How Personalized Merchandise Enhances Loyalty Programs

Want to boost customer loyalty and engagement? Personalized merchandise might be the answer. Here's why it works and how to make it part of your loyalty strategy:

• 76.1% of customers remember brands that give them corporate merchandise.
• Personalized rewards, like branded gifts or custom items, create emotional connections, increasing customer retention and spending.
• Loyalty program members spend 12-18% more and are 59% more likely to choose your brand over competitors.

Key Benefits of Personalized Merchandise:

• Builds emotional bonds, increasing customer lifetime value by up to 306%.
• Makes rewards unique and memorable, driving higher engagement.
• Boosts participation, with examples showing 35% more active customers and 40% more repeat purchases.

To succeed, use customer data wisely, offer choice in rewards, and ensure smooth fulfillment with platforms like Stitchi. Personalized merchandise isn't just a reward - it's a way to form lasting relationships with your customers.

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Current Loyalty Program Limitations

Traditional loyalty programs often fail to meet expectations, even with significant investments. These shortcomings hurt customer retention and limit growth. Let’s break down the key challenges.

High Customer Acquisition Costs

The cost of acquiring new customers has jumped 60% in the last five years. Here’s how it looks across industries:

• SaaS: $702 per customer
• B2B: $536 per customer
• E-commerce: $70 per customer

"As iOS 14 rolled out and paid acquisition became a highly competitive space, investors are looking at CAC to LTV ratios, and businesses are learning that retention is not just about squeezing more money from current companies, but rather a somewhat direct route to creating brand evangelists and superfans."
– Eli Weiss, Senior Director of CX and Retention at Jones Road Beauty

Low Customer Participation

Acquisition costs aside, keeping customers engaged is another major hurdle. Consider this:

• 77% of loyalty programs that are purely transactional fail within two years.
• 70% of CX leaders say maintaining engagement is a struggle.

Why does this matter? Because active loyalty program members drive 12%–18% more revenue than the average shopper.

Weak Customer Relationships

Many traditional programs miss the chance to form meaningful connections with customers.

"Create value through engagement and relevance. It's not just a transactional mindset that e-commerce businesses have... you've got to be thinking about creating value and loyalty from start to finish."
– Rick Almeida, Vice President E-Commerce, PUMA

The numbers back this up:

• Loyalty program members are 59% more likely to choose a brand over competitors.
• They are 62% more likely to spend more on that brand.

These figures make it clear: focusing on transactions instead of relationships limits a program’s potential. To truly succeed, businesses need to rethink their approach and explore options like personalized merchandise rewards to create deeper, lasting connections.

Benefits of Personalized Merchandise

Personalized merchandise takes loyalty programs to the next level, increasing engagement and creating more value for both brands and customers.

Building Emotional Connections

Offering personalized merchandise helps brands form emotional bonds with their customers. When customers feel like valued members of a brand’s community, they’re more likely to stick around. Research shows that customers with strong emotional ties are 52% more valuable, spend twice as much on average, stay loyal for 5.1 years (compared to 3.4 years for others), and have a lifetime value that’s 306% higher than those who are simply satisfied.

"Emotional connections are vital for cultivating deep, lasting customer loyalty." - Annette Franz, CCXP and founder and CEO of CX Journey Inc.

Making Rewards Stand Out

Personalized merchandise adds a special touch to rewards programs, creating experiences that customers won’t forget. For example, The North Face's XPLR Pass program in 2024 included personalized items alongside unique rewards like outdoor adventures and conservation projects. This approach led to a 40% increase in repeat purchases among members. Similarly, Esmi Skincare’s "GlowGetter" program combines exclusive personalized products with engagement rewards. As a result, loyalty members spent twice as much within a year and had an average spending rate three times higher than non-members.

Boosting Participation

Low participation in loyalty programs can be a challenge, but personalized merchandise offers a solution. By letting customers turn loyalty points into meaningful actions, brands can drive engagement. Edgard & Cooper’s program allows customers to use points for donations to shelter dogs or tree planting, resulting in a 22% increase in order value, 35% more active customers, and a 38% boost in retention. Similarly, The Pulse Boutique rewards social media engagement and referrals with custom merchandise, achieving 39% more returning customers, a 19% increase in average order value, and $200,000 in rewards-based purchases.

These examples demonstrate the power of personalized merchandise in strengthening emotional connections, making rewards more enticing, and driving customer engagement and loyalty.

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Adding Custom Merchandise to Programs

Using Customer Data Effectively

Customer data plays a key role in crafting merchandise rewards that resonate. In fact, 91% of consumers prefer shopping with brands that recognize them and offer tailored recommendations. To do this, brands break down customer data into categories like purchase habits, engagement levels, product preferences, demographics, and social media activity.

"Everyone is different. Give them the recognition they deserve. Once you recognize them, give them something relevant, something they would love. Be consistent and repeat the process, not the reward."
– Simanta Das, Co-Founder & COO, omnispay

By analyzing this data, brands can allow customers to influence the rewards they receive, making the experience more personal.

Giving Customers Choice in Rewards

Once brands gather insights, offering customers a choice in their rewards strengthens engagement further. A great example is Esmi Skincare's "GlowGetter" program, which provides personalized product bundles. Members in this program spend three times more than non-members.

Some effective options for rewards include:

• Early access to new products
• Customizable merchandise bundles
• Flexible redemption options
• Tiered rewards based on loyalty levels
• Gamified challenges with prizes customers can choose from

"Personalizing loyalty rewards is crucial for enhancing customer engagement and building brand loyalty. Tailoring incentives to individual preferences fosters a stronger connection between the brand and the customer."
– Anurag Majumdar, Sales Account Specialist at ZEISS India

Working with Stitchi's Platform

Scaling personalized strategies requires a reliable fulfillment platform. For example, Morning Brew used Stitchi alongside Shopify to ship 8,000 branded joggers and gained 75,000 new subscribers in the process.

