6 Types of Loyalty Programs to Increase eCommerce Customer Retention
eCommerce is booming, and the massive amount of shopping options available to online users means one thing for business owners: tremendous levels of competition. These days, crafting a beautiful online store is no longer all it takes to retain customers. Rather, business owners need to strategically implement methods that keep customers coming back for more. Today, we’ll discuss 6 different types of loyalty programs you can implement immediately to increase eCommerce customer retention.
The Importance of a Customer Loyalty Program
A customer loyalty program is incredibly valuable to a business, as it incentivizes shoppers to return. Of course, since customer acquisition costs are 5 times more expensive than customer retention, any opportunity to turn a one-time buyer into a repeat customer is more than worthwhile.
However, depending on their structure, customer loyalty programs often offer even more benefits. Properly implemented loyalty programs have the power to transform your happy shoppers into enthusiastic brand representatives. In other words, loyal customers are great at helping make brand new loyal customers.
So, what types of loyalty programs exist, and how can you know which best fits your online company? Let’s find out.
6 Types of Loyalty Programs for eCommerce
- Cashback Rewards
- Point-Based Loyalty System
- Referral Bonuses
- VIP & Membership Benefits
- Subscription Savings
- Cause Marketing & Charity Donation
1. Cashback Rewards
One of the most effective ways to earn a customer’s loyalty is to simply offer them “cash” as a reward. After all, credit card companies have successfully used this strategy for years. It works well with eCommerce by encouraging the shopper to come back again – and incentivizing them to do so with the money they “earned back” on their first purchase.
However, to avoid eating away at your bottom line, initiate a cashback reward program only after carefully strategizing it. For example, you could offer a percentage of each purchase back as credits for use on subsequent purchases. On the other hand, you could initiate a cashback reward only after customers have met a minimum threshold, first, or one that grows as the customer’s AOV does. Plus, don’t forget about special events, too, like an extra percentage of cashback during more competitive shopping seasons.
2. Point-Based Loyalty System
One of the more common types of loyalty systems, point-based programs allow customers to complete any number of brand-focused actions and earn points. In turn, these points can either be redeemed for prizes or used like credits at checkout.
Here are just a few examples of common loyalty-building actions for which you can offer points:
- Spending certain amounts of money on purchases
- Buying special, last-minute cart add-ons (a great way to move old stock, too)
- Signing up for the company newsletter
- Opting-in to SMS messaging
- Following or engaging with brand social media accounts
- Leaving a product review or rating
- Creating a store account
- Completing a CSAT survey
- Referring a friend (don’t confuse this with a referral bonus, discussed next)
Brands that have most successfully implemented a point-based loyalty system do so by keeping the process simple and easy, and clearly demonstrating how points translate into tangible rewards.
3. Referral Bonuses
In a point-based loyalty program, referring a friend might be as simple as forwarding an email blast to 5 friends. However, offering referral bonuses takes the incentive — and the brand benefits — up a notch.
In a referral program, customers can earn discounts, store credits, or other gifts by encouraging their friends to make a purchase. You’ve likely seen it presented like this: “$20 off for you AND a friend! Forward this coupon to them and earn $20 off after your friend makes a qualifying purchase.”
This strategy works well to transform your customers into brand advocates. Plus, the best part is that you don’t have to pay anything to the referrer unless the recipient makes a purchase. Just be sure to display the stipulations clearly to avoid unnecessary customer confusion and frustration.
4. VIP & Membership Benefits
Customers like to feel special, especially in a landscape where so much online content is generalized or impersonal. By providing VIP or Membership benefits, you use highly motivational exclusivity to increase customer loyalty.
Consider a customer’s journey on your site, and give thought to structuring your membership list. Instead of offering only VIP status, perhaps break benefits into three tiers of Basic VIP, Better VIP, and Best VIP (or some other catchy, brand-aligned names). Members may qualify for membership or membership levels based on:
- Amount of money spent
- Number of products purchased
- Types of products purchased
- Amount of points earned (when coupled with a point-based loyalty system)
- Customer history longevity
- Membership fees (VIPs can opt in to pay monthly for higher-level perks)
Then, depending on what your bottom-line allows, shape the perks of each membership or tier. By offering higher value rewards on more elite VIP statuses, you can foster loyalty and incentivize more shoppers to “level up” and qualify for better benefits.
