E-commerce is on a continuous rise since the last decade and there is no qualm over it. And the coronavirus pandemic has tipped the scale in favour of online shopping. But whether you are running an essential business which is having a huge demand or a non-essential business which is restructuring you always wish that your customers come back again & again to shop from your e-commerce store.
In fact, it is cheaper to keep customers coming back than acquiring new customers. The existing customers spend more money, and it is easier to sell to them. One of the most effective ways to keep customers coming back on your e-commerce store is through a loyalty program.
Loyalty programs are ubiquitous. In many brick-and-mortar stores, customers get some loyalty stamp cards in your wallet. But with an e-commerce store, you can’t just give physical loyalty cards. Loyalty programs when implemented correctly have become a huge hit. Whether it is Swiggy Super program or Zomato’s pro program, they have one thing in common which is that customers love them. In this blog, we will discuss every aspect of a successful loyalty program, with its types, benefits and much more, beginning with its meaning.
Customer Loyalty Program: Introduction:
Loyalty means “ A strong feeling of support or allegiance”. Customer loyalty refers to the customers’ willingness to purchase from your store. It will be the result of their overall previous experience, satisfaction, and the value they get from buying that product.
The e-commerce industry is categorized by the high purchasing frequency and equally high churn rates. There are many e-commerce retailers who believe that now customer loyalty doesn’t exist and that’s why to use exciting discounts for retaining customers. But this has never given long term results as you the discounts are never forever else you will end up in loss.
There are many different ways by which you can use customer loyalty programs to make yourself standalone:
- Customer-friendly shopping experience
- Incentivized customer profiling, to generate data from the customers and use it for other marketing purposes.
- VIP benefits and exceptional reward for higher customer lifetime value
- Groups & clubs to make communities
- Social media marketing campaigns for mouth publicity
Customer Loyalty Programs Stats:
Why Loyalty Programs Succeed?
The top three reasons via 2017 COLLOQUY Loyalty Census:
- Easy to use: 53%
- Gives me great discounts: 39%
- Easy to understand:37%
Why Loyalty Programs Fail?
Once customers sign up to a loyalty or rewards program, most members (54%) “fade away” and become “inactive”. Some of the potential reasons are:
- Took too long to earn points or rewards
- Did not provide rewards customer was interested in
- The program sent too many communications
- Communications were irrelevant
Types of Loyalty Programs:
The different types of loyalty programs are:
1. Points Programs:
In ancient times, retailers used to reward their customers with copper coins which could be redeemed later for discounts or items. With time, the copper coins evolved into stamps, plastic cards, etc. however, the programs haven’t changed. They are the same today as they were in the 1700s. Customers can spend money to get rewards which they can use later. Transactions first, benefits later.
However, the customers have changed. Now they have more options and less loyalty for a particular brand. But still, these programs are better than nothing. They are completely free to use for customers.
2. Cashback Loyalty Programs:
Cashback is having a huge attraction nowadays. People are preferring those e-commerce stores who are giving exciting cashbacks to the customers. Customers have to spend a certain amount to get a cashback usually in “coupons” or “cash” which can be used exclusively at a retailer. These loyalty programs are quite easy to maintain and highly in trend. Cashback program is similar to point programs and is easy to understand the value proposition.
3. Punch Card Programs:
The punch card programs are not a modern method of getting customer loyalty. In this method, the companies used to give a paper card to a customer which is “punched” when the customer bought any item or service. When the customer will fill that card, it could be redeemed for a reward. Now the paper card has been turned into the electronic versions of them. This loyalty program is also similar to points & cash-back programs and it is of low cost for smaller businesses.
4. Tiered Loyalty Programs:
In the tiered loyalty programs, the customers get different rewards when the members cross certain milestones which is mostly a currency amount. More the customer spends, the higher the tier he or she gets. These milestones can be a great way to increase member engagement because they add levels of exclusivity to the program.
5. Subscription-based loyalty programs:
Loyalty programs are highly exciting for users if they are free to use. The customers are getting discounts, coupons, vouchers etc. by not spending a penny extra. However, if you are already an established brand such as Amazon then you can be your customer for a subscription-based loyalty program such as Amazon Prime. Amazon gives many benefits with its prime membership such as exclusive deals, prime video, etc.
6. Hybrid Loyalty Programs:
As the name suggests, these loyalty programs must be an amalgamation of two or more above-mentioned programs. Many e-commerce businesses use this program for maximum efficiency and driving specific KPIs. This helps them to gain customer trust and loyalty by every different means.
Benefits of Customer Loyalty Programs:
Here are some of the benefits of setting up a solid loyalty program for your e-commerce store:
1. Customer Retention:
Do you know that customer retention is 5 times cheaper than acquiring new customers? If you have implemented a rock-solid loyalty program, then you are providing a reason for your customers to come back on your store. Whether it is a discount code, cashback or something else, it could make them regular patrons.
2. New customer acquisition:
The main aim of a customer loyalty program is to retain the existing customer on your e-commerce store but it is also beneficial for your brand reputation. You may get popular if you are delivering valuable service to your existing customers. Thus, giving some rewards to them when they bring in new customers is highly beneficial.
