A successful customer loyalty program allows you to celebrate frequent customers and reward them with deals that make them buy more and love your store more. When done right, everybody wins, and you get a slew of people who want to talk about how great you are. The trick is making sure that your program engages and entices the customer the first time and then the fiftieth time they take part. We all know that it can cost as much as 20-times more to get a new customer than to keep existing ones, so you really want to try and make sure that you are spending your dollars smart and keeping those customers. The Harvard Business School even notes that increasing customer retention rate by 5% can increase your profits by as little as 25% or as much as 95%.
Now you know that you can benefit from a loyalty program. Let’s look at how you can create your own and keep it profitable.
How Does It Work?
Loyalty programs are all about creating a trade that feels beneficial for your customers based on their past transactions. As they buy more often or increase the value of what they buy, they earn greater rewards. And, it doesn’t have to cost the customer anything, which makes them want to join.
There are three rules to making it work:
- Offer those who join something that the regular public doesn’t get.
- Make it easy to join your loyalty program.
- Splash the benefits all over your site so that everyone can see what joining the loyalty program gets you.
The right rewards depend on your industry and your business. Apparel companies can use loyalty programs to offer rewards and big discounts during a specific window of time to help clear out inventory between seasons, for example.
Keep things simple. Remember that your ultimate goal of this program is to keep people happy so that they want to buy from you again. Frustrating, confusing, and complex processes make people unhappy.
Why Will People Sign Up?
Customers want to save money and have fun shopping. If you make it easy for them to do both, they’ll jump at the chance to join your loyalty program.
To make sure you’re providing an incentive people want, start by gathering the answers to some important questions:
- How do they benefit?
- What emotions will they feel by joining or using the program?
- What motivates people to sign up for programs like the one I’m considering?
- How much effort does it take to sign up? Can it be easier?
Getting the right answers to these questions is important so you’ll want to do some customer research. Focus on their motivation for shopping at your store, plus review the deals they’ve purchased in the past. Finally, look for the sweet spot with an offer that’s simple and provides a lot of motivation to finish.
The Amazon Example
When it comes to ecommerce programs, you can’t get away with not mentioning Amazon Prime. The small cost and free two-day shipping on “many” items is a great hook. It relies on Amazon’s service and product selection being top-tier. It gives people what they want (free shipping) and makes it easier to shop (you don’t have to worry about adding shipping costs and getting an unpleasant surprise).
But here’s the kicker: Amazon Prime’s $99 price isn’t really all that important. Amazon could get rid of it tomorrow and still make all the money it needs. The company says that Prime members shop twice as often and spend more than double than non-members. It generates a majority of its revenue from Prime members.
Prime members spend more, shop more often, and are happier with their Amazon experience. Plus, seeing that $19.95 for two-day shipping is enough to make almost anyone join the program around the year-end holidays.
Going back to our questions list:
- Amazon provided a clear benefit by removing shipping.
- The emotions are joy and satisfaction.
- Motivation is saving money and being able to understand and forecast what a purchase will cost right now and in the future.
- They also made it simple to sign up for the one service. And instead of you needing to select additional things for its videos, music, and more, you get an introductory bundle that only grows larger.
Make Redemption Easy
When you start creating your loyalty program, focus your work on how it will be redeemed. Automate as much as possible, especially if you can automatically add savings, coupons, and deals when someone adds products to their cart.
Membership doesn’t have to be a separate digital product, just an account. And, when the log in to make purchases and more, you get to collect and keep all that lovely shopping data. Use this not only to refine your offers and marketing but tweak the loyalty program itself to mirror what is being purchased and what stock you need to clear.
There’s plenty of apps if you use today’s larger ecommerce platforms like Shopify. Or, you can spend a little to get a custom one. These tools are becoming common, so you should be able to pay a developer a reasonable fee without having to break the bank.
Review your options and focus on what makes it easy to see what the customer can save, select the savings option, and finish the transaction.
One golden rule, in this case, is to make sure the first redemption is as painless as possible and happens as soon as possible after someone joins your program. Whether that’s a gift, an emailed coupon, or immediate savings is up to you.
The faster you get them to join and make the first purchase, the faster you’ve secured a potential repeat customer.
How Do You Keep Interest Going?
So, you’ve hooked someone with an early bonus offer that got them excited. Congrats! Now comes the hard part. You need to make sure your incentives are useful in the long run.
There are multiple pathways to create milestones and goals that your customers can reach to gain their next gift, savings, or incentive. Making them work for it is a proven way to increase customer retention rates. Here’s a great older report that essentially describes this process of gamification of rewards before the term was coined.
Increase the number of purchases or value of goods purchased between each new tier of offering and you’ll be using a proven formula for growing customer retention and increasing the amount they enjoy your program. Satisfaction in loyalty programs requires minor changes and rewards interspersed with larger options.
Keep goals attainable and make them easy to understand so that your customers stay happy. Stay transparent, and you’ll be able to keep answering our same questions throughout the entire lifecycle.
Starting a new rewards and loyalty program can be exciting for you and your customers. It’ll improve your relationships and generate a real advantage, no matter if you’re an apparel company, high-end tech provider, or relying on drop shippers to sell whatever is today’s hottest stuff.
You can benefit as long as you make it clear how your customers do.
Author´s Bio: Jake Rheude is the Director of Business Development for Red Stag Fulfillment, an ecommerce fulfillment warehouse that was born out of ecommerce. He has years of experience in ecommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.