Do you have our loyalty card?
I’m sure you’ve been asked this question before. And I bet we all know at least one person who has every possible loyalty cards under the sun. I am always amazed at how many loyalty cards my friend has bulging out of her purse, whenever she goes to buy something.
Moreover, whenever I go shopping with her, I am always surprised by the amount of money she saves because of her loyalty cards. In fact, seeing this in person is the main reason I began to overcome my skepticism and also began to sign up to more loyalty cards.
Interestingly enough, I have noticed that most of my purchasing decisions are linked to loyalty programs. When I buy something online, I am more often likely to go to stores where I know I will receive some kind of rewards for my purchase.
I guess the reason for this is because it gives me a better feeling about my purchase – I am not just spending money but I am also getting something back in return. Now, the reason why nowadays there are all kind of loyalty programs is exactly this – retailers are aware that loyalty programs mean a higher chance of keeping customers loyal to their shops.
So, how can you utilize Loyalty Programs to build stronger relationships with your customers?
Over the last few years, eCommerce business has significantly increased. Furthermore, the pandemic we are all facing has had a tremendous impact on the eCommerce side of the business.
According to research from IBM’s U.S. Retail Index, the COVID19 pandemic situation has accelerated the shift away from offline shops to digital shopping by roughly 5 years.
This means online shop is not just a nice thing to have for many small businesses anymore – it is now literally the only way to survive.
As more and more shops make the shift from offline to online selling channels, this also means that competition in the online world has significantly increased. So, just because a customer enjoys and likes the products you sell online, they are not necessarily going to be loyal to your shop.
The competition in online world is ruthless, you need to know that there is always someone else who might offer a better price or better shipping options or better something than you. Also, for customers, it has never been easier to find better deals than in the online world thanks to online price comparison websites.
What can you do in order not to lose your hard-won customers?
Returning customers are extremely important for the success of an online shop. They not only usually spend more money but it is also less costly to retain customers than acquire new ones.
However, as the lifetime value of customers is a more complex matric to track than customer acquisition, it often gets neglected. But, one thing that speaks for the benefits of investing in retention is the amount of revenue produced by returning customers, which is roughly 20% more vs new customers.
Nowadays, it’s not enough to simply rely on a loyalty program. The loyalty program needs to offer customers a unique and exclusive experience. The experience has to be so enticing that it will consistently bring customers back to your shop.
Now, let’s take a look at 2 powerful examples of loyalty programs which you can utilize in your own eCommerce Shop
The Point-Based System
This is probably the most common program you see in the offline as well as the online world. The reason why it is so commonly used is because it is simple and efficient. As I think this one is pretty straightforward, I won’t go into too many details.
Utilizing point-based systems in the online shop means you offer points and rewards to your customers. The most common technique is to give customers a certain amount of points for every purchase.
For example: for every $1 a customer spends, she earns 5 points. The points can later be redeemed for some nice products or discounts.
So, if you don’t have any loyalty programs in your shop yet, then this might be the one you want to start with. As mentioned, it is easy and simple and customers like it.
The exclusive Upfront Paid Program – VIP customers only
The second program I want to mention is a bit of an unconventional loyalty program, but nevertheless a very powerful one. The difference when it comes to upfront paid programs vs the typical rewarding programs is the upfront fee which is charged to customers.
Typically, the upfront paid program provides customers with exclusive perks, discounts, freebies, etc. in exchange for a small fee. In order to understand this better let’s take a look at the following example:
One of the ways I utilized upfront programs in the past was as follows:
1. Identify the VIP customers and offer them an exclusive discount
The VIP customers were customers who were spending more than the average customers in one of the online shops I worked for. Now, it was not enough to just spend a little more than the average customers.
This is because in the retail online store, margin is very important in order to stay profitable, so when using this method, be aware that you need to find the right balance between giving an exclusive offer and retaining a positive margin. In order to get an exclusive discount, the parameters were put in place, which helped identify the VIP customers which were eligible for exclusive perks but at the same time kept our shop margin positive.
So, if the average basket value was $39, we identified the VIP customers to be people who spent more than $54 – this was the threshold which had to be crossed without jeopardizing our margin.
2. Identify the exclusive deal that you are going to offer
In the past I would often decide to give a VIP customer an option to purchase an annual saving plan. The annual saving plan was an exclusive offer to VIP customers and it enabled them, on top of all the other perks and special offers, to receive an additional 5% discount on every purchase.
The price of this offer was really symbolic as it cost less than $3, but the reason why they needed to pay was not to earn something but to make the customer value the annual saving plan even more. Once they paid for it, they were more attached to it and wanted to make sure they used it as many times as possible.
What was interesting is that the customers who bought and used the plan had on average 3x higher customer lifetime value.
For this reason, this is definitely one of my favorite loyalty programs. Also, because it is not something you would see everywhere, it adds value to both sellers and shoppers.
So, these are some of the methods you can utilize in your own online shop.
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Very interesting read! Love your blog.