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.
eBook
Increase LTV with eCommerce Customer Retention
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.
eBook
Increase LTV with eCommerce Customer Retention
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.
Best Customer Loyalty Programs: Smile.io
BigCommerce reports that it costs 5x less to retain an existing customer than it does to gain a new one. Since loyal customers spend up to 67% more than new customers, implementing one of the best customer loyalty programs is key to driving revenue and spending less.
We often recommend Smile.io to our clients, since it integrates with BigCommerce and Shopify and motivates customers to take action at every stage of the buyer’s journey. Turn website visitors into repeat customers and increase customer lifetime value by taking advantage of Smile.io's features:
- Points to reward customers
- A tiered VIP program to create a sense of exclusivity
- A referral program to reward brand advocates
Points
Most eCommerce businesses and consumers are familiar with points programs. When a customer buys something from a store, they're rewarded with points. When a customer accumulates enough points, they're awarded with a certain dollar amount off of their next purchase, a percentage discount, a free item or any other valuable deal that a store decides to offer.
Use Smile.io to reward customers with points when they create an account and make purchases. Get customers excited about shopping at your store and impel them to purchase high-value items by rewarding them for a variety of things, such as writing reviews, celebrating birthdays and more.
Smile.io provides the features eCommerce brands need to engage their customers. Re-engage customers who have expired points with the program's built-in reactivation emails.
Customize the name of your points to create a fun shopping experience, and leverage Smile.io's rate limiting and earning conditions to further customize your points program and decide how often your customers earn points.
VIP Program
As customers accumulate more points and continue to spend more at your store, they'll advance to the next tier. Create various levels of loyalty by implementing a tiered VIP program with Smile.io.
Incentivize customers to reach the next tier by offering better rewards at higher levels. Require customers to spend a certain dollar amount or earn a minimum number of points in order to progress.
Encourage future spending by motivating customers to reach the next loyalty tier. Make your higher-tiered VIP customers feel extremely valued by offering better deals and perks, like greater percentage or dollar discounts and accelerated points earning.
Further motivate customers to reach the next level of VIP by setting milestones. Determine a specific spend amount or points balance needed to move a customer into the next tier of your VIP program. Also, set the milestone duration to decide whether a customer's purchases within their lifetime or within a calendar year contribute to the points needed for the VIP program.
Referral Program
All business owners love when their existing customers refer friends and family to their store. Reward loyal customers and brand advocates by implementing Smile.io's referral program.
Since it's difficult and expensive to acquire new customers, we highly recommend utilizing referrals to award your most loyal customers. Your customer base and community grows when existing customers recruit new ones to do business with you.
Thank them by promoting rewards for referrals. Rewards vary depending on the type of business but can include anything from a percentage off their next purchase or a free item or service at their next appointment.
eBook
Increase LTV with eCommerce Customer Retention
4 Key Elements Your Loyalty Program Must Have
Defining the solution is only half of the battle. Reality is, in order for a business to successfully launch a loyalty program that has a true impact on the business, there are 4 key elements it must have for eCommerce loyalty programs.
#1. Personality
A loyalty program is an extension of your brand and one of the more outward facing tactics an organization can use in order to strengthen their relationship with their customers. As a result, when introducing customers to your loyalty program, make sure it contains the personality of the brand.
When we developed Players Circle for D'Addario with Sweet Tooth Rewards, we knew the program had to reflect the personality of D'Addario and speak to its audience - passionate musicians and artists.
#2. Exclusivity
In a noisy online environment, you must give your customer base a reason to engage in your loyalty program.
Think about the number of times you have stood at a checkout and been asked if you're a "rewards member' or if you have their "membership card." How often do you rush the cashier through this line of questioning, informing them that you're not looking for another invasion of your inbox, another card to carry, or another keychain accessory. We do this because we haven't been sold on the value of being part of such program, and exclusivity is one of the biggest drivers in the success of a loyalty program.
Your customers want to know that by engaging in this additional effort, they will benefit from offers, access, or deals they otherwise wouldn't receive. Communicating this can truly make or break the adoption of your program.
#3. Multiple Engagement Points
Depending on your business model, this is one of the areas that needs a lot of thought as it creates a ton of opportunity and a ton of responsibility pre- and post- program launch.
We have seen a few different types of programs that support multiple engagement opportunities.
1. Transaction/Point-of-Sale Model
In this program your customers are essentially reaping rewards at the point of purchase. As they spend more, they receive offers or better discounts. This can work great for merchants running with multiple brands and looking to increase annual/lifetime customer value.
