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eCommerce Loyalty Programs: Customer Retention

January 30, 2019
3 Min Read
eCommerce Loyalty Programs: Customer Retention

eCommerce Loyalty Programs: How Do They Work?

eCommerce loyalty programs reward frequent customers with discounts, rebates, rewards, free merchandise, coupons and access to unreleased products. As a result, customer loyalty programs help to increase retention and lifetime value. 

Loyalty programs help businesses increase sales and improve their bottom line by establishing lasting customer relationships. According to BigCommerce, it costs 5x less to retain existing customers than acquire new ones and loyal customers spend up to 67% more than new customers.

Types of eCommerce Loyalty Programs

Point Program

A point program is the most common yet simple eCommerce loyalty program. Its philosophy is straightforward: spend more to get more.

Every time a customer makes a purchase, they will earn points. Points vary based on different purchase types and allow brands to incentivize high-value items. When customers collect a certain number of points, they will unlock rewards and discounts.

Spend Program

In spend programs, customers get loyalty credits for the amount they spend at a business.

When they spend more, they will receive credits that they can later apply to receive discounts, rewards and other incentives. The spend program model rewards high-cost purchases and can help increase average order value.

Tiered Program

Tiered programs reward initial loyalty and encourage future spending. A tiered system creates levels of loyalty. At its simplest level, tiered programs help customers earns points when they purchase products. The more points they earn, the higher level of loyalty they will reach and the more rewards they will unlock.

This model helps customers see achievable benchmarks for purchasing and can encourage purchases to reach new loyalty levels.

Paid Program

Paid programs, or VIP member clubs, allow customers to pay a monthly or annual fee to access rewards and discounts. These benefits are typically reserved for paying members only.

Paid programs make sense when cost provides enough value to warrant additional customer expense. Businesses should consider this kind of program if their customer personas can support additional expenses.

Value-Based Program

Value-based programs are the most difficult to master. These programs align with customer values and beliefs to benefit a greater cause.

For example, for every $50 a customer spends, a business could donate $5 to charity. If done correctly, this approach helps brands connect with their customer on a deeper level by focusing on emotional and ethical bonds. This approach might not be right for every business, but can contribute toward brand loyalty if implemented well.

Partner Program

Partner programs begin when two businesses agree to offer benefits to loyalty program members. In this example, customers who engage in a loyalty program with a business will receive benefits from a different related company.

Partner programs give your customers more opportunities and access to your partner company’s products. This format helps brands enhance relationships with both their partner companies and customers simultaneously.

Game Program

Game programs use fun and interactive methods to engage their customers and encourage repeat purchases.

Businesses who implement game programs turn their loyalty program into a mission to accomplish. Brands can create fun and enjoyable experience for their customer to earn loyalty benefits. Benefits can include discounts, rewards and more.

Hybrid Program

Hybrid loyalty programs are a combination of two or more of any of the loyalty program options. The most common combination is the point and tiered programs. However, brands can have free rein to design a program that meets their specific customer and business needs.

Who Is The Right Fit For An eCommerce Loyalty Program?

Retailers Who Generate Consistent Orders

eCommerce loyalty programs work best when your customers already purchase at regular intervals. We liken this to the coffee shop loyalty punch card you might have in your wallet. If you don't regularly visit the shop, the program doesn't offer much value.

If you are not generating a steady stream of orders yet, you may want to bolster other marketing tactics to increase awareness and demand for your products.

Retailers With Price-Sensitive Customers

Price sensitive customers respond better to rewards than big spenders. However, that's not to say that brands with high average order values can't implement loyalty programs.

Ultimately, your brand should determine if customers will see value from your eCommerce loyalty program. If your discounts or incentives motivate customers who otherwise wouldn't have purchased, we'd consider that a win.

Retailers With Several Competitors

Loyalty programs give your company the extra edge against your competitors. Specifically, they will help you stand out from your competition and give your customers a reason to remain loyal rather than shop with your competitors.

As the online marketplace becomes more crowded, brands should strive to differentiate themselves by offering added value. We often recommend eCommerce loyalty programs because they offer clear incentives to remain engaged.

Customer Loyalty Program Tools

What is Smile.io?

Although there are several customer loyalty program software options on the market, we frequently recommend Smile.io to our clients. Smile.io creates rewards programs that engage customers and encourage repeat purchases. Smile.io helps you create intuitive loyalty point programs, VIP programs and referral programs. 

Right now, Smile.io has about 25,000 merchants around the world that are using their software to engage their customers. Merchants use Smile.io’s software to reward their customers for completing any sort of profitable actions, whether they purchase items, refer a friend or share a product on social media.

Smile.io’s strives to help you increase customer retention and build loyalty while decreasing your dependence on ads and promotion. They do this through three main loyalty systems:

  • Points - Easily motivate valuable customer actions like joining your program
  • VIP - Keep your best customers engaged with increasing rewards and status
  • Referrals - Turn your engaged community members into advocates who share your brand

Overall, these loyalty systems will help retain new customers, move customers up the buying ladder, increase the lifetime value, identify your best customers and reduce spending on advertisements.

Our team firmly believes in the value eCommerce loyalty programs can add to online businesses and are happy to answer any questions you might have. Feel free to reach out using the form below to connect with one of our marketing experts!

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About the author
Director of Operations

With a passion for eCommerce marketing, Jaime Sunday writes about how to create a successful digital advertising campaign. They cover topics like Google Ads, Facebook Ads, and more.

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