3. Reduce churn rate:
The rate at which the customers stop using your portal or doing business with your company is defined as the churn rate. It is most commonly expressed as the percentage of service subscribers who discontinued their subscriptions within a given time period. Customer loyalty programs will help you in not losing your customers and reduce the churn rate.
4. Customer Segmentation:
One of the major steps of a successful e-commerce business is to identify high-value customers who can boost your business. Whether these are existing customers or a new one, loyalty programs will give you a track of what customers are purchasing. How much they are spending and what you can do to keep them high.
5. Increasing lifetime value:
The lifetime value of a customer is defined as the amount of money the customer has spent on your portal over a particular period of time. With the loyalty programs, you can definitely expect CLTV to increase proportionally with the increase in the frequency of purchases.
6. Saves Marketing efforts & costs:
If you already know who your ideal customers are then you can put your marketing efforts to bring in new customers of that particular profile and replicate this model. These new customers will become your regular patrons. Hence, you have to spend less on marketing.
7. Staying ahead of the competition:
A cashback, discount, or anything extra to the customer can mean a lot to stay connected with your e-commerce store. If a brand is not giving cashback while others are giving then it is obvious that the customer will choose the first brand.
Different Loyalty Program Approaches:
1. Engage the customers outside their shopping journey:
If you are only rewarding customers when they make a purchase then it limits your chances for delivering an emotional connection. Unless they are purchasing consistently, being a loyalty program member is rather uneventful. And, if the customer doesn’t have a reason to log in on the site, they will eventually forget the credentials, or even your store and can switch to a competitor. Henceforth, you have to make loyalty programs which give reasons to the customers to come back on your store regularly by incentivizing frequent logins.
2. Omnichannel:
In today’s time online shopping is the dominating trend. But when the COVID-19 pandemic would be completely over, then the brick-and-mortar stores or physical stores will require help as much as possible for recovering. If you are having an online and offline presence then bridging the gap between these through a loyalty program will increase the customer footfall in many different ways.
3. Membership Page:
Every customer loyalty program is incomplete without a loyalty HUB. It is a web page which must be seamlessly integrated with your e-commerce store. It will be a gateway for your customers where they can learn about the loyalty program rules, check and redeem rewards, check their progress, unlock new milestones, complete challenges, and much more.
4. Multicurrency and Multilingual:
If your e-commerce store is having a presence in many other different nations, then it is optimal to display the spend-to-point ratio in the local currency. So, that the audience can understand what they are getting on a purchase. It will increase trust and participation from the audience if the HUB is available in many different languages.
5. Gamification:
There are many different types of gamification models that you can find in a loyalty program such as badges, online challenges, sweepstakes, prize wheels, etc. The motive is the same to make the loyalty program interactive and fun. It is a valuable method to incentivize the customer and make them return on your store.
6. Offer Management:
If you don’t want to give discounts in your loyalty program then you can opt for double or triple-point campaigns. These offers would be for a limited time and the current holidays’ theme would be followed. Promote your latest collection or make people interested in your existing stock.
7. Social Media Contests:
If you want to make a good relationship with your customers, you need to make a presence on those channels where your customers are available. In terms of loyalty programs, it implies that you must host social media contests on platforms like Instagram, Facebook or Twitter. The contests can be like posting a photo, hashtag contest, etc.
Popular Loyalty Program Examples:
DSW or Designer Shoe Warehouse runs a loyalty program that incentivizes customers with purchase points and also there are tiers of rewards that get unlocked when the customer spends more. There is no punch card system involved. There were also personalized emails for customers detailing:
- How many points do they require for the next $10 off certificate?
- Eligible deals for them
- A snapshot showing their interaction with the brand such as the duration of their loyalty
Almost every brand is opting for a mobile app to manage loyalty programs and when Starbucks launched My Starbucks Rewards through the Starbucks app, it was a new idea. It was easy to access the program through the mobile app for customers. There was no sign-in required and no need to remember a punch card.
Amazon is a highly popular brand for their e-commerce store. The Prime membership program of the company receives a huge appraisal from the users’ end. It is an early membership by which the customers can get free delivery and also one or two-day delivery. The other perks are access to Amazon Prime Video, Amazon Prime Music, etc.
There are many airlines which use this loyalty model. In the customer loyalty program, they will earn miles and they can use them for future flights. But many companies are not even limited to this such as Virgin Atlantic Flying Club. The company introduced a flying club in which the members can earn tier points. There are 3 different tiers – Club Red, Club Silver, and Club Gold. Each tier has different rewards for the customers.
IKEA is one of the largest furniture companies based in Sweden. IKEA provides different perks such as surprise & delight offers that are sent out as emails. The members have free access to their workshops and events, etc.
Wrapping Up:
Customer loyalty programs come with many benefits and very few risks. Implementing them in your e-commerce store will be worth your efforts. They make the customers return to your store and make more purchases. If you are having requirements of implementing a customer loyalty program scrupulously or want to develop an e-commerce store from scratch then you can definitely tell your requirements. We, at Ceymox Technologies, are having expertise in developing e-commerce stores from scratch.
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