Sales! Every shop wants more. The average ecommerce business spends 80% of their marketing budget on acquiring new customers, and almost a lifetime creating and testing the perfect formula to bring them in. Completely ignoring the big, flashing beacon ahead saying “we like you, we’ll buy more”- existing customers!
Existing customers are golden. Strike that, they’re platinum. They’re 27% more likely to return to make a purchase once converted, and upon returning spend on average 20% more per transaction.
That (amongst a long list of other reasons that we’ll cover in this post) is why retaining existing customers is just as important as acquiring new ones.
In this post, we’ll discuss everything you need to know to build a loyalty rewards program for your online shop that will help to retain existing customers. And built correctly, will also encourage them to spend more money, more often and help you to acquire some new customers in the process.
How to reward your customers with a loyalty program
The most recognisable and popular way to reward customer loyalty is with a points based system; meaning that your customers will earn x points per £1 spent with you to spend on further purchases. This method is used by some of the most popular stores in the UK (Tesco, Sainsbury’s and Boots etc.) and will be an instantly recognisable system for your customers to understand.
How many points per £1 should I reward?
When deciding on the rate at which you will reward your customers, it’s all about finding the right balance. You need to make sure that customers are able earn enough points to make collecting them worthwhile but you also don’t want to end up out of pocket.
Two values determine how much your customers get in return for their money. The first value is how many points your customers will earn per £1 spent with you and the second is how much money each point is worth. With the most popular programs, you’ll find that customers will earn a varying amount in pence (between 1 – 5p) per £1, and then each point will be worth 1p.
So, what values should you assign to your points? First, consider the profit margins for the products in your shop; the higher your profit margins, the more value you can afford to assign to your points. For example, a retailer with an average profit margin of 15% won’t be able to withstand as much of a reduction in profit made on an item as a retailer with an average profit margin of 60%. The other factor you should consider is the standard offering for your industry. If your main competition offers 2p per £1, your offer of 1p per £1 may not seem as attractive.
Marketing your loyalty program
Once you’ve decided on the rates of your loyalty program, the next step is getting your customers and visitors excited about it. Just like your shop, your loyalty program will achieve more success if you market it correctly.
If you do only one thing to promote your loyalty program, it should be to feature it on your homepage. Customers that are already familiar with your brand (i.e. existing customers) will enter your shop via the homepage, so this is the perfect place to tell them about it.
Create a landing page
Your customers will need to know more information about your loyalty program. Telling them that you have one is only the first step. They’ll need to know how to earn points, the value of the points and how to redeem them. Create a webpage dedicated to your loyalty program that explains all of this information in a simple way. It’s also a good idea to highlight the benefits of joining your loyalty program on the page.
An important thing to consider when creating this page is to keep it simple. Research into customer loyalty program retention conducted by Colloquy last year determined that the top reason parties surveyed continued to use a loyalty program was because it was easy to understand.
Some examples of ecommerce websites that have nailed the loyalty program webpage are linked below. Take a look at them for some inspiration for your own shop.
Give your program a name
A big part of marketing is building a brand. This is exactly what you want to do for your loyalty scheme. Doing this will have many positive benefits; it will help your customers become familiar with your program, it will ensure that your program looks professional, being a part of your program will feel like being part of an exclusive club and it will leave you a lot of room for innovative marketing in the future. You should name your program something that makes it clear what your program is. If coming up with a name isn’t your speciality, ‘Your business name club’, ‘Your business name rewards’, and ‘Your business name loyalty’ will all resonate easily with your customers.
Communicate on behalf of your loyalty program
Another crucial marketing task is to communicate with your customers. You want to remind them of your program, under the guise telling them something about your loyalty program. You can do this via any of the ways that you usually communicate with your customers.
If you contact your customers by email (if you don’t, you should be doing) create an email address specifically for your loyalty program (e.g. firstname.lastname@example.org). This will contribute towards the brand building mentioned in the previous point and will stand out from any regular emails that you send out – this is to your exclusive club members only, remember! Send out a regular ‘points balance’ email update once every month, and send marketing emails as you would for your shop containing any offers/ exclusives for your program members. Featuring ‘points earned per order’ for members and ‘you missed out on x points’ for non members in order confirmation is also a useful way to include your program in your email communication.
The power of package inserts is often overlooked by many ecommerce businesses, with only 12% using them. However, including print marketing directly to your customers gives you the opportunity to reach customers that don’t pay attention to your online marketing efforts. A simple ‘20% off next purchase for Yourloyaltyprogramname members’ will tell your customers two things; “We have a loyalty program and we want you to be a part of it” and “We give our loyalty program members benefits”.
On your product pages & at the checkout
Including ‘you’ll earn x points with this purchase’ on your product pages and at the checkout will tell your customers about your loyalty program without the use of overt marketing.
*If you have any other methods for marketing your loyalty program – let us know in the comments section.*
Using your rewards program to increase sales
As mentioned in the introduction, the benefits of a well implemented loyalty program reach way beyond increasing customer retention. Your program can be used as a marketing tool to grow your business and to attract new customers.
Offer members exclusives
Drive sales by creating exclusives for your loyalty members. This will also help with brand building for the program. You can:
- Give members early access to sales with a discount code available only to account holders
- Hold double points days
- Offer all members free delivery
- Competitions for members only
- Regulate your exclusives; promise a certain amount of exclusives per year for members
It’s also a good idea to give customers awards based on the frequency that they shop with you. Offer merchandise (i.e. a free notepad, key ring, pen etc.) for new members or incentives for reaching particular milestones in points value.
Tell non members about the benefits of joining
Telling members about the benefits of your program, is simply a way of encouraging them to become a regular customer. Promote your loyalty program to non members as you would do with your products. Email them with the benefits of joining your loyalty program and make sure that it is well publicised on your social media pages.
Awarding points to customers in exchange for actions that will help you to grow your brand will give customers alternative ways to earn money to spend with your brand (thus encouraging even more brand loyalty) and will also help you to increase sales. These actions can be anything that you really want your customers to do such as, liking your Facebook page or following you on Twitter. A few examples are:
- Creating an account
- Liking your social media pages
- Referring a friend
- Leaving product reviews
- Sharing a purchase on Facebook
- Visiting your shop weekly
Offering customers an alternative way to earn points will counteract a common perception, stated by 60% of under 30’s surveyed by Maritz who believe that brands only offer points to increase sales.
Push specific products
Your program can be used to increase sales of a specific product, range, category or even sales. Offer your customers a point based incentive, like the one below from Boots to push the products that you need more traffic to.
Loyalty program checklist
Now we’ve covered everything, let’s run through a final checklist. Once you’ve created your loyalty program, return to this post and compare it against the checklist.
- Is it easy to understand? Can I explain the basics in just one sentence?
- Is it easy for customers to sign up?
- Is it easy for customers to use the points? (i.e. Can they use them easily at the checkout)
- Roughly how long will it take for a customer to earn 5% off one shopping basket? (If it takes more than one year, consider whether you have set the price per £1 too low)
Congratulations, you have made it to the end! By now you should be equipped with the knowledge and enough ideas to create a loyalty program for your shop that will improve customer retention.
If you have any questions about creating a loyalty program for your shop, please leave them in the comments section.
If you go ahead and create a loyalty program, we’d love to hear from you too.