Customer retention is one of the most common challenges among eCommerce marketers. With increasing competition and the eCommerce giants like Amazon & Flipkart, it is getting difficult for small businesses to retain existing customers.
Nowadays, customers have more options, and online stores offer huge discounts and better deals to acquire new customers. However, offering discounts and coupons to every customer on every sale is neither affordable nor a good strategy to grow your business.
Instead, you need to focus on improving the shopping experience for your customers, which makes them stay loyal to your brand and keep coming back.
This is where a customer loyalty program would be an excellent tool for eCommerce brands. It will help you keep your customer engaged throughout their buying journey and increase the retention rate.
In this guide, we will cover every aspect of the eCommerce loyalty program in detail and help you implement it for your online store.
What is an eCommerce Loyalty Program?
An eCommerce loyalty program is a marketing tool designed specifically to boost customer retention and lifetime value (LTV). Loyalty programs are built by blending elements of psychology, gamification, and behavioral economics to reward customers for building loyalty to your brand.
An attractive loyalty program engages with customers and makes their purchasing journey exciting by winning more rewards and getting better deals on purchasing.
As long as your loyalty programs are engaging, value bombed, and economical for your customers, they will come back, bring referrals, and boost conversions that no other marketing strategy can offer.
Advantages of eCommerce Loyalty Program
Based on various studies, here are a few statistics that show how impactful a loyalty program can be for your business –
- Companies with loyalty programs tend to grow revenue 2.5X faster than their competitors. (Harvard Business Review, 2020)
- 70% of millennials, 71% of Generation X, and 63% of baby boomers stated that a loyalty program influences the brands they choose to buy. (Oracle, 2020)
- A 5% increase in customer loyalty can increase the average profit per customer by 25% – 100%. (HubSpot)
- 50% of consumers changed their behavior to reach a higher tier in the loyalty programs. (Invesp)
- Consumers who engage in loyalty programs are 78% more likely to pay higher premiums than just stay with the brand. (3tier Logic)
- 64% of retailers say that their loyalty/reward programs are the best ways to connect with consumers. (Invesp)
Looking beyond these statistics, a loyalty program has several advantages that make it an essential element of an eCommerce marketing strategy.
Let’s look at some of the benefits of starting a loyalty program –
- Improve customer retention rate. Loyalty programs retain existing customers by offering interest-aligned rewards that significantly motivate repeat purchases and sales.
- Boost customer acquisition. Your loyal members would share their positive experiences and drive new customers to your store. You can also showcase your loyalty program as a perk to attract new customers.
- Regain lost customers. You cannot retain 100% of your customers over a long time, but with a loyalty program, you can identify the potentially lost customers and offer them better deals to bring them back to the store.
- Improve your customer lifetime value. If you have an attractive loyalty program and customers benefit from it, customers’ purchase frequency will increase over time and thus increase the customer LTV.
- Reduces advertising costs. With increasing customer LTV, you will have enough data about your customers to identify the best type of customers. You can use those insights to improve your marketing strategy, targeting particular audiences which will reduce your advertising cost or improve the ROI on the same spending.
Types of eCommerce Loyalty Programs
Before setting up a customer loyalty program for your store, you must know the different types of loyalty programs that brands are already using.
Here are the six common types of customer loyalty programs –
1. Point-based programs
In this type of loyalty program, customers are offered certain points for the desired actions they make. It can be anything like creating an account, making a purchase, filling out a form, posting reviews, etc. The points earned can be redeemed as per the loyalty program instructions.
2. Tiered based programs
With tier-based loyalty programs, you can create different levels that customers can attain once they reach a point threshold.
For example, the more the customers spend, they will be moved to the next tier to get access to better rewards and perks. Customers will have to progress through each milestone to step into the next highest tier level.
3. Hybrid loyalty programs
As the name says, hybrid loyalty programs combine any two different types of loyalty programs. For example, you can combine point and spend-based programs to motivate customers to unlock brand-new rewards.
4. Gamified programs
Loyalty programs should include fun-based activities to boost interaction, and incorporating gamified elements are one among them.
This can be a great idea to convert first-time visitors into potential customers. For example, you can include a spin wheel game where visitors spin the wheel and win exciting rewards that eventually entail a purchase.
5. Paid Loyalty Program
Paid or subscription-based loyalty programs require customers to pay a fee to join the program and get access to exciting rewards and deals. With this type of program, you can increase customer loyalty by offering rewards worth the penny they pay for.
For example, customers can pay a fee of $50/month to join your loyalty program. In exchange, they will get better deals and offers than non-members. You can offer deals like percentage discounts, cashback rewards, free shipping, early access, and more.
6. Punch card loyalty program
A punch card loyalty program allows customers to earn free products or discounts upon reaching a specific purchasing value. For example, you can offer customers a combo pair of T-shirts for free if their cart value reaches $1,000.
How to Set up an eCommerce Loyalty Program
By now, you must have understood the customer loyalty program and how you can leverage it for your eCommerce business.
Now, let’s start setting up a loyalty program for your store.