2. Catalogue-Driven Program
In a Catalogue-Driven Program, our clients are seeing customers either repeat purchases with a particular aspect of the catalogue or they have a set of products and the program is driven on getting their customers to buy more of their offering.
Sonos would be a great brand to launch one of these programs. With a truly defined catalogue of products, Sonos would have the opportunity to create a great loyalty program by encouraging their customers to expand their collection of their speakers product-line.
3. All-encompassing Loyalty Program
Starbucks is a great example of a successful, all-encompassing loyalty program. These programs have rewards, point-of-sale, content, and exclusive offers.
While these are certainly the types of programs that garner the most attention, the key is making sure you do well within your business model and choose a program based on your customer base. Ensure that there are multiple ways to engage with the program, creating a continued interest which drives buying behavior.
#4. Relevant Content
Depending on the execution strategy you choose from #3, this can be the next great success or fatal flaw of your program.
Releasing relevant content to those who engage is critical to maintaining interest and participation in loyalty programs.
Often we are brought in to help re-engineer a program that simply turned into an alternative e-mail list for brands and has lost its user-base and adoption of the program. Acknowledging this group and providing them with exclusive and relevant content based on the program is another major opportunity to communicate with this audience. By providing them with relevant and interesting content based on the information you collect about this group, you’ve given them another reminder of the value of the program and encouraged your audience to continue participation.
Time and time again we remind companies that building these programs is actually very simple. However, running them well requires a strong commitment to these 4 elements in order to truly be successful. Creating a game plan to not only launch the program but also to define who and how you will handle these elements is what determines success.
Choosing A Customer Loyalty Program Software
With several options to choose from, how do you know which loyalty software provider is best for your company? We recommend that you first consider your company's budget and customization needs when deciding which loyalty platform to utilize.
Budget
As with any project, it's best to identify available funds early in the process. Ask yourself the following questions:
- What is my budget?
- How much will the program cost to maintain?
These questions will help you narrow loyalty platform options that will work for your company. Remember that scope and scale are both factors that influence price, so we recommend keeping an open mind as you go through the research process to identify options that fit your company best.
Customization
Not all platforms are created equal. When researching loyalty programs, clearly define the level of customization your business needs to achieve your goals.
Customization can range from point systems to tiered programs and many formats in between. As you go through the evaluation process, ask any platform providers specific questions to ensure their functionality will work best for you and your customers.
Overall, loyalty programs aim to enhance customer experience through meaningful relationships.
We Recommend Smile.io
Although there are several loyalty platforms on the market, we typically recommend Smile.io (formerly SweetTooth Rewards) based on our client experience. Smile.io creates loyalty and rewards programs and has over 25,000 active reward programs with over 50 million participating program members.
Based in Canada, Smile.io focuses on fostering customer-company relationships that generate great customer experiences. Smile.io works with all types of companies from local stores to billion dollar businesses.
Smile.io offers three main types of customer loyalty programs:
- Points
- VIP
- Referral
Points Program
A points program is the most common way to structure a customer loyalty program. Reward your customers at 3 common stages: join, engage and share. Encourage membership by offering rewards for simple things such as joining and making purchases.
Increase engagement with customers by offering points for things like writing reviews or celebrating birthdays. Finally, encourage customers to share your brand by rewarding social shares and referrals.
Customers are more inclined to write that review or share that social post if there is an incentive, like a discount, behind it. And they benefit your business, too, by increasing your social media presence and benefiting your SEO.
Customers will use their points to earn things like percentage discounts, free shipping, dollar discounts or free products. Settings like points expiration, rate limiting and earning conditions help to enforce that customers shop at your store in a timely manner.
VIP Program
VIP programs promise future perks; that's what makes them work. Increase customer engagement by offering additional rewards and status the longer a customer stays loyal to your brand.
Customize your VIP program by setting the milestone type, such as revenue or points. You can even customize milestone duration based on a 365-day period or customer lifetime with your company.
The biggest difference between VIP programs and point programs is that VIP programs focus on connections with your top customers, while point programs benefit all customers equally.
Referral Program
Referral programs offer points and rewards for customers who refer and share your brand. In this scenario, you can encourage referred customers to join your program.
Smile.io gives you control over the platforms your customers can send referrals from. Most importantly, they make it easy for your potential customers to claim and use their rewards.
Conclusion
Want to know more about eCommerce customer retention? Fill out the form at the bottom of this page for access to our exclusive .PDF guide on the subject.
Looking for experts to help implement a winning eCommerce loyalty program? Contact us today to learn how our experience, partnered with a loyalty and rewards program that suits your business, can generate exceptional results.
