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STEP-BY-STEP GUIDE TO DEVELOP ECOMMERCE LOYALTY PROGRAMS
Loyal customers contribute significantly to the profitability and development of eCommerce businesses. Therefore, as a business, you need to focus on strengthening relationships with customers and encouraging repeat purchases. Among the methods available, building and convincing customers to participate in Loyalty Programs is an effective strategy.
Below is the ultimate guide to successfully build and implement an eCommerce Loyalty Program.
Related Readings: Everything To Know About eCommerce Loyalty Programs
Set Objectives
The first step of the process is to establish the goals of the eCommerce Loyalty Program, which includes identifying the objectives (e.g. increasing customer retention rates, promoting repeat purchases, attracting new customers, increasing CLV). These objectives should align with the overall development strategy and business goals.
In addition, as a business, you need to clearly define the target audience of the Loyalty Program by analyzing the demographic and psychographic characteristics of those audiences to design a suitable program that meets their expectations.
You also can research the Loyalty Programs of competitors, analyze their strengths and weaknesses, and then create your own program to differentiate your business and provide unique value to customers.
Develop eCommerce Loyalty Program
Determine types of Loyalty Program
Currently, there are various types of eCommerce Loyalty Programs, but the most popular ones are point-based programs, tiered-based programs, and subscription-based programs.
- Point-based Loyalty Programs
This allows customers to earn points for each purchase or specific action and redeem them for rewards once they have accumulated a certain number of points. You should pay attention to the value of the rewards customers will receive and the reasonable time to redeem them to make the programs attractive.
- Tiered-based Loyalty Programs
This program encourages customers to strive for higher tiers to receive higher-value rewards and benefits. It will require customers to invest their time and money in shopping and engaging with your brand, meaning the more they spend, the more benefits they receive, and the higher their loyalty to your brand.
- Subscription-based Loyalty Programs
This Loyalty Program requires customers to register as members and pay a monthly, quarterly, or annual fee, depending on the terms of each program. Because of that, customers are more likely to commit to engaging with the brand, which is higher than other types of programs. Typically, these programs will have a trial period for customers to decide whether or not to join, and this is also an opportunity for you to convince them that the value they will receive is worth every cent.
The choice of Loyalty Program type depends on the budget, resources, and overall strategy of your business.
Choose rewards meaningful to customers
After choosing the right type of eCommerce Loyalty Program, you will want to select rewards that are suitable for that program. For point-based Loyalty Programs, common rewards include:
- Discounts on the next purchase;
- Free shipping;
- Free gifts;
- Priority support;
- The opportunity to join exclusive events
- The latest product updates.
The SHEIN Bonus Point Program is a typical point-based Loyalty Program, where customers will earn 1 point for $1 spent. In addition, customers can also earn reward points by taking specific actions such as verifying their accounts, reviewing products, etc. When reaching the required number of points, customers can redeem them for discounts of up to 70%.
For the type of tiered Loyalty Program, the tiers will determine the equivalent benefits that customers will receive and require effort to maintain or upgrade. Therefore, rewards will be designed to reflect the brand’s characteristics and personalized for each customer at each specific tier. This makes the customer’s efforts worthwhile.
For example, Aldo Crew is a tiered Loyalty Program from the famous fashion brand – Aldo, with 3 main tiers: Crew, Plus, and VIP. The program offers customers attractive and personalized benefits such as special pricing, free birthday gifts, birthday discounts, 20% off handbags when purchasing shoes, exclusive privileges and surprises, and account sharing with friends.
Most membership programs are applied by leading and well-known businesses worldwide due to their credibility, product value, and high-quality service that make customers trust them to spend their money to sign up. The rewards of this type of program tend to be exclusive, only available at the brand and for registered members.
For example, customers who register for the Walmart+ membership program will receive benefits such as product discounts, shipping policies, gas service, and movie watching with Paramount+ that non-members cannot receive.
Depending on what Loyalty Program you choose, you will select rewards that are appropriate for both your customers and your business. However, you should consider the cost of each reward as well as the benefits it brings to the business before applying it to the program. Providing valuable rewards can not only increase customer retention and loyalty but also boost sales and increase the CLV.
