The competition between online businesses is getting fiercer by the day. As we keep moving forward in this modern world, more and more innovative ways have been put to practice by big and small companies to try to attract customers. With literally hundreds of choices in every aspect of their life, customers have every right to be picky and only choose what brands bring them the most value, especially when it comes to the online platform. Therefore, it is important for businesses to set up an attractive loyalty program. The acquisition cost for new customers is often greater than the cost of retaining loyal customers. 

Furthermore, repeat customers have a higher lifetime value and potentially lead to more repeat purchases and even more profit for your business throughout their entire lifetime. All in all, it is infinitely better for you to maintain a good relationship with your regular customers, and one of the most effective ways to do that is through a carefully crafted loyalty program. Let’s have a look at the article below to have a better understanding about how to set up an E-commerce loyalty program.

1. What Is An E-commerce Loyalty Program?

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E-commerce loyalty programs are often what encourage customers to come back and make repeat purchases in your online store. The encouragement comes in the form of rewards ranging from simple discounts to free shipping, freebies and more. 

The loyalty program has been going on for quite some time, but it does not mean that it is any less effective on the online platform. An example of an effective and well-known loyalty program (offline and online included) is Starbucks. For every dollar spent, the customer earns one star. Eventually, customers can obtain a free drink, free upgrade on size and much more. At 300 stars, they reach the gold rank and get exclusive rewards.

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Source: Starbucks

2. Types Of Customer Loyalty Program

There exists various types of loyalty programs for online business. Listed below are some of the most popular kinds of loyalty programs that can be observed on the market.

2.1. Point System

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One of the simplest and most straightforward kinds of loyalty programs is the point system. The customer is required to pay upfront to receive the points or tokens, which they can then use later to redeem goodies, merchandise or discounts. This method is easy to set up and operate for businesses whose profit is based primarily on low-cost and frequent purchases. This type of loyalty program is unsurprisingly common with online stores. The above Starbucks  loyalty program is a great example of the point system in effect.

2.2. Tier System

Also one of the more well-known kinds, the tier system rewards customers for how loyal they are to the brand. As they make more and more purchases, they can climb the ranks higher and higher. This is meant to be used for customers who make big purchases, either regularly or every once in a while. The goal when using this system is to keep customers for the long-term benefits. To avoid program abandonment early on, businesses need to introduce a small base reward for joining the program and also not make it too difficult to climb between the tiers.

One of the most popular loyalty programs when it comes to the tier system is Sephora’s Beauty Insider. The customer gets benefits right away when they sign up for free, which acts as an incentive for them to remain and continue shopping. Then after spending a certain amount of money, they can move up to other tiers, such as VIB or Rouge status, where there are better and more desirable rewards.

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Source: Sephora

2.3. Premium Loyalty Program (Paid Loyalty Program)

Some companies offer this VIP program; where customers pay a membership fee to join. When you are a part of the circle, you have “instant” benefits such as access to exclusive gifts, discounts and even access to premium events. This creates a sense of immediate gratification, and further strengthens the relationship with customers. Since not everyone can afford the upfront fee, it is understood that the customers that can and do tend to be the ones who are  willing to pay. This means that they are valuable clients that businesses need to keep an eye on and make an effort to satisfy.

The prominent example is Amazon Prime, with which you can obtain VIP services after joining such as free shipping, discounts or access to even greater benefits.

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Source: Amazon

3. Why Do You Need An Ecommerce Loyalty Program For Your Business?

Significant advantages is essentially what an E-commerce Loyalty Program offers. A new customer can be converted into a loyal one if you provide an on-spot  loyalty program. You also have the opportunity to focus your entire business on the needs and wants of  your regular customers, who happen to be the ones that bring the most profit to the table. The three perks below are why most businesses set up a loyalty program.

3.1. Increase Customer Retention

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Most customers like being rewarded for making more purchases. Furthermore, they are more likely to shop at the same store many different times if that business provides them with a quality loyalty program. These programs may incentivize people to convert wants into purchases more frequently because they enjoy the prospect of earning rewards. Customers that accumulate points, or achieve a higher tier, are more likely to stay with your company and avoid switching to a rival.

