Loyalty programs for e-commerce

Loyalty programs for e-commerce

What is the most effective way to retain clients of an online store? To create such a loyalty program that will engage them and encourage to make further (and preferably regular) purchases. In this article we will explain what is the role of an effective loyalty program and why should you think about one now.

Why is it worth to have a loyalty program in e-commerce?

A loyalty program is a way to build a stable relationship with the clients, to support the sales processes, and also an effective marketing tool to promote your products.

Among the readers of this article there will likely be a number of people who belong to some loyalty program. In large chain stores the clients receive stickers, which can be exchanged, e.g. for a cookbook, and various loyalty cards are offered at the checkout. The chains are fiercely competing with each other in offering their clients ever newer benefits, because they know that the customers like to be rewarded, even if they have to spend a large amount of money in order to receive a small prize. And how does it look in the e-commerce industry? In the case of online stores, loyalty programs are a tool that effectively increases sales. What is reason for their success, or, more broadly – what are the benefits of loyalty programs?

First of all we should ask ourselves the question – does my store need a loyalty program? It is estimated that a customer visiting a store at least four times per year is a safe minimum level that justifies the launch of such a program, which will bring measurable profits. However, it could also be the case that our store is based on one-time clients, who do not come back for additional purchases.

That is why it all starts with the basics, that is, gathering knowledge about your clients. Here we are assisted by CRM systems such as edrone, which make it easier for us to collect such data. It is important to precisely determine what profile of customers visits us the most frequently, what is the size of their wallets, what are their shopping preferences, and what do we want to achieve by launching a loyalty program (increased sales, that’s a given, but is there anything else?). You gain additional knowledge about the clients, you get to know their purchase path better, which gives you a better position to personalize content and to create dynamic content. It has been demonstrated that customers are willing to provide their personal information if they can expect some benefits because of that. The company additionally gains stability in the market, because it has a reliable group of returning clients.

In theory, it should be the case that only a good product can attach a client to a brand, engage them and encourage them to make further purchases. This, however, is an ideal situation, and let’s face it: it often isn’t enough to fully realize the potential of the store (and to satisfy the financial expectations). Besides, there are many more factors that influence the purchasing decisions of consumers. Even if the products in our store are of high quality and are popular with the customers, it is very likely that a client will go to our competitors if they offer them a promotion for the given product. In business there is no room for sentiment. The customers will not be sentimental either, if they can get more elsewhere. Shopping in your store simply has to pay off.

The moment when the program is launched is crucial for its success. But that is not all: it is worth to remember that its effectiveness is the result of a number of factors that will be characterized in this article.  

A loyalty program has to be well-thought-out and has to be characterized by something more than just collecting points. A 5% one-time discount for collecting 1000 points (and, e.g., spending 1000 PLN) is probably not an attractive offer, right? A good program should be memorable, engaging and should also be fun.

One big advantage of loyalty programs dedicated to e-commerce is that you don’t have to carry as many plastic cards as in the case of brick-and-mortar shops. How many times have we accepted the loyalty cards of stores that we barely visit once per year, but were too embarrassed to refuse? Or loyalty cards of coffee chains even though we don’t really like how it tastes. As a result we carry dozens of unnecessary items in our wallet, in addition to our payment cards. Of course, in this case the solution could be smart phone apps in which our individual customer code is displayed on the screen and scanned, but they still aren’t as popular as it might seem.

The value of the “rewards” has to correspond to the level of prices in the store. We will not offer a 5% discount on socks in an exclusive store with suits made of New Zealand wool, because that would simply not be encouraging enough. Instead, a better option would be to offer complimentary alterations, or a one-time coupon for the dry cleaners to refresh the suit.  

Acquiring a new customer is typically 5 to 10 times more expensive than retaining an existing client. We often repeat this statistic on the blog in order to show how important it is to care about our clients and to constantly give them reasons to stay with us. But that’s not all – an existing client spends 60% more than a new client on average, because they already know the brand and trust it, and are probably satisfied with the store’s services and its products.

Loyalty programs are becoming increasingly popular in Poland, but in the West they are practically the norm – in the United States as many as 90% of consumers declare that they belong to at least one loyalty program.

What matters is the value added! Points that could one day turn into a discount on further purchases (but don’t have to if you don’t make purchases frequently enough) will not be enough. A good loyalty program simply has to offer something more.

7 effective steps to create a good loyalty program for e-commerce

  1. Use a clear points system. The client should immediately know whether using the loyalty program in your store will pay off. Clearly point to the benefits arising from participation in the program. Whether it is a price-drop, free gifts or a birthday discount – highlight this clearly in the message encouraging the clients to join the loyalty program / membership card etc. This is the stage at which you can establish a strong relationship with the client. Don’t miss this chance
  2. Make sure that your program boosts sales. In addition to the benefits for your clients, your store also has to profit. After all, you are launching this program in order to increase sales in your store, right? You will sell more if the customers buy more, and they will buy more if you offer them something attractive in return. The virtuous circle closes and everyone is satisfied. Use your program to encourage clients to do more frequent purchases, and to acquire subsequent distinctions on the loyalty ladder.
  3. Build a community around your loyalty program. Show everyone that joining your club will be attractive not only because the purchases will be more affordable. Point to other benefits. The clients will remember your program, even if they forget about the discounts that you offer. It turns out (although not in every case) that financial benefits are not the only argument for joining the club.
  4. Turn it into a game! Once again, we would like to remind you to adapt to the specific nature of your store. If your customers are mostly people from the business class, aged 50+, then involving them in games does not necessarily have to be a good idea. But if you are selling youth clothing, why not? Notice the enormous popularity of simple smart phone apps where users collect points (or vegetables for a virtual farm). Why shouldn’t you utilize this mechanism in your loyalty program? There is a lot of room for creative ideas here.
  5. Make sure that the client will have an equally easy access to your loyalty panel on every type of device. Millennials use smartphones, others use tablets, and many also use computers. Make sure that everything runs smoothly on each of these channels.
  6. Let the customers benefit not only during purchases. If your loyalty program is based on a point-collecting system, then you should offer your customers points not only for purchases. You can reward them for their activity on your brand’s social media channels, or on your website. This will allow you to increase the traffic on the site, which will lead to the optimization of your website in the search engines. The clients will appreciate that they are rewarded without having to spend money. Of course this cannot be the only reason for the rewards, but as a complementary item, why not?
  7. Promote your program. The creation of the most attractive loyalty program will get you nowhere, if no one knows about it. Use the tools provided by marketing automation and inform your clients about the launch of such a program through the dispatch of a personalized newsletter, notifications on the site, or other forms of communications.

Creating loyalty programs for edrone clients

One of the stores that use the edrone system offers its clients a discount on further purchases, if the total amount of earlier transactions exceeds a given threshold. Of course, both the threshold, and the size of the discount can be set freely, depending on the strategy of the given store. We also determine on our own when we want to send the information about the loyalty program to the customer in order to encourage them to join and earn points.

To summarize, we will only remind, that loyalty programs are a great source of revenues in an online store, and also a way to engage customers and to attach them to the brand. We should keep in mind that a store should not build a loyalty program solely because the competitors have one, but mainly in order to reward the most loyal customers or ambassadors of the brand, who build its prestige.

Katarzyna Gądek

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By Daniele Zedda • 18 February

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