up the difficulty of levels?

When thinking about the difficulty, make the first two levels easy to achieve, so customers feel the sense of achievement right away, and then each new level could be harder to achieve, so they want to work towards the top.

If you want no more than 5 levels, make sure that the final level can only be reached by your most loyal customers. For example, a "VIP" level that active, engaged customers would reach.

When should players level up?

Players could level up when they meet criteria that allow them to join the following level. For example, players can unlock and move to the second level when they have received more than 2000 points from the time they joined.

Points are not the only element that can determine the leveling-up criteria. Here are some other elements or methods that a player can collect to level up:

• Amount spent: when they spend x amount, they reach the next level. This could be a good method if you are solely focused on pushing orders and monetary value through your program (engagement is not as important)
• Points earned: points are usually collected from various channels such as cashback, referrals, challenges, and so on. This is the best way to create an engaging program across all parts of the program, so we typically recommend using this method! 
• A number of completed orders: When they complete x orders, they reach level y. If you are solely focused on pushing orders, like for a single product with multiple SKUs, this is an ideal leveling-up method.
• Friends referred: The more they refer friends, the faster they level up. If referrals are imperative to your business, use this leveling-up method.
• Score: Same as points, but the score does not have a monetary value. So you can reward players by increasing their scores instead of points.

What should I reward customers with when they level up?

There are two types of rewards to offer when a player levels up:

• Welcome reward: a gift that celebrates the achievement of reaching a higher level
• Level benefit: a constant reward that a player can always use for being on a level.

What benefits should they get for being at higher levels?

Each level should offer a constant benefit, such as a percentage-based discount that they can always use anytime they are making a purchase. Make sure that the benefits get better with each consecutive level.

Tactic #4: Keep Customers on Track through Notifications

For engagement and to guarantee that the player is able to track their loyalty progress and achievement as well as the rewards they receive, notifications are essential to complete your customized loyalty experience.

A notification is a short piece of message that informs the player of a new event or progress that has just taken place.

Who to notify?

• Registered customers

When to send notifications?

• After completing a challenge (being rewarded for something they did)
• When leveling up
• When they sign-up and a reward awaits 
• Successful referral
• Unlocking a new challenge or getting closer to achieving it
• Cashback received after a purchase
• Coupons earned

Other Important notifications:

• Points about to expire
• Cancellation

How can I notify players?

• In-app: for surfers or on-spot achievements or alerts.

• Email: for players to check them anytime and to have instant access to their rewards all the time.

Goal 3: Increase Sales

Tactic #1: Level up Your On-Site Experience with Personalized Messaging

Unlike Push notifications, messaging is used to inform customers and incentivize specific actions like engaging with a challenge or push a cart completion.

When do I use messages?

you can create a pop-up message that tells them about the following:

• A flash sale
• a campaign
• new collections
• a new line of products 
• or simply wish them a happy holiday.

Messages are often sent in multiple formats, such as pop-ups, small and big toasts, and banners. Make sure to plan a concrete messaging strategy to guarantee effective results.

Tactic #2: Time-Based Campaigns

Creating campaigns in times such as special occasions is a technique often used to boost sales by businesses in the fashion industry.

When to create a cashback campaign?

• Holidays such as Mother's day, Halloween, Christmas, 4th of July, Thanksgiving, etc.
• Competitive sales days such as Black Friday
• Beginning of each month, when people have just received their paychecks
• On low sales days. boost sales on low engagement days through a campaign (i.e., double the points weekend, happy hour on low-traffic days)

How to make a campaign appealing

Break your traditional cycles of rewards by offering special gifts during the campaign. Here are some examples:

• Cashback campaigns: offer extra cashback on purchases made on that day
• Coupon giveaways: send your customers free coupons to intrigue them to use them during the campaign

Goal 4: Gain Brand Loyalty through a Unique Customer Experience

Customer experience depends not only on deployed loyalty programs; it's the whole experience that counts. 

Here is how you can enhance the whole loyalty experience:

Tactic #1: Segmenting Your Customers

Customer segmentation is the process of grouping your customers according to shared characteristics. If implemented right, segmentation could be the key to understanding your target audience and providing products that serve the market needs.

What type of segments can I create?

Go through the list of customers and pinpoint the type of lists that would benefit you to recognize and separately identify. Think of the type of player groups you would feel curious to learn more about their mass and the duration to which this group would stretch or shrink. Think also about the actions or messages you would convey to a certain segment of players if you had your fingers on.

Examples of these segments could be:

• High-value customers
• Hesitant customers
• Semi-engaged
• Referrers
• Inactive
• and so on…

Your segments should be distinctively different and focus on the right factors. This way, you can create personalized, engaging experiences for every customer profile you have.

What can I use these created customer segments for?

Segments are often used to gain insightful data on customers, but there are endless applications to use these segments on. Here are some examples:

• Creating special challenges for VIP customers
• Rewarding frequently referring customers with a special gift
• Sending coupon gifts to inactive customers via emails for retention 
• Messaging hesitant customers who put items in carts and do not complete a purchase.
• Creating special challenges for semi-engaged customers to increase engagement
• Celebrating a national holiday with a geographic matching customer segment via a message
• Creating and deploying scheduled challenges to customers on special days such as mothers day for women, etc

Tactic #2: Interface That Matches Brand and Theme (Widget Customization)

The loyalty program you create should go well with your business theme and brand so it will look like an integral part of your whole platform.

How can I create a seamless loyalty program?

Here are some tips you can do to create a coherent loyalty program that goes well with your platform:

• Name your loyalty program: Branding your loyalty program is also important, just like branding your platform. For that reason, naming the program with something catchy and convenient that would resonate with customers is the first step in creating a seamless loyalty program.

• Create a matching interface:
• Use your brand's colors and them to customize your loyalty widget, messages, notifications, emails, launcher buttons, and all customer-facing elements that are part of your loyalty plan.
• Use icons and photos that represent you in the widget, emails, messages, etc.

• Language: Make sure you communicate using the same language as your customer. Translate your loyalty content before publishing it if you have to.

• Speaking tone: use the same tone as your brand's. For example, If you're in luxurious fashion, you maybe want your tone to be sleek and straightforward. If you're in the kid's fashion, however, the language could be more informal, friendly, and fun.

• Design assets: changing all logos to fit your branding (client examples of great ones: Check Alder Apparel to get an idea of how loyalty program icons and photos can completely blend with the website.

There is always more to do in order to enhance your loyalty experience for customers; the preceding recommendations are primary keys to creating a concrete and coherent loyalty program for anyone in the fashion business.

With 1500+ customers in 65 countries and over $59m worth of points processed, Gameball has gained insight into world-class retention strategies and what it means to create strong and sustainable brand loyalty.

You can always speak with one of our experts about your strategy or get any questions answered.

Book a Call Now!