Competition is fierce in the fast-paced world of ecommerce and consumers are inundated with options, so customer retention emerges as the golden goose that keeps the eggs coming. One-time purchases may drive initial sales, but it's the repeat customers who become the lifeblood of any successful ecommerce operation.
These are the customers who not only contribute consistently to your revenue but are also more likely to become brand evangelists, singing praises and recommending your products or services to their networks. For this reason, business owners are always on the lookout for effective strategies to not just attract but also retain customers.
That's where meticulously designed loyalty programs come into play. By offering valuable rewards, special discounts, or exclusive experiences, these programs incentivize customers to stick around for the long haul. In today's digital age, where personalization is key, loyalty programs can be particularly effective when they're fine-tuned to the specific needs and preferences of individual customers.
Rather than offering a one-size-fits-all program, ecommerce platforms can use data analytics and even AI tools to tailor their offerings for maximum appeal. The result is a win-win situation: customers enjoy a more personalized shopping experience and are more likely to stay loyal to the brand, while businesses see increased revenue and a more stable customer base.
This article is the third in our series on how to delight ecommerce customers. We'll dive deep into how loyalty programs can increase customer lifetime value, boost ecommerce sales, and contribute to a well-rounded marketing strategy. (Check out the first part and the second part)
11 Popular Types of Loyalty Programs
1. Points Programs
Customers earn points with each purchase, which they can later redeem for goods or discounts. For example, a customer who shops at a fashion ecommerce site might earn 10 points for every dollar spent. Once they accumulate 1,000 points, they could exchange these for a $10 discount on their next purchase. This encourages repeat business by offering tangible rewards for continued spending. It creates a sense of achievement and immediate gratification, which in turn fosters brand loyalty.
2. Tier-based Programs
These programs offer different "tiers" of rewards, getting better as the customer spends more or engages more. For instance, a coffee shop could offer a bronze, silver, and gold tier, each with increasing benefits like free refills, birthday specials, or exclusive event invitations. To move from bronze to silver, a customer might need to make 30 purchases in a year. This adds an element of exclusivity and aspiration, motivating customers to engage more with the brand to climb the tiers.
3. Mission-based Programs
Mission-based programs allow customers to donate their rewards to charitable organizations. Imagine an online pet supply store where customers can donate reward points to animal shelters. Not only does this give the customer a sense of fulfillment, but it also aligns with the brand's mission of animal welfare. This builds a deeper emotional connection between the consumer and the brand, elevating the relationship beyond mere transactions.
4. Spend-based Programs
Customers get rewards based on the amount of money they spend within a specific timeframe. For example, a bookstore might offer a free book to customers who spend more than $200 in a calendar month. This encourages higher average order values and pushes the customer to make additional purchases to reach that spending threshold. It adds an element of urgency and exclusivity, as these perks are time-sensitive.
5. Gaming Programs
Gamification in loyalty programs involves adding game-like elements to engage customers. Let's say a travel booking site offers a "traveler's journey" game where customers earn badges for booking hotels, flights, or activities. Unlocking badges could give customers access to special discounts or exclusive deals. This makes the shopping experience more interactive and fun, encouraging continuous engagement with the brand.
6. Free Perks Programs
Offer free shipping or a small free item after a certain number of purchases. For instance, a cosmetic store might offer a free lip balm after every fifth purchase. This not only gives an incentive for repeated purchases but also allows the customer to try new products, potentially increasing their basket size in future visits. Moreover, these free perks act as delightful surprises that can enhance customer satisfaction and build positive associations with the brand.
7. Subscription Programs
Customers pay an upfront fee for VIP perks. Imagine a gourmet food delivery service that offers a subscription program where, for a yearly fee, customers receive monthly premium items not available to regular customers. This creates a feeling of exclusivity and can secure a reliable revenue stream from committed customers. Additionally, the upfront fee creates a sunk cost that can motivate customers to engage more with the brand to make the most out of their investment.
8. Community Programs
Build an online community where loyal customers can share tips and tricks, much like Sephora's Beauty Insider program. For example, a fitness brand could create an online community where customers can share workout routines, nutritional tips, and encourage each other in their fitness journey. This creates a sense of belonging and offers additional value beyond the product itself. Such a community also provides a platform for the brand to directly communicate with its most engaged customers.
