Updated: Jan 11
Copper tokens, trading stamps and box-top coupons? What connects the three of them? If you’re thinking they sound like a hobbyist’s collection, think again. They were the lifeline of the early type of loyalty programs. Even in the 18th century, business owners knew they needed to retain their loyal customers and created commercial loyalty programs to address this need. Fast forward to the 80s. Customer loyalty programs started taking on a dual purpose - reward the customer and also acquire customer data. Think frequent flier programs that you or a parent may have been part of. This innovative strategy was soon followed by the card-based loyalty programs and the business membership programs. These new marketing tools added another layer to the strategy that included relationship building with the customers.
The arrival and rise of eCommerce and technology has given industries an opportunity like never before. Platforms like Shoptimize know that with mobile apps and digital forms of loyalty programs, the sky's the limit. All you need is a creative, innovative strategist to lead your loyalty program marketing digitally.
Let’s find out if these loyalty programs have any real benefit for your eCommerce business
Truth is, loyalty programs, for eCommerce businesses, regardless of size, are a boon. And we’ll get into the details in just a bit. First let’s think about which customers you want to target – existing or new users?
Existing customers are 50% more likely to try new products and spend 31% more, when compared to new customers.
It’s a no-brainer that you need to focus loyalty efforts towards rewarding existing customers.
Studies show that it costs five times less to retain customers than acquire new ones and loyal customers spend up to 67% more than new customers.
Now if you’re wondering whether a loyalty program can work for small businesses without burning a hole in your inventory, the answer is that it definitely can. The trick lies in differentiating yourself.
Imagine you own an online store selling yoga apparel. You could partner with companies selling health food, yoga classes, and wellness retreats. When your partners also offer rewards like discounts and free trials, the customer gets goodies fast enough to stay happy and often ends up buying more frequently. This positively impacts your revenue as you are the referring store.
What more do you gain through a loyalty program?
While the best programs ensure shopper retention, they also work towards acquiring new customers. Let’s assume you own an online business selling vegan butter.
When customers try your product and gift it to friends and tell others to try it out, you get new customers visiting your site. Immediately offer the new clients discounts or bonus trial jars for joining the loyalty program.
When customers know they have rewards associated with their relationship with you, the churn rate or percentage of customers who discontinue subscriptions, goes down.
All successful retail businesses identify and keep track of their high value customers. A loyalty program gives you an insight into what they buy, how much they spend and what they like. When you know this information, you can strategically plan your marketing and advertising to suit the profile of your best buyer. You want more of that kind of customer.
The loyalty programs also let you identify your biggest fans. The customers who love your nut butters, buy consistently, use their rewards, and share about the brand on social media can feature as ambassadors. You can even identify, track and lure back lost customers if they’re on a program.
Lastly, imagine if a customer is considering your almond butter and that of a competing brand. The special discount or free shipping on your butter will lure that shopper to click your ‘buy now’ tab.
Members of loyalty programs typically spend up to 18% more than other customers.
What should your loyalty program look like?
You might choose to go with a points-for-purchase program if you’re an online grocer for example. Link every purchase to points that can be redeemed in a simple manner towards the next bill. Or if you were say, an online handbag store, you could add advanced features like social media reward options for those clients who share on Instagram, Facebook, and Twitter. Or you could offer a 25% off on next purchase for customers who refer the brand to others who buy.
The tiered reward levels work well for businesses like airlines, insurance companies and hotels who increase the value of the reward as the customer’s rank goes up in the loyalty program based on past purchases.
Do your points have a lifetime value or an expiry date? Let the fine print cover all eventualities especially from the risk of people who enjoy gaming the system
How to set up your eCommerce loyalty program?
There are many tools to choose from like marketing plugins, extensions, and apps based on your budget, goals and customer habits. Before you invest in a loyalty platform subscription, do some research, read reviews and check that it has the features your business requires.
Loyalty programs can work wonders for all eCommerce businesses – you can sell a niche product to a price sensitive client, or if you’re in a market with several competitors. You are probably a subscriber to this popular eCommerce company known for exclusive annually paid-for membership program that gives members unlimited free two-day shipping on most products, access to streaming service and early access to their sales. In a market where competition is heavy, this kind of differentiation is what brings in incremental revenue. Each business customizes programs and the differences across sectors arise in the following areas:
Reward for what actions?
What are the reward options?
How are rewards redeemed?
What are the rules of the program?
The best loyalty programs are those that are simple to use.
You want to make sure the customer never abandons the program without redeeming points. Customers become more loyal when they actually use their rewards. Consider the example of a popular international chain of coffee houses that offers one of the most successful loyalty programs ever. They give stars for every Rupee spent. Stars accrued can be exchanged for free drinks. They also send customers promotions via their app.
Tailor your loyalty program to be personal. Take for example, an international designer shoe brand. Their traditional online program offers shoppers points for each purchase and also for tier actions. The automated system worked so seamlessly that customers forgot about the program. To reactivate customers, the company sent personalized emails.
“Hey there Malini, spend Rs. 350/- to earn a Rs. 750/- certificate for your next shopping trip. As an exclusive member you get 2X points on every purchase.”
The company had access to their customer’s data and so used email automation to hyper-personalize and lure their loyal customers back to using the program.
Another brand that specializes in apparel and outdoor gear shook up the loyalty program concept by offering their customers rewards that matched their lifestyles. In addition to earning points on purchase, points are given for attending brand events, checking-in to locations and downloading the store app. Points can be redeemed towards unique travel experiences in addition to discounts and free gifts
To convert new customers to repeat and keep the loyal ones forever, start with a DIY loyalty program. Shoptimize’s proprietary eCommerce SaaS Platform offers the best-in-class in-built functionalities for loyalty and membership programs. It helps you plan the entire program through and lets you focus on your best customers. It tells you about the products they buy. Once you have the information you need, you can add customizations and have your program ready to beta test. Shoptimize also helps you get the word out about your loyalty program through relevant marketing campaigns. Advertise, have your fans speak about it, encourage people to join via email, social media, and through conversations with your user community.
When you get innovative while setting up your loyalty program, you can use any type of format and even create your own unique hybrid like some of the successful brands have done. When you reward your customers, and you reap the rewards of your loyalty program.