Stitchi's platform simplifies the process by offering:

• Design collaboration to maintain brand consistency
• Quality control during production
• Inventory management
• Global order fulfillment
• Integration with existing loyalty systems
• Analytics to track performance

"From product selection and design advice to integration and fulfillment, our team offers white-glove service to make merch easier."
– Stitchi

Solving Common Problems

Stock and Delivery Management

Handling inventory for personalized merchandise rewards can be tricky. Keeping track of stock across all channels is absolutely critical for a program's success. Some effective strategies include:

• Real-time inventory monitoring to stay updated across all sales channels.
• Automated reordering systems for popular items to avoid stockouts.
• Cloud-based tracking tools for easy remote management.
• Demand forecasting analytics to anticipate customer needs.

Take Macy's as an example. Their targeted offer program has delivered nearly half a billion tailored offers, achieving a 50% personalization rate in the Star Rewards loyalty program. Similarly, Stitchi simplifies the process with integrated warehousing, inventory management, and a secure ordering portal. These tools ensure smooth fulfillment and protect customer data. But beyond just managing inventory, companies need to strike a balance between scaling their operations and offering deep personalization.

Growth vs. Customization

Finding the right balance between growth and personalization can significantly boost customer spending. For instance, Starbucks has mastered this through its personalization efforts. The secret? Focusing on high-quality data. With better data, businesses can gain sharper customer insights, predict trends, and build stronger emotional connections.

"Instead of amassing large quantities of data, we focus on acquiring quality data that provides a contextual understanding of our customers that we can adapt to predict trends and future behaviors"
– Paul Bucalo, Senior Director of Digital and Marketing Engineering at Dollar General

Spotify is another standout example. Ranked #3 in the US on Prophet's Brand Relevance Index, Spotify uses features like personalized daily mixes, "Wrapped" year-end summaries, and group listening options to keep users engaged.

Customer Data Protection

As personalization strengthens customer relationships, protecting their data becomes non-negotiable. With 86% of consumers voicing more concern about data security and nearly half abandoning purchases due to privacy worries, trust is everything.

"When customers trust your brand with their data, they engage more deeply with your loyalty program. This trust translates into higher participation rates, more frequent purchases, and increased customer lifetime value"
– Reward the World™

To safeguard customer data, implement measures like strong encryption, multi-factor authentication, and regular security training. Ulta Beauty sets a great example with its quiz-based system, which provides personalized recommendations while maintaining transparency and trust. Stitchi also prioritizes security, integrating robust data protection features into its merchandise fulfillment solutions.

Program Results and Improvements

Success Measurements

Measuring the success of personalized merchandise in loyalty programs involves more than just tracking membership numbers. It’s about assessing emotional connections and the long-term value customers bring to your brand.

Here are some key metrics that help gauge a program's performance:

Metric	Description	Industry Benchmark
Customer Lifetime Value	Total value a customer contributes over time	81% of brands track this
Program Sales %	Portion of total sales from loyalty members	Varies by industry
Repeat Purchase Rate	How often members make purchases	Typically higher than non-members
Retention Rate	Percentage of members who stay active	Industry-specific
Share of Wallet	Member spending within the category	Program-dependent

These metrics provide a clear path for refining strategies through targeted experiments and adjustments.

Testing Different Approaches

Once the metrics are in place, testing becomes crucial to ensure loyalty programs and merchandise offerings stay relevant and effective. For instance, leading grocery retailers in Poland tested their loyalty program by giving employees early access. This allowed them to identify and fix operational issues before launching to the public.

Some effective testing methods include:

• Collecting feedback via focus groups
• Running pilot programs with smaller, controlled audiences
• Using A/B testing to compare different options
• Conducting usability tests to ensure smooth navigation and functionality

A great example of this is Sephora's Beauty Insider program. By studying Generation Z preferences, they introduced gamified experiences and activity-based rewards, which led to a noticeable increase in member engagement.

Using Data to Make Changes

Data plays a vital role in refining rewards and making strategic adjustments to strengthen loyalty. With 91% of customers favoring brands that offer relevant deals, leveraging customer data effectively can lead to better personalization and higher engagement. Predictive analytics, for example, can increase sales by up to 85%.

To make the most of customer data, brands should:

• Use RFM analysis (Recency, Frequency, Monetary) to segment customers
• Track reward redemption and engagement trends by merchandise type
• Adapt offerings based on real-time performance insights

Interestingly, only 41% of brands currently use lifestyle data for personalization, and just 32% leverage real-time customer information. This gap highlights a significant opportunity to improve merchandise personalization and drive loyalty.

Conclusion

Personalized merchandise is reshaping loyalty programs by increasing both customer engagement and spending. Members who engage with these programs make purchases 90% more frequently, spend 60% more per transaction, and are five times more likely to remain loyal to the brand. This translates into an impressive return of $14 to $32 for every dollar spent on loyalty initiatives. These numbers highlight the importance of incorporating tailored strategies into loyalty efforts.

"In calling customers by name you are putting a 'human touch' to a 'transactional relationship', making the communication more genuine." - Siddhartha Gupta, CEO of Mercer-Mettl

For businesses looking to implement personalized merchandise programs, platforms like Stitchi seamlessly integrate into existing loyalty systems. They simplify the process of design, production, and fulfillment, helping brands create stronger connections with their customers.

With 62% of consumers spending more when experiences feel personal, investing in personalized merchandise offers a powerful way to build meaningful relationships. By focusing on genuine customer connections, brands can drive growth and foster loyalty that stands the test of time.