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You’d be nowhere without your customers, maybe it’s time to give back to them.
What do you think of when you hear “Loyalty marketing”? Some may think of referral programs, others of points systems, and so on. A lot of these phrases, at least when looking at how they are used in eCommerce today, may lead you to believe that loyalty programs are a modern invention, when in fact they were one of the first methods that retailers used to encourage customer loyalty. After all, a physical coupon is just a compact version of a loyalty program.
eCommerce led loyalty programs differ from traditional ones in several ways, both in terms of how they operate - you won’t likely see someone with 6 half completed loyalty programs for the same brand tucked under their car visor - and in how customers view them.
In this blog, we want to look at how you, as an eCommerce brand, need to go beyond just having a loyalty program in place. And how you, in your pursuit of increasing customer loyalty, may actually be detracting customers
Let’s first unpack what customer loyalty actually means. Sure, we, as brands and marketers, may have our own definition of what customer loyalty means, in fact you need only click on one of Google’s first results to get a pretty good definition.
“Customer loyalty is the act of choosing one company’s products and services consistently over its competitors.” But, to customers who may be less aware, customer loyalty is more akin to muscle memory than to an active choice, people do what they know after all.
Having a strong base of loyal customers does have a clear impact on business growth and profitability, however. You’re more likely to get repeat purchases, and there’s an increased chance customers will recommend your brand to friends and family, growing your overall customer base.
In 2024 though, customers have become smart to loyalty programs. So, while a loyalty program may have once emphasised a joint level of respect, the power has since swung in the customer’s favour. Customer’s will now seek out benefits, rewards, and convenience, which is reflected in 42% of them getting actively annoyed when a brand doesn’t offer a loyalty program - perhaps a reflection of how common they’ve become. When every brand is doing the same thing, you’ll struggle to stand out. So whilst loyalty programs are a relatively cost effective strategy overall, with 80% of companies who measure the ROI of their loyalty programs reporting a positive 4.9x more revenue than average spend, there is scope for loyalty programs to fail, or for customers to grow tired of them.
There are two things here. Whilst your loyalty program may be something that entices new customers, it should primarily be built with the intention of serving your existing customers. Similarly, this is not a method that brand’s should look towards, with the goal of growing a new revenue stream at the front of their minds. Whilst that is inevitably what a loyalty program sets out to achieve, it should not be built with preserving funds as a primary goal.
Here are some tips to perfecting your loyalty program and ensuring you get a positive ROI.
77% of worldwide customers view product quality as a top driver in what products they buy. Whilst saying “have a high quality product” in a piece intended for eCommerce brands might be the equivalent of saying “breathe oxygen,” when it comes to customer loyalty, and loyalty programs, it really is key. For a customer, there would be no incentive to work towards the rewards in your loyalty program if they’ve bought from you previously and are of the opinion that the rewards are ultimately going towards a low quality product.
20th century psychologist B.F. Skinner once theorised that the rewards and punishment model used to condition rats in a maze has similar dynamics to consumer behaviours. Eventually, the rewards are no longer attractive when they become commonplace. This is not a perfect comparison as ultimately, the consumer is the one holding all of the power. But this does illustrate that, with a loyalty program, after so long the customer is going to create an unrealistic expectation. So if your customer feels that rewards are too easily attainable, they’re going to become disenfranchised with your product offering overall. So, you need to ensure that customers actually get a level of self-satisfaction for reaching your reward tiers.
If fashion, lifestyle brand, KITH’s, recent loyalty program launch taught us anything, it’s that coupons, on their own, are very quickly not going to be enticing enough.
Exclusive products however?
In 2024, everything is integrated. Your web development and design teams work in tandem, your retail stock management is linked in with your paid ads, and so on. So ideally, your loyalty program should be integrated with your product development. We recently saw KITH integrate a loyalty program with exclusive products offered to individuals in each tier of the program. If you have a white hot customer base that are going to want those exclusive products, there is an opportunity to sell them more. This is going to encourage buy-in to your loyalty program and make those customers feel like part of an exclusive club.
Whilst this piece has made clear that loyalty programs are a two way street, and that you, as the brand, have to be equally loyal to your customer as the customer has to be loyal to you for the program to succeed. However, this does not mean that there is no scope to benefit from loyalty programs beyond just creating happier customers.
To look into this, we’ve teamed up with our partner Loyalty Lion, the data-driven loyalty and engagement program empowering eCommerce brand’s customer loyalty efforts. So hear it directly from the source, here are Loyalty Lion’s tips for measuring the success of your loyalty program, how to set objectives for it and how to collect and analyse the data it creates.
When writing these blogs we try to stay away from saying “far too often do eCommerce brands go blindly into SEO” or other reductive phrases, as we know first hand how difficult, and how daunting, each of these disciplines can be. That being said, we do see objectives for loyalty programs made with little consideration for their measurability, their achievability, or how controllable each objective is.
This is a three pronged notion of course, but each attribute is equally important.
Your online checkout system is the ever refilling well of data in eCommerce, be it the success of your product portfolio, the time of purchase, or customer journey mapping. We can add your loyalty program to that list too. Integrating your loyalty program with your online checkout system allows you to track and attribute customer purchases and behaviours directly to their loyalty account. Not only does this allow you to segment your loyalty customers away from others, but allows you to segment customers within that subsegment too. Furthermore, this allows you to benchmark the performance of your loyalty program.
Benchmarking is not just a one-time task that you can do once and call it a day. Like with every other measurable statistic, it requires a more regular review.
You need to look into the causes why you may or may not be succeeding, and adapt accordingly. Finding a lot of this information will be challenging, so you'll most likely need to make some educated guesses. However, your goals will have far greater significance if you are able to perform some sort of benchmarking.
A loyalty program should be a positive cycle that brands can learn from and use to excite customers. Whilst it should not be looked at as the solution that will pull you out of a financial hole, if you have a loyal customer base and want to both capitalise and reward them for sticking around, there are few better options.
To enquire about building a loyalty program click here.