9. Refer-a-friend Programs
Reward customers for bringing in new business. If a customer refers a friend who makes a purchase, the original customer might receive a $20 gift card. This not only encourages existing customers to promote the brand but also brings in new customers at a relatively low acquisition cost. Moreover, a successful referral can increase the original customer's emotional investment in the brand, as they become a stakeholder in its growth.
10. Paid Programs
These require an upfront fee but offer exclusive perks. A video streaming service, for instance, might offer an ad-free experience and exclusive content for paid members. Customers see immediate value in their membership, making the upfront cost justifiable and increasing long-term loyalty. This model is especially effective for brands with robust offerings that can consistently deliver value over time, further justifying the initial investment.
11. Cashback Programs
Offer a percentage of the purchase price back as store credit. For instance, a furniture store could offer a 5% cashback in the form of store credit for every purchase. This incentivizes customers to return and make another purchase, knowing they have store credit waiting for them. It's a mutually beneficial program that keeps the customer engaged while also encouraging repeat business. This can also aid in upselling, as customers are more likely to consider higher-priced items knowing they have some store credit to offset the cost.
Case Studies Of Successful Loyalty Programs
Grubhub’s loyalty program, Grubhub Points, allows customers to redeem ongoing offers, which can total more than $400 in free food at any given time. For every dollar spent, customers can earn 20 points. The program helps its restaurant partners promote their restaurants on the app by introducing customers to places they haven’t tried before.
Grubhub's approach benefits both the customer and restaurant partners. By offering a points system, it incentivizes customers to continue ordering through their platform. At the same time, it allows restaurants to gain visibility among new potential patrons. The more the customer engages with the platform, the more points they earn, leading to a cycle of increased customer retention and acquisition for Grubhub and its restaurant partners.
Sephora’s Beauty Insider program gives customers a choice of gifts based on a points system. It also offers something unique: an online community. The Beauty Insider community is an online community where customers can ask questions, share their looks, and swap tips.
Sephora's Beauty Insider program extends beyond just transactional loyalty and taps into emotional and community engagement. The online community acts as a gathering space for beauty enthusiasts to share advice and experiences, creating a deeper connection between the customers and the brand. This holistic approach to customer loyalty encourages both repeat purchases and community participation, leading to a more engaged and committed customer base.
Three Ships, a natural skincare brand, runs a community by the name of Fleet and provides discount coupons to customers not only for their own use but also to distribute them to friends and family. They have thus turned their community into a tool that not only helps them retain customers but also acquire new ones.
Three Ships' Fleet community acts as both a retention and acquisition tool. By offering discount coupons that can be shared with friends and family, they incentivize current customers to spread the word about the brand. This referral mechanism effectively converts existing customers into brand advocates, thereby not only retaining their business but also acquiring new customers through trusted recommendations.
The Body Shop
The Body Shop’s Love Your Body Club is a mission-based loyalty program that gives customers the option to donate their rewards to charitable organizations. For every 100 points earned, users get $10 to spend on products or donate to a charitable partner, such as: Black Lives Matter, No More, World Land Trust, Born Free USA & Wires.
The Body Shop's Love Your Body Club brings a unique ethical dimension to customer loyalty programs. By offering an option to donate rewards to various charitable organizations, they attract a consumer base that values social responsibility. This mission-based program not only cultivates loyalty but also aligns the brand with ethical consumerism, creating a strong emotional and ethical bond with their customers.
What Effect Do Loyalty Programs Have on Ecommerce Customers?
Loyalty programs offer incentives that naturally encourage customers to engage more frequently with a brand, whether it's through making purchases, writing reviews, or sharing products on social media. For example, a points program might offer bonus points for sharing a purchase on Instagram, thus encouraging not just buying behavior but also social sharing. This amplified interaction helps the brand remain top-of-mind for the customer, thereby boosting the potential for future purchases.
Increased engagement also means increased data; the more a customer interacts with a brand, the more insights the brand can gather to further personalize the shopping experience. Ultimately, greater engagement not only enhances the customer's experience but also allows the brand to better understand their customer base.
