We’ve written about how throwing a loyalty card at a customer doesn’t necessarily make them more loyal. Now, our friends at Sweet Tooth Rewards are chiming in on the RIGHT way to run a loyalty program. Here’s what they have to say…
Many eCommerce merchants will look at their analytics data and say, “If I could just get my existing customers to buy one more time this year, my profitability would increase drastically.”
They are right! According to the Harvard Business Review, a 5% increase in customer retention can lead to a 95% increase in profitability.
But how do you increase customer retention?
There are many excellent customer retention tools available. One of the most popular is a customer loyalty program. These programs reward your customers for shopping with you, so that they come back and purchase again, and again.
The only problem: if a program is not done right it provides little value at all.
Why Your Customer Loyalty Program Isn’t Successful
We see two common mistakes merchants make, when executing a loyalty program. They don’t differentiate the program and they don’t promote the program.
You don’t differentiate the loyalty program.
If you create a program that is the exact same as everything else your shoppers won’t be engaged. They can get a generic customer experience at any retailer. The trick to a successful program is to make it stand out.
Differentiating a program does not have to be complicated. The easiest ways to make your program unique are:
- Branded names for your program and points
- Unique ways to earn
- Unique ways to spend
Pixi Beauty is a great example. They call their points “pixi dust,” which is a much more memorable name than something like “Pixi Reward Points.” Give your program a name that matches your brand and company ideals. It is an easy way to make your program more memorable and shareable.
Everyone loves to have something that no one else has. It is in our nature.
A loyalty program can capitalize on this desire, by providing rewards that the shopper can’t get anywhere else–not even in your own store. We call these “points only products”.
Below you can see a great example from theory11, who reward customers with limited edition cards and one-on-one training sessions.
You don’t promote the loyalty program.
A loyalty program is just like any other marketing initiative: you need to promote it. You need to let your current customers know you have launched a loyalty program, and let future shoppers know that you have one.
The best way to let current customers know about your new program is to email them and let them know they have points waiting when they signup (remember we want members to have points to spend). This is an easy way to tell your existing customers about the program and get them engaged right away.
Letting future shoppers know about your program is a little bit trickier.
You need to show shoppers on your site that you have a loyalty program. For some shoppers this is actually part of their purchase decision.
There are many ways to promote a loyalty program, but the most important is homepage visibility. Promoting on the homepage immediately lets potential customers know that they can earn points, and can be a point of differentiation that leads them to choose you. If you want a great example, checkout ToyZoo.
Building a Successful Customer Loyalty Program
Now that you know what actually generates loyalty and the common mistakes to avoid, how do you go about starting an effective loyalty program? Follow these steps:
- Plan ahead
- Start simple
- Add features over time
- Use customer data to improve
Plan ahead.
Start by outlining the emotions you are trying to create with your program, and the goals you wish to accomplish. When you know what you want to achieve, it becomes a lot easier to get there.
For example, your goal could be to create a high class luxury feel with your program, that aims to get customers to shop 2 more times each year. This goal is clear and attainable. It gives you a point of reference when deciding on what to do next.
Start simple.
Start with simple functionality, so you don’t overwhelm your customers. Rewarding for account signups and purchases are great ways to get customers interacting with a program. Once they have spent points on a reward, they will be motivated to earn more points. This is when you can start to add additional ways for them to earn points, like referrals.
Add features over time.
Adding functionality over time has one more amazing benefit: sustained marketing. Every time you introduce a new feature you can reach out to your customers and encourage them to come check it out. When customers see that you keep giving them more, they’ll keep wanting more.
Use customer data to improve.
The final step in the process is to evaluate your program using data. Be sure to check your analytics to see what is working and what is not. Your loyalty program should be helping you achieve the objectives you set at the very beginning. The trick here is that you need a way to consolidate your customer and product data, which can be especially when executing a multichannel strategy.
Be sure to also focus on the customer experience you are providing! A loyalty program isn’t a substitute to a great customer experience. They need to work in tandem. You can learn more about creating loyalty through customer experience in the white paper below.
The 4 steps above are a really easy way to visualize a loyalty program implementation. We recommend going through them to clients all the time.