This is a guest blog post by ShopSocially, a Demandware certified LINK premier partner

With a world of choices available to consumers, digital commerce is more exciting than ever. At the same time, these voluminous choices mean that competition among retailers for those precious dollars is fiercer than it has ever been.

In such a competitive market, customer loyalty and retention take on a level of importance that is impossible to understate, not only because they are more valuable customers but also because they are cheaper to retain. According to Forrester Research, it costs five times more to acquire new customers than it does to retain current ones.

Many retailers have loyalty programs in place, but struggle to perfect them. Researchers at Experian found that 64% US companies with loyalty programs say data collection needs to be improved, 56% cited a need for improved customer sign up, and 53% saw a need for greater personalization.

What are loyalty program best practices? How much should you invest? And how do you ensure that your program is effective?

Here are six key considerations from a ShopSocially Best Practices Guide on customer loyalty:

1) Reward 360-Degree Consumer Behavior

Most loyalty programs award purchases only, which is archaic. Loyalty should focus on customers’ 360-degree interaction. Think about your customers’ behaviors and award them for writing a review, connecting with you on Facebook, becoming an email subscriber, posting feedback or a question, etc.

2) Give Thought to Branding

A good name can be a game changer when it comes to the popularity of your loyalty program. The name should be tied to your brand, for example: “Macy’s star rewards.” Keep it simple, descriptive and run it through a test group. Try to capture the emotion of your brand; for example, a value-oriented brand naming its loyalty program ‘Dealbucks.’

3) Keep it Simple

How you name your reward points can be a powerful motivator for your customers to collect more points. Keep the name descriptive so customers know exactly what they are earning. Engage your audience by understanding their demographics and the emotional connection they have with your brand.

4) Make it Worth Their Effort

Customers won’t be willing to give you their personal information if you don’t make it worth their time and effort. Consider flexible redemption options including exclusive offers, special incentives, account credit, pre-sales, discount codes for stores and third party gift codes.

5) How Much Should You Invest?

Loyalty programs can increase repeat purchases by an average of 25%. Suppose your yearly revenue is $1 million; 40% of that revenue derives from repeat sales, as per the industry average. Implement a loyalty program, and you will receive 25% of this in incremental revenue. To boost your ROI by four times, you should be prepared to invest around $25,000 in your loyalty program. Alternatively, you should allocate 2.5% of your annual revenue to your loyalty marketing budget.

6) Promote. Don’t Irritate.

Your loyalty program should be aggressively promoted without being intrusive. Place a link to the program in the top and bottom navigation bars on your site. Display the points that can be earned next to the ‘add to cart’ button on the product pages. Embed a link to the loyalty program in your newsletter to encourage enrollment. As soon as users earn points on your site, notify them with a drop-down animation or send them an email notification to keep them incentivized.

Now you have some of the knowledge you’ll need to design a successful loyalty program. Remember, its impact on sales is directly linked to how you recognize and reward every action of your customer. If they’re happy, they will be loyal.

Click here to read more about how Demandware retailers can acquire these loyalty apps and drive repeat business.