3.2. Boost Your Sales 

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Another point, directly connected with the previous one, is that customers who stay with one brand will probably make another purchase at that brand. Most profit a business makes also links directly back to the amount of loyal customers they have. Therefore, with each customer your brand manages to keep, your profit and your sales grow accordingly. 

3.3. Optimized Marketing Strategy

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With loyal customers, your E-commerce business can create content or programs that instantly appeal to them. You can collect their data and preferences, and prepare specialized rewards or promotions that will be the most impactful and push sales even further.

4. How To Set Up An Ecommerce Loyalty Program For Your Business?

Starting a loyalty program can be challenging and complicated, but it is not that difficult if you know the basics. Essentially, a loyalty program has two goals:

  • Convert new customers into loyal ones.
  • Keep the retained ones so they make more purchases with your business. 

Below are steps you can take that can effectively help you ease the process and launch a successful loyalty program.

4.1. Determine Your Loyalty Program Type

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As stated above, there are various types of programs you can choose from. Your business model may not fit them all and you should make sure you choose the right fit for your business. The above types and examples of programs are the dominant ones on the market that you should at least give a go if you have not decided yet. 

In addition, a good program is not only one that gives out the most reward, but rather, one that is well connected to your business and represents your values the best.

4.2. Develop An Omnichannel System For Your Target Audience

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Poor customer experience, especially for new customers, is a risk that most businesses simply can not take. First impressions are even more important now that customers have a variety of brands to choose from. As a result, you need to create a user-friendly, cross-channel platform that is comfortable and convenient for your customers. One of the ways to achieve this is by designing a user interface that is both concise and responsive that will allow customers to subscribe or redeem rewards easily and quickly.

4.3. Introduce Premium Services For A Fee

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If there are any VIP incentives in addition to the standard rewards in your program, you must enact a premium service. It’s the only way to cover the expenses incurred. While most VIP-focused loyalty programs require an annual subscription, this allows members to avoid entrance hurdles for special deals and enormously attractive prizes.

4.4. Market Your Loyalty Program

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The existence of your loyalty program must be known if you want anyone to join it. Launching marketing campaigns can raise awareness of your loyalty program and may persuade new consumers to test your product as well. While site design, and developing landing pages that attract individuals to join, are crucial elements in creating a loyalty program, you’ll need to employ marketing to make them aware of the program you’ve built.

One of the most crucial parts of promoting your reward program is personalization. This could help you increase your engagement rates by ensuring that all of your clients are engaged and feel like they are a part of your brand. Personalization in emails and online landing pages will make it simpler for individuals to connect with your products or services on an individual level, leading them back into physical stores.

4.5. Keep Track Of The Performance Of Your Loyalty Program

Measuring the success rate of your program is practically invaluable. If your loyalty program does not include a tracking formula, you should redesign it from the beginning. Your goal is to determine how satisfied, significant, and receptive your consumers are. You may evaluate the corresponding metrics using analytical tools. Here are 6 metrics, frequently used to measure the success of your loyalty program:

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Keeping track of these metrics will prove essential to your business in the long run. A successful loyalty program that actively engages consumers will result in a greater retention rate, as well as more brand advocates who will remain loyal to you.

5. Conclusion

Having loyal customers that make repeat purchases, is the dream of many businesses. Setting up a quality loyalty program that focuses on customer experience is a vital strategy that most brands should aim for. There are numerous varieties of programs, with each one having its own unique way of retaining customers. You also need to make sure that your program is well known through awareness marketing campaigns and your customer experience’s game is on point. Last but certainly not least, keeping track of important metrics will help you understand your programs, your loyal customers and how to maintain a great and healthy relationship with them.

Kyanon Digital is currently providing the loyalty platform solution for Starbucks in Vietnam, Singapore, Cambodia and New Zealand. Should you be interested in our services, do not hesitate to contact us using the form below.

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