Choose Loyalty Program Software
Next, you will need software to develop, and manage eCommerce Loyalty Programs, track customer activities, and distribute rewards. The choice will be based on some factors such as ease of use, integration with eCommerce websites, and the price of the software. There are some popular Loyalty Program software on the market today, including Smile.io, Loyalty Lion, Yotpo, S Loyalty, and so forth. These softwares can be easily integrated and work effectively with eCommerce platforms such as Magento, Shopify, WooCommerce, etc.
Design the program rules
The next step is to design the rules of the program. You need to ensure that the rules and conditions for participation are presented clearly, easy to understand, and easy to follow.
For example, the Sephora Beauty Insider program is based on a tiered system where customers earn one point for every dollar they spend, and the conditions for participation and advancement are clearly presented.
Again, with Walmart+ as an example, customers easily recognize the benefits they will receive for joining the program as a member, and the cost of $12.95/month after a 30-day trial as well.
In addition, the registration process should be easy to execute. Typically, brands will require customers to create an account on their website or fill out a registration form, or even simpler, just log in with Facebook to participate. These actions are quick and easy to execute.
For example, in the Sephora Beauty Insider program, customers can click “join now”, fill out the form, and join the Insider tier. Or, if they already have an account, they need to log in to see their points balance and tier.
For the Aldo Crew program, customers need to fill out a registration form on the website or log in with their Facebook account to start.
In addition to ensuring the clarity and understandability of the program rules, you also want to ensure that the conditions set are appropriate for customers to quickly earn rewards and maintain the attractiveness of the program, while also bringing profits to the business.
For example, the Amazon Prime membership program offers customers a 30-day free trial and a range of pricing options. The most noteworthy are the monthly payment plan at $14.99/month and the annual payment plan at $139/year. The majority of customers are likely to choose the annual payment plan ($139) to save money, which is also Amazon’s intention as the profits they earn will be higher.
Implement eCommerce loyalty Program
Integrate the program to eCommerce website
To implement a Loyalty Program, you will need to integrate the program into your eCommerce website and display the point balance and rewards on the Shopping cart page.
Taking Sephora as an example again, the Profile page displays the customer’s current membership tier and current point balance.
Train the team
For the success of your eCommerce Loyalty Program, you have to educate your team about the program, including participation requirements, point accumulation methods, rewards, and more.
Moreover, you want to ensure that your team knows how to answer customer questions about the program and handle any arising issues. This activity should be done regularly along with the changing of your Loyalty Program to fit market trends.
By providing effective training, your team is able to promote and manage the program accordingly. This contributes to the success of your eCommerce Loyalty Program.
Launch & promote the program
When launching your Loyalty Program, you will want to make it popular so promotion is necessary. To do it effectively, you can prominently display the program on the Homepage and Navigation menu of your website. Also, you can promote the program on social media or use eye-catching graphics and compelling content for email marketing.
An Influencer marketing campaign is an effective way to increase the program’s awareness and engagement. Referral Marketing is also a commonly used marketing strategy in Loyalty Programs today, encouraging customers to refer new members to the program to expand the customer base.
Popular Loyalty Programs such as Sephora Beauty Insider, Amazon Prime, Walmart+, Aldo Crew, and eBay Plus all have referral programs. When someone signs up for the Loyalty Program through a referral link, both the referrer and the referee will receive a small bonus of $1-$10 or a discount on their next purchase.
Measure outcomes & keep customers engaged
You will need to track and measure the results of the Loyalty Program to ensure the objectives are achieved and make adjustments if necessary.
You can use KPIs like customer retention rate, repeat purchase rate, or average order value of members compared to non-members. Moreover, you can collect and analyze customer feedback and reviews on their satisfaction with the program to identify what to improve.
You also need to keep your customers engaged by regularly improving, updating, and promoting the program. At the same time, you should provide personalized rewards and experiences based on their interests and behavior to increase customer satisfaction and interaction.
In addition, you can consider building a community of members by providing online and offline events and special offers exclusively for program members. Again, Sephora does this well, they offer exclusive events for all Insider, VIB, and Rouge members in addition to other incredible experiences. This gradually creates a community of loyal Sephora customers who love beauty.
Retention isn’t about convincing customers who were going to leave to stick around. Instead, retention is about providing so much value to your existing customers that they never go anywhere else and become your strongest benefit.
Therefore, enhancing your customer experience through attractive Loyalty Programs is an effective way to increase customer retention and loyalty.
