Keeping existing customers happy is a top-priority task for ensuring the sustainable growth of an e-commerce business. Among the major reasons why people get loyal to certain brands, loyalty and rewards programs are not of the least importance.
Let’s discover the benefits of building a loyalty program for customers, what types of rewards you can utilize, and what makes for a great loyalty experience.
What is a customer loyalty program and what are its benefits?
A loyalty program is a set of rewards and perks that are given out to customers for being loyal to a store. It’s a popular retention strategy aimed to boost customer satisfaction and drive more repeat purchases.
The reasons why you should have a loyalty program include the following:
- Higher customer retention. With relevant and attractive rewards, you can keep a share of customers interested and make them continuously return to your offers. In fact, 84% of shoppers maintain loyalty to stores that have a rewards program in place.
- Increased AOV. To get more sales and boost your average order value, nothing works better than loyalty perks. Given that almost 50% of consumers tend to spend more after joining a loyalty program, you can motivate loyal customers to spend more with relevant rewards and product recommendations.
- Cheaper customer acquisition via referrals. Customer referrals are often part of loyalty program marketing and an easy way to bring new customers to your store. Even the simplest referral system can have a great return on investment and be a notably cheaper customer acquisition strategy. For instance, a fragrance brand that offered £3 off as a referral gift would otherwise spend 20 times more on attracting new customers via PPC campaigns.
- Improved social presence. When stores incorporate social shares into their loyalty programs, they are building their representation on social media, driving engagement and interest in their products. Plus, social networks give you room for creativity—besides simple content shares, you can go with full-on challenges.
- Insights on customer segments. By gathering data on how customers interact with your program, you can understand what types of rewards resonate with them and improve your offers.
- Unique shopping experiences. A loyalty program is your chance to give customers something extra. Shoppers can be satisfied with high-quality products alone, but if you add a fun, rewarding experience to that, you’re more likely to build a bond with customers.
The benefits of loyalty programs speak for themselves. Now, let’s see what types of programs you can build so that you can decide which one works best for your business.
5 major types of loyalty and reward programs
There are 5 different types of loyalty programs you can come across in online stores:
- Point-based system. You can assign a certain number of points for each customer action: completing an order, registering an account, downloading the shopping app, etc.
- Multiple-tier system. You can go with layering a loyalty program into several tiers, with each text one promising progressively more perks.
These tiers can be based on the yearly spending:
Or, tiers can be combined with a point system and based on the number of collected points:
- Paid programs. Sometimes, it makes sense to offer an exclusive membership for a fee. It’s mostly popular with large retailers that offer a paid subscription for a year-long premium free shipping. However, it can be beneficial for smaller businesses too: for instance, clothing stores can offer a year-long custom hemming for paid subscribers.
The point of this type of loyalty program is to provide clear value that would otherwise cost much more. In fact, McKinsey’s report reveals that paid loyalty programs make consumers 62% more likely to spend more.
- Value-based programs. Communicating the values your brand stands for can build up the most dedicated group of loyal customers. If your business supports some social or environmental initiatives, for example, it’s a great idea to promote those as part of your loyalty program.
You can offer customers an opportunity to donate their loyalty rewards to a certain charity. This can strengthen their emotional connection to your brand and give them an experience that goes beyond shopping.
- Exclusive partnerships. Besides offering inside perks, meaning discounts and vouchers for your store, you can extend your loyalty rewards by partnering with other brands. You can either have a joining program that allows customers to earn and exchange points on several different stores, or you can let customers exchange the points earned on your store for another brand’s products.
Think about the value it can bring to shoppers: for example, a candle store can motivate its customers to make several more orders per year thanks to loyalty perks, but they still won’t make dozens more orders because they probably don’t need that many candles. However, they might appreciate getting a voucher for using it in another store, say, dedicated to home decor. Consider what partnerships might be fruitful for all involved businesses and relevant to customers.
5 tips for creating the best loyalty program
Regardless of what type of loyalty rewards program you choose, there are several rules that are proven effective by hundreds of businesses. Here are the major recommendations for creating an irresistible loyalty program.
1. Keep it simple
Complexity is the enemy of fun: it should be super simple to understand your loyalty program and redeem the gifts offered by it. The COLLOQUY’s report on customer loyalty shows that ease of use and ease of understanding are among the top 3 reasons reward programs succeed.
So when crafting a loyalty system, make sure it’s comprehensible. Eliminate all the fluff and guarantee a fast process of redeeming the perks.
2. Clearly explain your loyalty rewards
What goes in hand with program simplicity is a clear explanation of its benefits. Design a dedicated loyalty and rewards page on your website that will highlight the perks in all their glory. Explain what customers will get and how the process goes.
If there’s a selection of products you offer in exchange for loyalty points, demonstrate them on the rewards page so that customers know what they might expect from the get-go.
Adding an FAQ section can also be helpful. Plus, if you have analytics on internal site search, see if visitors search for loyalty-related information and cover that information in the FAQs.
3. Make the program visible on the site during the shopping journey
You may have the best loyalty program imaginable, but to no avail if people can’t see it and aren’t informed about it.
For starters, create a separate page about your loyalty program and feature it on your site’s header.
Plus, you can remind about the loyalty benefits on product pages, in the cart, and during checkout. Here’s an example of a paid loyalty program promoted on the checkout page:
On top of that, don’t forget to mention your loyalty perks in email sequences sent to different groups of customers. To keep your communication relevant, use apps like Loyal that will allow you to craft automated emails based on distinctive customer segments.
4. Gamify it
A loyalty trends report by Open Loyalty shows that gamification is in the top 3 trends businesses are considering and planning to invest in:
Gamification techniques can step up your loyalty program and give you a solid competitive advantage. What you can do to gamify your loyalty perks: offer social media challenges, design quizzes for personalized product recommendations, create an interactive game for additional points, etc.
For instance, a retailer incorporated an AR game that wasn’t connected to its products but simply gave customers an additional source of fun and, consequently, connection with the brand:
You can also try creating simple contests that will allow loyalty program members to win one of your products.
5. Provide an omnichannel experience
If your products are not exclusively presented on your website but are also sold offline, on marketplaces, or elsewhere, think about going omnichannel with your loyalty rewards. Make sure that all sales points are interconnected in your program and customers can collect and redeem their gifts regardless of where they shop.
For example, a cosmetics brand that gives out points for each purchase, allows consumers to collect these points by scanning an online receipt or an offline one from either a brand shop or partner pharmacies:
To sum up
A loyalty program is your opportunity to extend the shopping experience on your store and offer customers something fun and extra. There are different ways to approach loyalty rewards—create a point-based system and reward a variety of actions, partner with other brands, etc.—but in any case, you should make your program attractive, easy to use, and truly engaging.
There are plenty of loyalty tools that will help you automate the process: for instance, Smile is a popular solution available on Shopify and other platforms. Choose the tool that supports the type of loyalty program you need, allows for customizations, and gives you access to analytics so that you can monitor how users engage with the offered perks.