Earning a customer’s loyalty could help differentiate your business from competitors and ensure one-time consumers convert to recurring buyers. So how can you ensure your customers will want to come back for more? eCommerce customer loyalty programs could be the answer.
In this article
Most people are probably more familiar with loyalty programs in the form of coffee shop paper cards and stamps. However, like most things nowadays, loyalty programs have also transitioned to online formats. For example, many eCommerce websites have implemented loyalty schemes in their business models as a way of formalizing and strengthening relationships with consumers.
It’s evident that eCommerce customer loyalty programs can benefit consumers through rewards programs, VIP privileges or free shipping. But what’s in it for the business? It may seem counterintuitive, especially for new or small businesses, to include free extras in their offering, but earned loyalty and repeat customers have a higher value in the long term than what will be given away.
However, it’s not enough to simply offer extras to everyone, it’s essential to track customer behaviour and reward loyalty accordingly. Small business loyalty program software can help implement an advanced tracking system and ensure businesses grow their revenue whilst building lasting relationships with their customers.
What are the 5 stages of customer loyalty in eCommerce?
With the implementation of a loyalty program in eCommerce, customers should naturally advance through the five stages of the pipeline: awareness, consideration, conversion, retention and advocacy. If you are able to nurture your customers appropriately during each step, they should reach the advocacy phase. In other words, you have successfully converted them into a loyal, returning customer.
Customer acquisition refers to the process of gaining new customers for a business, typically through marketing and outreach efforts. It involves attracting and converting prospects into first-time buyers.
On the other hand, customer retention focuses on maintaining and nurturing existing customer relationships, aiming to encourage repeat business and loyalty. Retention strategies involve personalized experiences, loyalty programs, and excellent customer service.
Why are customer loyalty programs important for SMEs?
The number of users in the eCommerce market in Canada reached 27 million in 2022 —or 75% of the Canadian population— and is forecast to grow to 77.6% of the population by 2025. This means it has become even more important for businesses to attract and then retain their consumers on eCommerce platforms. In the dynamic landscape of small and medium-sized enterprises (SMEs), customer loyalty programs serve as pivotal tools in establishing lasting connections with customers, fostering repeat business, and creating a competitive edge in the market.
Benefits of customer loyalty programs
- Retention: Loyalty programs help in building a base of repeat customers, reducing churn, and increasing customer lifetime value (total earnings from a customer during their relationship with the business). You can also consider implementing CRM software to aid customer retention through features for tracking customer interactions, preferences, and feedback.
- Brand advocacy: Loyal customers may refer people, write positive reviews, and share their experiences on social media, helping to generate organic growth for the business. The use of customer advocacy software could further encourage consumers by rewarding them for advocating and tracking their referrals.
- Reinforcing your reputation: Business reputation grows by building trust, offering transparent rewards, and fostering community, contributing to positive customer-centric experiences. For eCommerce businesses, the importance of digital reputation cannot be overstated.
- Consumer insights: Small businesses can use data from loyalty programs to understand their customers, tailor marketing efforts, and improve the customer experience. Business intelligence software is an effective way to generate these insights, which will help leadership with better decision-making.
eCommerce loyalty program ideas for SMEs
The next step is choosing the right implementation of a loyalty program within your business model that fosters the best environment for retention and brand advocacy. Some options to consider include:
1. Points-based reward programs
A points-based rewards program is one of the most common eCommerce loyalty programs, which encourages customer loyalty by awarding points for specific actions or purchases. Customers can usually enrol for free, earning points through transactions, frequent purchases, referrals, or social media engagement. Points can usually be tracked through various channels, with transparent communication on balances, promotions, and exclusive offers. Redemption options can include discounts, free products, or exclusive access. A user-friendly redemption process ensures customers can easily access the program's benefits, promoting sustained engagement and brand loyalty.
2. Free perks
Free perks loyalty programs are best when used in conjunction with an existing loyalty scheme. For example, you could offer a free birthday gift for users already signed up to the points based reward program or a welcome gift for those that join the program. You will gather this customer's information and a birthday gift will encourage loyal users to return and even refer their peers to the scheme, just for the free gift. This sparks interest and uptake amongst a larger number of potential customers and encourages them to visit the online store.
3. Tier-based
A tier-based eCommerce loyalty program caters to high-value customers by offering exclusive benefits like personalized discounts, priority customer service, and early access to events or products when you reach a higher tier. Through the identification of tiers based on spending, the program fosters a sense of exclusivity and appreciation. Alignment with customer preferences also enhances loyalty and encourages sustained engagement with the brand.
4. Free shipping
A free shipping eCommerce loyalty program encourages customer loyalty by providing complimentary shipping benefits. Members, who typically enrol for free, unlock free shipping through qualifying purchases, minimum order thresholds, or loyalty tier levels. Paid subscriptions to free shipping also exist, where customers can pay a reduced price for a year of free shipping, for example. The program's success relies on strategic design, regular communication, and responsiveness to customer preferences. Businesses should also consider using price optimization software to ensure they stay within sales margins when using this offer.
5. Gamification
A gamification loyalty program in eCommerce adds game-like elements to engage customers. Users earn points or badges by completing specific actions such as purchases, reviews, or referrals. Accumulated points unlock rewards, creating a sense of achievement. The interactive and enjoyable nature of gamification fosters customer loyalty, increases brand interaction, and boosts overall satisfaction, ultimately driving repeat business and customer retention in the eCommerce space. Gamification software can simplify the implementation of this strategy.
In summary: loyalty programs are a valuable tool for eCommerce
Overall, it is clear that loyalty programs have many benefits, especially in terms of customer retention, brand reputation and the provision of consumer insights. In terms of eCommerce, strategies, such as points based rewards programs, encourage referrals, repeat purchases and may even convert regular consumers into brand advocates.
