How Do I Start a Customer Loyalty Rewards Program?

February 11, 2019 Javier Cano

Companies in every industry — from apparel to electronics to beauty products to automotive and everything in-between — are competing for the same consumers, but the most successful companies have realized that retention is critical.

Studies have shown it’s between 5x and 10x more expensive to acquire a new customer than it is to keep an existing one. In fact, even if you improve your retention by just five percent, you could see an increase in profit of 25 percent to 95 percent.

retention is easier than getting new customers

Whether you’re an up-and-coming eCommerce store looking to boost retention or an established digital superstore with a loyalty program that needs a facelift, we’re here to share what you need to know about eCommerce loyalty programs and how to start a customer loyalty rewards program for your own eCommerce store.

What is a Customer Loyalty Rewards Program?

Though reaching a larger audience and attracting new customers is a piece of the puzzle, being able to retain the customers is how you achieve lasting, long-term success. After all, returning customers spend significantly more than first-time customers, and roughly 80 percent of your future profits will come from just 20 percent of your existing customers, according to the Pareto Principle.

If there’s so much to gain from repeat business, how do you encourage customers to return and make more purchases? Since 84 percent of customers are inclined to stick with brands or businesses that offer customer loyalty programs, starting your own eCommerce loyalty program is an effective way to boost retention.

Customer loyalty rewards give customers the ability to earn points or credit by making repeat or higher-volume purchases, or for other behaviors a company may want to incentivize. As for specific rewards, customers can earn things like merchandise discounts, coupons, advanced access to products that haven’t yet been released, or any number of other special benefits.

Customer loyalty programs benefit both the customer and the company. The customer benefits by earning perks and the retailer sees repeat business (and increased profits) from customers who want to earn those perks.

Among a number of different loyalty programs, there are three types that are most effective for use as eCommerce loyalty programs.

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 Best Customer Loyalty Programs For eCommerce

  • Points-based loyalty rewards programs
  • Tiered loyalty rewards programs
  • Subscription-based loyalty rewards programs

Points-based loyalty rewards programs are a common type of loyalty program that assigns a certain point value to each product, service, or transaction. The points accumulate as the customer makes purchases over time and can be redeemed for rewards. An example of this type of loyalty program is Starbucks Rewards. Each purchase earns points, or “Stars,” that can be redeemed for a free drink or snack.

Starbucks Rewards program

Tiered loyalty rewards programs are another common type of customer loyalty program. In such a program, each tier is associated with either a cumulative amount spent, a number of transactions, or a number of products purchased over a period of time. The perks get better with each tier, which incentivizes customers to make more purchases so they can access better perks. Tiered loyalty programs are commonly (but not exclusively) offered by hotel chains such as Marriott Rewards, IHG Rewards, and Hilton Honors.

Subscription-based loyalty rewards programs — also known as fee-based rewards programs — offer access to perks for an up-front fee, often paid annually. Amazon Prime is a subscription-based loyalty program, costing $119 per year for perks like free two-day shipping with no minimum purchase, exclusive savings during the company’s annual Prime Day, and access to Amazon services like Prime Video, Prime Music, and Twitch Prime.

There are other types of customer loyalty programs, too, including value-based programs, cash-back programs, and coalition programs, but these are either difficult to implement or less effective for eCommerce.

Benefits of Customer Loyalty Programs

In summary, customer loyalty rewards programs are beneficial for three fundamental reasons, which are:

Retention: Customer loyalty rewards programs are an effective tool for businesses to improve retention. Since these programs offer perks, customers are encouraged to continue making purchases to either take advantage of their existing perks or to gain access to even better perks.

Referrals: When customers earn valuable perks from a loyalty program, they often share their good fortune with family and friends who might also sign up for the program to experience those perks for themselves. Members of your rewards program can become your brand crusaders, driving more growth and revenue than advertising.

Cost Effective: It’s simply less costly to invest in a customer loyalty rewards program that keeps existing customers coming back than it is to gain new customers through marketing.

Important Customer Loyalty Program Considerations

Loyalty programs can be an invaluable tool for your eCommerce store. However, if perks are too hard to earn or don’t offer enough value, there’s no incentive to be loyal to your store, meaning less repeat business.

Here are some important considerations as you’re creating your eCommerce loyalty program:

  • Attainable vs. aspirational
  • Short-term vs. long-term value
  • Generosity stands out
  • Be wary of loyalty killers

Attainable vs. Aspirational

Take your time to figure out how the tiers will work if you choose a tier-based program. Customers should be incentivized to make additional purchases by the perks of higher tier levels, so higher tiers should be aspirational and not too easy to reach. But if the upper tiers are too difficult to reach, your customers could get discouraged and may not even try to reach those tiers.

HiltonHonors rewards

Short-Term Vs. Long-Term Value

Single-use coupons and discounts are short-term benefits commonly associated with points-based rewards programs. They can be both earned and used quickly. However, long-term perks are aspirational. Long-term benefits tend to involve achieving a higher tier or unlocking a certain status to earn perks of increasing value.

For example, customers might unlock special pricing or gain access to exclusive products as they ascend to new tier levels. Make sure your customers’ shopping habits should match the type of value and perks your offer through your loyalty program.

Generosity Stands Out

The most generous loyal programs are the ones that get the most buzz, both from your customers and the larger industry in which you operate. In fact, a generous loyalty program can be a major draw for new customers while also making your business more competitive. Ultimately, you want your customers having such positive experiences with your loyalty program that they become crusaders for your brand.

Be Wary Of Loyalty Killers

Your eCommerce loyalty program should always work for you, never against you. Some of the specific loyalty killers to avoid include:

  • Reward delays (i.e. lapses of time between earning and receiving rewards)
  • Customers not receiving rewards they should’ve received
  • Excessive or irrelevant communications

How to Start Your Customer Loyalty Rewards Program

Though starting your own eCommerce loyalty program may sound complicated to implement, it’s actually easier than you might think.

