Designing an E-Commerce Loyalty Program to Increase Retention and Sales

Loyalty programs are the perfect customer retention tool. We already know that it costs less to retain an existing customer than to gain a new one. Loyalty programs are an important part of your customer’s post-purchase journey. They are a way to keep your customers engaged with your Magento store after they make a purchase and encourage repeat visits. Studies show that customers who are members of loyalty programs generate between 12% and 16% more revenue than non-members.

Have you ever tried to pull a child away from a video game only to be met with “Please, just one more level!”? Games are addictive, you don’t want to stop playing. Loyalty programs can be very effective because they essentially “gamify” shopping with your Magento store. Games reward you as you continue playing, the more you play the more you win and a good loyalty program is much the same. Rewarding customers for hitting different milestones in their purchasing journey is a very effective way to keep customers coming back for more.

 

 

However, like any good game, a good loyalty program needs a well-planned value system. You don’t want customers to feel manipulated or like they bought into a gimmick – the whole idea is to make them feel rewarded for shopping with you. If your customers have to spend thousands of dollars to only receive a $5 coupon, chances are they aren’t going to be interested in participating in your program.

This guide will walk you through the different elements that go into the creation of a loyalty program including:

• Setup
• Choosing actions to reward
• Key Considerations
• Implementing Rewards Programs on Magento 2

 

Setup

There are some key aspects you may want to consider when setting up your new loyalty program:

 

1. Name

The first and most basic action is to decide on a name for your loyalty program. Creating a unique, catchy, and identifiable name for your program will help to set you apart from your competitors and leave a lasting impression on your customers.

 

2. Points Value

Points are money, so you need to be sure you know how much they are worth – and how much you are comfortable giving away. The most basic conversion value is 1 point is equal to $1. Some stores may set minimum and maximum limits for how many points can be used at once.

 

3. What Actions Recieve Points 

• Creating an account: Rewarding account registrations is a simple way to encourage registration on your website. Registrations are a high value action for a number of reasons. Customer accounts allow customers to check out faster in the future – with 27% of shoppers abandoning carts due to lengthy checkout processes, you are more likely to have repeat customers if you are able to shorten this process for your customers in the future. When your customers create accounts you also get access to crucial marketing information, such as email addresses.

• Birthdays and Holidays: Everyone likes to get a gift on their birthday or a holiday. These are also times of the year when people often have extra cash they may have received as gifts. Giving a gift of points during these times is an excellent way to show your customers you care by remembering these important events and encourage people to spend money with your store by giving them a little free gift.

• Social Actions: It’s no secret that a strong social following is an important component to modern success. It helps to build and an audience you can market to. Social actions such as “liking” on Facebook, “following” on Twitter, and Instagram help to build your social following. Giving rewards points to customers who complete social interactions is an easy way to build up your social following while providing your customers with a reward for their interaction.

• Referrals: By rewarding points for referrals you turn your loyal customers into brand ambassadors. Studies rank referrals as the most trusted form of advertising. When you give your customers a reward for telling their friends, they are much more likely to tell their friends.
• Reviews of Products: You can award rewards points to customers who review products on your store. This is a great way to encourage customer reviews, as your customers will feel like they are getting something in return. Customer reviews are an important aspect of any online store as studies show that 63% of customers are more likely to purchase from an online store that has reviews.
   
  
  

  Cosmetic subscription-box company Birchbox gives 10 points per review for customer’s first five reviews of items received in subscription boxes. Which equates to a value of $5 in their store – in addition to one point per dollar you spend in their store. This is a simple and fun way to encourage customers to review the products in their monthly boxes for something that holds value among their customer base – money off their next order of cosmetics.

   

4. How Many Points to Reward

Once you know what your points are worth you can decide how many points to award for each action. Will all actions be rewarded the same? Or are some actions a higher point value than others? If one point is equal to $1, and you give a customer 2 points for liking your brand on Facebook, that’s a $2 investment into that customer. You need to make sure the amount of points you are awarding per action is worth it to your business.

 

5. Loyalty Program Page

Once you know what your points are worth you can decide how many points to award for each action. Will all actions be rewarded the same? Or are some actions a higher point value than others? If one point is equal to $1, and you give a customer 2 points for liking your brand on Facebook, that’s a $2 investment into that customer. You need to make sure the amount of points you are awarding per action is worth it to your business.

 

Key Considerations

There are some key things you want to keep in mind when developing your loyalty program, including:

• Keep it simple – your rewards program should be easy to join and understand the terms and conditions. For instance, having your point rate be 1 point for $1 is much easier to customers to understand than 1 point for every $4.50 spent.
• Easy to earn and use points –  57% of consumers say they have abandoned loyalty programs because it was too difficult to earn enough points. Customers become more loyal when they actually use their rewards, so don’t make them jump through hoops.
• Easy to join –  You don’t want to have any barriers to join your program, or customers are unlikely to go through the necessary steps. You may want to consider options such as automatic sign up for the program when a customer makes an account with your store, or allowing them to log in with Facebook to create an account.
   
  
  

  The Macy’s Plenti rewards program is a great example of a program that is easy to join, clearly laid out, and easy to use your rewards with.

   

Creating a Loyalty Program on Magento 2

The Magento 2 Commerce (formerly known as Enterprise Edition) comes with a rewards points system pre-built in the system. This feature expands on catalog and sale rules available in the Magento 2 community edition. However, this built-in rewards points system is only available for the Magento 2 Commerce. You can create rules that automatically reward your customers for different actions. Your customers can then redeem their points on your store. If you are running the Magento 2 Open Source (formerly known as Community Edition) and want to set up a rewards points system you may want to consider one of the many extensions available on the marketplace.

 

Closing Thoughts 

Customer Retention should be a top priority for any Magento store owner. A well-crafted loyalty program keeps customers engaged with your store and gives customers a reason to come back again and again. If you are able to create a loyalty program that entices customers and makes them feel like they are getting a great deal when shopping with your business you will create a loyal customer base.

Do you need help setting up your own loyalty program? Customer Paradigm can help! Connect with us today and let us help you achieve your e-commerce goals.