1. Define your Goals and KPIs
A loyalty program is all about rewarding your customers for taking specific actions. But, the type of loyalty program, actions to reward, and the rewarding options are based entirely on the goals that you want to accomplish from the loyalty program.
For instance, if you want to increase the average order value for your store, you can choose the spent-based loyalty program and reward customers for every dollar they spend on your store.
Bottom line, defining a clear goal for your loyalty program will help you set up an objective-driven loyalty program, resulting in more sales and growth of your store.
Further, based on your goals, you should pick some metrics (or KPIs) to analyze the performance of the program and ensure that it is in the right direction.
Some of the common loyalty program KPIs that you can consider are as follows –
- Loyalty Redemption rate – The percentage of loyalty points issued and redeemed by the customers.
- Repeat purchase rate – The percentage of customers who make repeat purchases.
- Enrollment rate – The percentage of customers signing up or enrolling in your loyalty programs.
- Traffic rates – Analyzing the growth in traffic after starting the loyalty program.
2. Decide the Actions you want to reward
Next, based on your goals, choose the customer actions that contribute to the overall goals. For example, if you want to get more customer reviews, you can set a reward for submitting the product reviews.
Similarly, you can offer rewards for actions like –
- Creating a new account
- Amount spent
- Social sharing
- Buying a specific product
- Shopping on sales days
- Newsletter subscription
Pro Tip – You can take this chance to boost the sales of slow-selling products by encouraging customers to purchase them, and in return, they earn higher rewards.
3. Decide the Rewards you want to offer
Rewards are the crux of your loyalty programs. It is the central factor that encourages customers to participate in your loyalty program. So make sure the rewards are exciting and beneficial for customers.
You just have to think that they are the most loyal customers and should be rewarded accordingly. Be generous while choosing rewards!
You can offer several kinds of rewards like –
- Percentage discount
- Store credits
- Free products and free shipping
- Dollar discount
- Early access to premium products
- Attractive gifts
- Membership Tiers
Remember, your rewards should benefit your customers so that they’ll enjoy and will likely come back to earn more rewards.
4. Decide the type of loyalty program to offer
Now, choose the type of loyalty program that aligns with your goals. Point-based and tier-based are the most common types of loyalty programs among eCommerce brands. It is perfect if your primary objective is to boost retention and customer engagement.
However, if you already have an established customer base and want to focus on increasing sales, you can consider the subscription-based loyalty program.
5. Find a suitable loyalty software
Once you have decided on the type of loyalty program, the next step would be to select the right loyalty software to help you build the loyalty program as you want it to be.
Here are a few standard features that you should be looking for in a loyalty reward software –
- Supports your eCommerce platforms
- Allows multiple rewarding options
- Provides a simple redemption process for customers
- Supports POS integration
- Branding and customization capability
- Supports integration with your email marketing software
- Provides detailed analytics report
Some of the best eCommerce loyalty software that you can consider are as follows –
- Stamped.io: It is a robust loyalty software with advanced rewarding options and integrates seamlessly with popular eCommerce platforms including, WooCommerce, BigCommerce & Magento.
- Growave: #1 Shopify Loyalty app. You can create point-based or tier-based loyalty programs with excellent rewarding options. Read our Growave review to know more.
Further, if you want to explore more loyalty software, you should read these articles next –
We hope this article would help you find the most suitable loyalty software for your online store. If found, let’s move to the next step.
6. Configure the loyalty software
Once you have decided on the loyalty software to use, configure it to start your loyalty program.
If you have followed the previous step, then by now, you should have a clear idea of what you want from your loyalty program. It should take you less than 30-mins to install the app and set it up for the program.
After setting up the software, create a landing page for the loyalty program where users can learn about it and sign up. The landing pages should provide clear information on how to join the program, the rewarding options, rules, and most importantly, the redemption process.
Just look at the Starbucks reward page, where they have provided every detail customers need to know before signing up for the program.
7. Invite customers to join the program
Finally, it’s time to drive traffic to your program page and encourage customers to join the program.
Here are a few effective ways that you can implement to promote your loyalty program among customers –
- Pre-launch your loyalty program to create excitement and buzz among customers
- Send personalized emails inviting customers to join the loyalty program
- Attract new customers with eye-catchy pop-ups
- Offer free loyalty points or other offers to join the program
- Add a link to your loyalty program at checkout or thank you page(s)
- Invite new customers via payment confirmation emails
- Invite customers via social media by retargeting ads
At this stage, your objective is to convert your customers into loyal members. So, leverage every marketing tactic available in your book to encourage them to sign up.
Afterward, keep rewarding your customers for being with you, and they will reward you with more purchases from your store.
Ready to Launch your Ecommerce Loyalty Program?
As Chip Bell has perfectly stated, “Loyal customers, they don’t just come back, they don’t simply recommend you, they insist that their friends do business with you.”
Loyal customers are the best promoter and brand advocates for your eCommerce site. And, with an exciting loyalty program, you can amplify its effect by 10X – they will not only come back to shop more but bring more customers to purchase from you.
We hope this guide gave you a complete overview of the eCommerce loyalty program and helped you implement it successfully for your online store.