Contact SECOMM now for a free consultation on developing a comprehensive eCommerce Loyalty Program.
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06/07/2023
EVERYTHING TO KNOW ABOUT ECOMMERCE LOYALTY PROGRAMS
In the world of eCommerce, customer loyalty plays an important role in the success of businesses amidst fierce competition. There are many ways to build and maintain customer loyalty, but one of the most prominent is to enhance the customer experience through loyalty programs.
The Importance of Customer Loyalty for eCommerce Businesses
Sometimes businesses focus too much on finding new customers and forget the value of their existing customers. The following statistics show how valuable it is to maintain customer loyalty:
- The probability of selling to an existing customer is 60%-70%, whereas, the probability of getting a prospective customer to buy products from you for the first time is only 5% to 20%.
- 65% of sales come from existing customers.
- Compared to new and prospective customers, existing customers are 50% more likely to try out new products.
- 80% of future profits will come from just 20% of your existing customers.
- Loyal customers spend an average of 31% more than new customers.
- 32% of executives worldwide said customer retention is their top priority.
- Increasing customer retention by even 2% has the same impact on profitability as cutting costs by 10%.
- 75% of loyal customers will recommend the brand to friends and family.
Existing customers are the best customers and the most valuable asset of an eCommerce business. These customers contribute greatly to the business profit and help businesses save time and money to acquire new customers.
What affects Customer Loyalty?
89% of eCommerce businesses around the world agree that the customer shopping experience affects customer retention. A high customer retention rate indicates that customers are happy and satisfied which leads to increased loyalty and repeated purchases.
Retaining customers plays an important role in eCommerce businesses because the cost of attracting new customers is five times higher than maintaining existing ones. Moreover, increasing customer retention by even 5% can increase business profits by up to 95%. This is because satisfied customers are likely to refer the brand to others.
Therefore, businesses need to focus their time, money, and energy on enriching the customer experience, persuading them to come back to shop more often, and recommending the brand to friends and family.
Among the various strategies for maintaining customer loyalty, Loyalty Program is one of the most effective factors for eCommerce success.
What is an eCommerce Loyalty Program?
A loyalty program is a marketing strategy designed to encourage customers to continue to shop at or use the service of a business associated with the program. Simply put, eCommerce businesses build loyalty programs to reward customers for their purchases and engagement for a long time.
The reward can be any free product, discount code, or special offer to represent the appreciation of the business for its customers, who tend to spend more because of the benefits they receive when participating in loyalty programs.
According to Yotpo, nearly 68% of customers said they would be willing to join the loyalty program and special incentives motivates them to buy more products.
Loyalty programs not only enrich the shopping experience and keep customers engaged with the brand but also from a business perspective, the benefits they bring to eCommerce businesses exceed the initial expectation.
The Benefits of Using eCommerce Loyalty Programs
Increase Customer Retention
The development of eCommerce helps customers shop more conveniently. That means their expectations for the shopping experience are higher. Today’s customers make their purchasing decisions not only based on price but also other factors such as service experience or emotional connection with the brand, etc.
According to HuffPost, 66% of customers tend to switch brands for shopping if the service is not good enough. Loyalty programs help enhance the shopping experience. The more shopping satisfaction, the more customer retention and loyalty.
Increase Customer Lifetime Value
Customer Lifetime Value or CLV is a key metric that indicates the total revenue an eCommerce business can reasonably expect from a single customer account throughout the business relationship. Most business owners will always find ways to increase the CLV index in order to maximize their profit.
According to Harvard Business Review, the cost of acquiring a new customer is more expensive, ranging from 5 to 25 times, compared to retaining an existing customer. As a result, high lifetime value customers become priceless assets for a business, as their purchases will not require acquisition costs. In other words, a business doesn’t have to incur acquisition costs for loyal customers.
On the other hand, the business has to spend acquisition costs to convince potential customers to buy its products. Thus, even if a new customer spends the same amount on a product as an existing customer, it may not bring in equivalent profits because of acquisition costs.
Encourage Brand Advocates
In most cases, existing customers are also the most incredible advocates. When customers are satisfied with the shopping experience, they are more likely to share it with their family, friends, or colleagues, and the business will gain more potential customers naturally.