The most successful eCommerce sites present a combination of some of the following perks in varying degrees based on tier level:
- Bonus, percentage-based discounts
- Larger (or no limit) return/exchange windows
- Access to a personal consultant
- Free shipping
- Admission to an online VIP forum
- Invitation to product trials or testing panels
- Free sample products
- Annual, exclusive, special event gifts
- Early promotion access
- Invitation to company events
5. Subscription Savings
Subscription models (like this one) are great for reducing customer churn, but they also incentivize first-time buyers to become loyal, long-term customers. Not every product niche can support a subscription-based model, but if you can, it will prove worthwhile.
For products that customers purchase on a repeated basis, offer the opportunity to “Subscribe and Save!” By signing up for automatic purchases, shoppers not only save the time and hassle of remembering to reorder but can even take advantage of a small discount, too.
Many companies in the fashion, entertainment, and decor niches have found success altering the subscription model slightly; instead of incrementally sending the same product, brands send out a “surprise” gift or product each month, like a new, exclusive piece of jewelry.
6. Cause Marketing & Charity Donations
Sometimes, the incentive for building customer loyalty doesn’t have to directly benefit the shopper. At the end of the day, customers are most loyal to brands with which they feel an emotional resonance. While “points” and “perks” are motivating, many customers recognize the need to do better in the community and support businesses that use their positions to help.
For that reason, consider setting up a give-back program that benefits a cause or charity. Perhaps you donate a percentage of each purchase or give one item to charity for every transaction. Then, make shoppers aware of their contribution — just be sure to follow through on the promise. By showing shoppers that you care and taking actions that align with your brand morals, you’ll gain loyal, long-lasting customers.
6 Types of eCommerce Loyalty Programs To Increase Customer Retention — Which Will You Implement?
Loyalty programs have the ability to transform even the smallest eCommerce businesses into long-lasting commercial empires. However, implementation is only the first step. Keep in mind these important reminders to derive the most benefit from your powerful new loyalty program:
- Provide Value — Often, the gap between making a profit and breaking even is narrow. However, in order for your loyalty program to incentivize shoppers and reach them on an emotional level, you need to provide something of value. Don’t undercut your offerings and think you’ll see the same results.
- Keep It Simple — Too many steps or unclear stipulations can deter even the most well-meaning customers from joining or participating in your loyalty program. It’s always best to find a few family members or friends in various age groups and have them test out the flow — if they’re successful without any interference or help, your customers will likely be also.
- Make It Fun — The most successful loyalty programs keep customers engaged. By making the program feel like a game, customers maintain interest and continue coming back.
- Test & Adjust — With any aspect of technology, there is always potential for improvement. Carefully analyze your loyalty program data and make adjustments when needed. Try to provide better incentives if participation seems low, or better-advertise the program if the joining rate dwindles. Speaking of joining…
- Advertise It — If customers aren’t aware a loyalty program exists, how can they join and benefit? Make sure you provide ample instruction about the program, and strategically fit it into your marketing scheme. Many companies find it beneficial to introduce the program in the first purchase confirmation email; after all, a shopper just bought something from you, so it’s a great time to show him more of the benefits of doing so!
Customer Loyalty Programs — A Necessity for eCommerce Endurance
Experts have predicted that in 2022, eCommerce will be more competitive than ever before. You cannot leave customer loyalty up to chance. Rather, take action now by implementing a strategic loyalty program to strengthen your business’ most important asset: the customers.
One of our favorite eCommerce apps, Smile: Rewards & Loyalty, can help you do just that. Check out our post here to read more about it. And, as always, feel free to chat with one of our eCommerce experts if you need assistance. We are more than happy to help you pave the way to a scalable, profitable, and enjoyable eCommerce journey.