9 Steps to start a loyalty rewards program

Step 1: Pick a Catchy Name

While it’s true that a rose by any other name would still smell as sweet, your customers will hear the name of your rewards program before they ever smell the sweetness of its perks. For this reason, taking some time to choose a name for your eCommerce loyalty program, something memorable and catchy, is the first step.

As you brainstorm, try to think of names that play off the imagery of your logo or your brand, business, or site name. Additionally, it’s a good idea to choose a name for the rewards “currency” your customers will earn, or to pick names for the tiers they’ll strive to hit. For example, customers enrolled in Starbucks Rewards earn “Stars,” which has much more personality than simple points.

Step 2: Choose a Loyalty Program Type

There are pros and cons to each type of rewards program, so you’ll need to consider the purchasing habits of your customers to make the most appropriate choice. For example, a points-based program that offers short-term perks is ideal if your customers make frequent purchases with a relatively low average transaction amount.

Alternately, if your eCommerce store offers a vast catalog of products or services, a subscription-based program that offers continuous discounts or perks like free shipping might be the best option.

Step 3: Invest in the Right Infrastructure

Investing in some infrastructure is the next step toward rolling out your own eCommerce loyalty program. More specifically, you’ll need some type of software, plugin, or a third-party service to implement the program.

For example, WordPress plugins like Gratisfaction by Apps Mav are ideal for those who use WooCommerce to run their eCommerce sites with WordPress. Using Gratisfaction lets you quickly and painlessly add a customer loyalty rewards program to both the customer-facing front end and admin-facing back end of your WooCommerce store.

Step 4: Offer Perks That Your Customers Value

When your eCommerce loyalty programs offer perks that your customers would legitimately love to get their hands on, there’s immediately a compelling reason to participate in the program. It’s even better when the perks your offer aren’t available anywhere else. Don’t offer the same coupons your customers can find on sites like RetailMeNot.

Step 5: Create the Structure of Your Loyalty Program

Now that you’ve gotten several steps into the process of starting a customer loyalty rewards program, you have to answer some important questions, such as:

  1. How will your rewards program work?
  2. Will you offer a points-based, tiered, or subscription-based loyalty program?
  3. If it’s a points-based system, how are points earned?
    • And what’s the value of those points?
  4. If you’ve chosen a tiered rewards system, how many tiers will there be?
    • What is the criteria for each tier?
    • And what are the exclusive perks for each tier?
  5. If you’ve chosen a subscription-based program, how will your customers justify paying the fee to join your loyalty program?

Expect your loyalty program to change and evolve as you answer these kinds of questions to better understand how your loyalty program will work. In fact, that’s actually the point of this step; you want to address all the minute details, allowing your rewards program to take its final (or nearly final) form. From here, you can iterate, making your loyalty program stronger and more compelling.

Step 6: Leverage Your Loyalty Program for Reviews

You can leverage your eCommerce loyalty program to gain more exposure for your WooCommerce store. A prime example would be to offer bonus rewards points to customers who write reviews of your products or services. This brings in a social element, creating a community of loyal customers who are encouraged by your loyalty program to share the experiences they’ve had with your products, services, or brand.

Step 7: Offer Fun & Excitement

If you want to take your eCommerce loyalty program to the next level, you might consider upping the fun and excitement levels a bit. Something as simple as offering achievement badges for hitting certain tiers or reaching high point levels can make your rewards program more social and give it the feel of a game.

In fact, you can even add game-like elements to your rewards program, such as a wheel to spin periodically for bonus perks or puzzles that temporarily boost discounts when they’re solved. This is called gamification, and it can make for a more effective loyalty program.

Step 8: Give Your Customers Emotional Value

If your business supports a cause or advocacy group, consider bringing it into your rewards program. For instance, you could donate a small percentage of purchases made by your rewards program members to an initiative that’s relevant to your business.

Since their purchases would have a positive influence on others, your customers could take pride in having invested in your business while also making them more likely to continue making purchases from your WooCommerce store.

Step 9: Marketing & Accessibility

The easiest way to market your new loyalty program is to include it in your existing marketing channels. Mention it in newsletters, promote it to followers on social media, and add links to the sign-up page in logical places throughout your site. There are even ways to have a pop-up prompt your visitors to join your loyalty program using any number of WooCommerce-friendly WordPress plugins.

Make your loyalty program accessible. Customers should be able to sign-up for your eCommerce loyalty program at any of the three key times: before, during, or after checkout. Add sign-up options accordingly.

Cultivate a Following With Your Own Customer Loyalty Program

A growing number of managed WooCommerce stores are recognizing the immense value that offering an eCommerce loyalty program provides for your WordPress store. Whether you choose a tiered program, a points-based program, a subscription-based program, or even some other type of rewards program, the idea is to offer your customers real value, which becomes an incentive to remain loyal to your business.

Now that you know the steps to take to create the best loyalty program for your WooCommerce store, you’re ready to turn loyal customers into your own word-of-mouth marketing team.

Need a Solution Designed For eCommerce?

Liquid Web’s Managed WooCommerce Hosting includes premium plugins from IconicWP, Beaver Builder for landing pages, and cart abandonment technology from Jilt to help retain more customers.

The post How Do I Start a Customer Loyalty Rewards Program? appeared first on Liquid Web.

 

About the Author

Javier Cano

Javi Cano is the Director of Demand Generation at Liquid Web. He manages a team of marketers that focus on lead generation campaigns for new and existing customers. His background covers 10 years of tech marketing with hosting and startup software companies. In his downtime, he enjoys playing with his two Siberian huskies.

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