Compared to brand messages, recommendations from existing customers are even more effective. According to Nielsen, 77% of consumers trust recommendations from people they know more than any other source. As a result, before making a purchase, they will seek advice from people they trust. Plus, 64% of marketing experts believe that word-of-mouth marketing is one of the most effective forms of marketing.
With the development of the Internet and social media platforms, recommendations from existing customers come in various ways, including posts, comments on social media or review videos, etc. This helps reduce acquisition costs so that every eCommerce business needs to focus on enhancing their existing customer shopping experience and new customers will end up rolling in for free.
Types of eCommerce Loyalty Programs
Point-based Loyalty Programs
This is one of the most popular eCommerce loyalty programs since it is easy to set up and manage. By joining this type of program, customers can earn reward points after each purchase. They can then redeem their accumulated points for rewards such as gifts, discount codes, and other special offers. They also can earn reward points in many other ways besides making purchases, such as sharing product pages on social media, writing product reviews, completing surveys, filling out personal profiles, and so forth.
Although this type of program is relatively simple to implement, businesses still need to ensure that the points customers earn have enough value to encourage them to continue shopping. Plus, the time it takes to redeem points for rewards should be short enough because if customers have to wait for several months or even years to redeem points for a valuable reward, the attractiveness of the points-based program will decrease.
SHEIN, a popular fashion brand founded in 2008, has created a great SHEIN Bonus Point Program reward system on its mobile app. This program allows customers to earn points by registering an account, making purchases, reviewing products, and participating in special online events held by the brand.
Each activity equals a specific reward point. Then, customers can use their reward points to receive discounts ranging from 15% to 25%, and even up to 70% for their next purchase. Additionally, reward points can also be used to exchange vouchers or other special offers when customers participate in SHEIN events or play games on the mobile app.
Tier-based Loyalty Programs
Another popular loyalty program is the tiered-based one. It encourages customers to strive to move up higher tiers to receive more valuable benefits and rewards. The more customers spend on shopping, the more benefits they receive.
This program helps to foster customer loyalty to the brand. To maintain or move up in rank, customers have invested a lot of time and money, and they will not easily give up the huge benefits they are receiving to participate in another brand’s loyalty program.
The famous shoe brand Aldo, with over 1,000 stores in 65 countries, focused on 3 main markets – the US, the UK, and Canada – when building their loyalty program. Known as Aldo Crew, the program offers customers three levels of membership: Crew, Plus, and VIP. All customers are initially enrolled as Crew level members. To advance to the Plus or VIP levels, customers must spend between $150-299/month for the Plus level and over $300/month for the VIP level. Depending on the level, each customer receives corresponding rewards, and VIP-level customers receive all the special perks offered by the Aldo Crew program.
Subscription-based Loyalty Programs
eCommerce loyalty programs are very attractive because, from the customer’s perspective, they get benefits for free. However, in reality, customers have to make a purchase or perform a specific action to earn those “free” benefits.
Many world-renowned brands have created incentive programs based on subscriptions to provide incredible services and charge customers for participation. Amazon Prime, eBay Plus, and Walmart+ are some examples.
To participate and receive truly valuable benefits, customers are required to pay a fee. Since customers have to pay a fee, their commitment to engaging with the brand is also higher than in other loyalty programs. Also, because businesses charge customers when they register as members, this loyalty program type usually has a trial period for businesses to convince customers that the benefits they receive are worth the money they spend.
In 2020, the famous American retail chain Walmart launched a subscription-based loyalty program called Walmart+. The program is integrated into the Walmart app and offers many special benefits to customers both in-store and online, including:
- Free delivery and same-day pickup
- Free delivery with no minimum order value
- The same prices for products purchased online and in-store
- Scheduling delivery options
- 10-cent discount on gasoline at over 14,000 Walmart branches
- Scan-and-go checkout option
- Special member-only deals and promotions during holidays and events, etc.
To join the program and enjoy these benefits, customers have to sign up and pay a specific membership fee of $12.95/month or $98/year. Customers can try the program for 30 days before committing to a membership.
The loyalty program strategy plays an important role in customer experience which leads to their loyalty to the brand. The success of SHEIN, Aldo, and Walmart has become an inspiration for other eCommerce businesses to jump into the game.
To learn more and develop the best loyalty program strategy, contact SECOMM now for a free consultation.
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