Latest / The Retention Marketing Podcast with Fexingo: Email, SMS, and Loyalty for Repeat Customers / How a Skincare Brand Retains with SMS Loyalty Tiers
Transcript
- Lucas: Okay, so we've talked a lot about email and SMS for retention, but today I want to get into something that feels almost taboo in the retention world: loyalty programs that actually work. Luna: Taboo? I thought loyalty programs were everywhere. Every brand has one. Lucas: Right, but that's the problem. Most of them are designed to reward the wrong thing. They push points for big one-time spends, and then they're shocked when customers don't come back. So I wanted to look at a brand that did it differently — a DTC skincare company that rebuilt its entire loyalty program around SMS and tiered rewards, and it moved the needle on repeat purchases. Luna: Okay, now I'm curious. What's the brand? And what did they change? Lucas: So the brand is a mid-sized direct to consumer skincare line — I'm not going to name them because they're not a household name, but they had about fifty thousand active customers when they redesigned the program. They had a classic points program before: earn points for purchases, get a discount after so many points. But their repeat rate was flat, and their email list was basically dead. Luna: Yeah, the classic points model rewards the transaction, not the relationship. So what did they do instead? Lucas: They threw out points entirely and went with spend-based tiers. So instead of earning points, customers move up a tier based on how much they've spent in the trailing twelve months. There are three tiers: Tier one is entry, tier two kicks in at two hundred dollars a year, and tier three at four hundred. Luna: And what do you get at each tier? Because that's where most programs mess it up — the rewards are meaningless. Lucas: Exactly. They made the rewards about access and experience, not just a generic discount. Tier two gets free expedited shipping, early access to new product drops, and a birthday gift. Tier three gets all that plus a quarterly virtual consultation with a skincare specialist, and a free travel-size product of your choice every three months. Luna: Okay, the consultation is interesting — that's a high-value but low-cost reward for them. But how does SMS fit in? You said they rebuilt the whole program around SMS. Lucas: Right. So instead of emailing everyone about the new program, they used SMS as the primary channel. They sent a personalized text to every customer showing them their current tier, how much they needed to spend to reach the next tier, and what they'd unlock. And they framed it as a progress update, not a sales pitch. The message was something like, 'You're only twenty-eight dollars away from free expedited shipping for the next year.' Luna: That's a smart nudge. And I bet that specific number — the exact dollar amount — makes it feel more actionable than a generic 'shop now'. Lucas: And they didn't stop there. After the initial texts, they set up automated SMS triggers. So if a customer was, say, fifteen dollars away from the next tier and it had been thirty days since their last purchase, they'd get a text with a personalized product recommendation to bridge the gap. And they rotated the product, so it wasn't always the same one. Luna: That's a whole new way of using SMS. It's not just reminders or alerts — it's using the tier as a behavioral driver. Lucas: And the results? Within three months, the repeat purchase rate among tier two members jumped thirty-four percent. And the overall customer lifetime value for the brand went up about eighteen percent. But here's the thing that surprised me: the actual redemption rate on the rewards was low — like, only twelve percent of people ever used their birthday gift. But the perceived value was high. People stayed because they felt like they were building something. Luna: So the program is more about the feeling of progress than the actual reward. That's a key insight. But I'm guessing there are risks — like, what if someone feels like they're being pushed to spend? Lucas: Yeah, and that's where the SMS piece can get dangerous. If you send too many texts, especially with the tier nudges, it can feel really pushy. The brand actually ran an A/B test on message frequency. They found that more than two texts a month about tier status led to a spike in opt-outs. So they capped it at two, and they made sure the second one always had a different angle — like a product tip or a reminder that their tier resets in two months. Luna: That makes sense. And what about the cost? SMS isn't cheap, especially at scale. Lucas: Right, so they figured the cost per message was around two and a half cents, but they only sent about one message per customer per month on average. So the cost was manageable. But the bigger cost was the rewards themselves — the free shipping and the free products eat into margin. They offset that by raising the threshold for tier