Higher Retention Rates
When customers feel that they're gaining something extra by staying loyal to a brand, they're less likely to defect to competitors. For example, if a customer is part of a tier-based program where reaching the next level offers substantial benefits, they're incentivized to continue shopping with that particular brand to unlock those rewards.
Customer churn is a significant concern for any business, and reducing it even by a small percentage can have a major impact on revenue. Retained customers also tend to be less price-sensitive, especially if they feel they're getting value from the loyalty program. Ultimately, loyalty programs build a sense of commitment and reduce the lure of one-time promotions from competitors.
Improved Customer Lifetime Value
Loyalty programs can significantly enhance the Customer Lifetime Value (CLV) by incentivizing repeat purchases and deeper engagement. For instance, a spend-based program might encourage a customer to reach a spending threshold within a month to earn a special reward, thus encouraging more frequent and higher-value purchases.
Over time, this increased spending can substantially lift the average CLV, making it a more profitable long-term relationship for the brand. Moreover, high CLV customers often become brand advocates, amplifying the brand's reach and reputation. Therefore, loyalty programs serve as an investment in developing more profitable and long-lasting customer relationships.
Customers who frequently engage with a brand through a loyalty program are often more invested in the brand's success and are therefore more likely to offer constructive feedback. For example, a mission-based program could allow customers to suggest new charitable causes to support, creating a feedback loop that directly contributes to the brand's mission and product development.
Customer feedback is incredibly valuable for any business, offering insights that can drive improvements in product quality, customer service, and overall strategy. The more a customer feels invested in a brand, the more genuine and detailed their feedback tends to be. Brands can leverage this feedback to not only improve but also to deepen the relationship with the customer by showing that their opinion is valued and acted upon.
Enhanced Emotional Connection
A well-structured loyalty program can evoke a sense of belonging and appreciation in customers, deepening their emotional connection to the brand. For example, a community program like Sephora’s Beauty Insider could create a platform where like-minded individuals share beauty tips and product reviews, fostering a sense of community and belonging.
This emotional connection makes the customer more likely to return, even in the face of potentially cheaper or more convenient alternatives. Furthermore, emotionally connected customers are more likely to become brand advocates, sharing their positive experiences and recommending the brand to friends and family. In a market saturated with similar products, an emotional connection can serve as a significant differentiator, turning a one-time buyer into a lifelong customer.
How To Supercharge Your Loyalty Programs With Maverick
Maverick's AI-generated video technology takes the concept of personalized customer interaction to a whole new level, and this can be a game-changer for your loyalty programs. Imagine a points-based program where, upon reaching a specific milestone, a customer doesn't just receive an automated email but gets a personalized video message congratulating them.
Or consider a tier-based program where customers are welcomed to each new tier level with a custom video, making them feel truly special and appreciated. With Maverick, these scenarios aren't just possible; they're easily implementable. The platform integrates seamlessly with your existing ecommerce tools—be it Shopify, WooCommerce, Klaviyo, or Omnisend—allowing you to enhance your loyalty programs without any cumbersome engineering work.
Moreover, Maverick’s pre-built scripts and templates make it incredibly easy to add these personal touches across multiple touchpoints in the customer journey. Whether it's sending a video to thank a customer post-purchase or a specialized message to re-engage long-lost customers, the possibilities are endless. What sets this apart is the genuine emotional connection that a video message can establish compared to text-based communication.
Videos also increase customer engagement rates—by as much as 3X, according to Maverick's own metrics. By blending the personal touch of video with the power of a well-designed loyalty program, you're not just increasing customer retention and lifetime value; you're creating brand apostles who will spread the word about your incredible service.
Loyalty programs are a cornerstone in building a long-term relationship with your customers. The integration of Maverick’s AI-generated videos can magnify the effectiveness of these programs. From personalized thank-you videos to customized updates on loyalty points, the possibilities are limitless. Implement these strategies today to skyrocket your ecommerce sales and bolster your customer service efforts.
Maverick uses AI-generated video to help ecommerce stores have personalized interactions with each of their customers across their journey. Start boosting your customers’ lifetime value (LTV) today with personal videos at scale!