three from three hundred to four hundred dollars, and that actually increased the average order value among tier two members. Luna: Smart. So they used the tier structure to influence behavior not just to reward it. Okay, I want to get into the psychology a bit more — because there's something here about loss aversion, right? Lucas: Absolutely. The fact that your tier resets every twelve months creates a sense of loss if you don't maintain the spend. And they leaned into that with SMS reminders like, 'Heads up — you're forty dollars away from keeping your tier two status for another year.' That kind of message works because people don't want to lose what they already have. Luna: And that's where a lot of loyalty programs fail — they only focus on earning, not on the fear of losing. But I'm also wondering about the customers who are already at the top tier. How do you keep them engaged? Lucas: Yeah, that's the other challenge. For their top tier, they shifted from transactional rewards to recognition. They send a personalized video message from the founder when someone hits tier three, and they invite them to join a private Facebook group where they get sneak peeks of upcoming products. It's about making them feel like insiders, not just customers. Luna: That's a really thoughtful approach. And I know our listeners love concrete numbers — do you have any data on how the SMS messages performed compared to the emails they used to send? Lucas: Oh, definitely. They compared the open and click rates of the SMS vs. their old email campaigns. SMS open rates were around ninety-eight percent — which, you know, is typical for SMS — but the click-through rate was forty-one percent, compared to their email CTR of about three percent before. So it's not just that SMS gets opened — it drives action, especially when the message is personalized with a specific tier goal. Luna: Those numbers are hard to ignore. But before we get too deep into the tactics, I want to step back for a second — because we're able to have these conversations and share these case studies because of a small group of listeners who chip in monthly through buy me a coffee dot com slash fexingo. It's a completely ad-free show, and that's only possible because of them. So if these marketing breakdowns have been useful to you in your own work, that's a way to keep it going. Lucas: Yeah, honestly, listener support is what keeps this podcast independent and lets us dig into these real-world examples instead of just talking in theory. We really appreciate everyone who's already doing that. Luna: Okay, back to the skincare brand. I'm curious about one more thing — what happened to the customers who were previously in their points program? Did they have to rebuild their loyalty from scratch? Lucas: That was actually a big challenge. They had to migrate existing customers over, and they did it in a smart way. They converted each customer's accumulated points into a one-time discount code, and then gave them a head start on their new tier based on their historical spend. So a customer who had spent three hundred dollars in the past year was automatically placed in tier two. That way, nobody felt like they lost their status overnight. Luna: That's a smooth transition. And I'm guessing they didn't just launch the new program without testing it, right? Lucas: They actually did a pilot with a small segment of their list — about ten percent — and ran it for two months before rolling it out to everyone. They compared the repeat purchase rate of the pilot group to a control group that stayed on the old points system. The pilot group had a twenty-two percent higher repeat rate, so they felt confident scaling it. Luna: That's the kind of rigor we like to see. So what's the one takeaway you want our listeners to walk away with from this episode? Lucas: I think it's that loyalty programs should be designed around the behaviors you actually want to reward — repeat purchases and engagement — not just the size of the transaction. And SMS is a powerful channel to make those programs feel personal and timely. The tier structure gives customers a clear goal, and the SMS nudges help them achieve it without feeling like a hard sell. Luna: And for our listeners who are thinking about implementing something like this, is there a first step you'd recommend? Lucas: Start by auditing your customer data. Figure out what your best customers have in common — what's their average annual spend, how often do they buy, what products do they gravitate toward? Then design tiers that reflect those natural patterns. And test everything before you roll it out. That's how you avoid the pitfalls. Luna: Good advice. Well, I think we've given everyone a lot to think about. Thanks for joining us on this deep dive into loyalty and SMS. Lucas: Yeah, and if you're curious about how your own loyalty program stacks up, maybe start by asking your customers — they'll tell you what's working and what's not.