Customer loyalty programs for online retailers

Customer loyalty programs are a familiar concept with shoppers, and they’ve proven to be a good way of establishing and maintaining relationships with customers - encouraging them to spend more, more often. However, for small online retailers it might seem like a difficult prospect to set up a loyalty program, despite the long term benefits.

We’ve put together an overview of how a loyalty program can improve customer retention, the different types of loyalty program and how small online retailers can implement one.

Why do small online retailers need a loyalty program?

Repeat customers are nine times more likely to convert into a sale than first time shoppers, and they spend nearly 30% more per order - meaning that once a customer has ordered from your business, they become very valuable and you need to ensure they order again and again. 

If the order management, shipping and customer service aspects of your business offer shoppers a great experience with your business, then the next step to maintaining that ongoing relationship with them is to reinforce their loyalty to your brand.

82.4% of customers are more likely to shop somewhere that offers a loyalty program, which means that it can actually attract people to your retail business. 66% have also said that they will modify their purchase amount in order to maximise the number of points that they earn for a loyalty program.

Not only does it encourage and change spending habits, a good loyalty program will also affect how shoppers talk about your business - 73% are more likely to recommend companies with strong loyalty programs.

It’s clear that loyalty programs can have a significant positive impact on your customer retention, however, there’s an emphasis on the loyalty program needing to be well thought out, easy to understand and with achievable rewards.

Which type of loyalty program suits your retail business

Offering a customer loyalty program doesn’t mean that you have to give anything away for free, its focus should be on strengthening customer relationships - keeping them involved and interested in your business and products. There are a number of different ways to run a customer loyalty program including:

Points system

The basic idea behind any loyalty program is going to be that the more you spend, the more you’ll be rewarded. This can be as simple as offering a number of points for every pound that’s spent, and then the points add up to money off. To incentivise customers more, you can offer double points on certain days or on certain products.

Tier system

Either based on the amount someone spends or the points they earn from spending, you can differentiate different levels of loyalty and rewards. As the shopper moves up each level they will have access to more discounts, exclusives, and special offers.

Brand values

For certain brands with a strong focus on values, donations to a relevant charity relative to the amount a customer spends will be an appropriate loyalty program. It may not encourage shoppers to spend more in the same way, but it is likely to create brand awareness, positive feedback, and recommendations.

To choose the best customer loyalty program for your retail business, you need to analyse your most frequent customers and customers with the highest order value. Are these customers always buying the same products or a particular brand? Do they only purchase when items are on offer? Which shipping methods do they use? By looking into their purchase habits you’ll be able to form an idea of what kind of rewards would incentivise them to spend more.

Setting up a customer loyalty program

For most ecommerce platforms such as Shopify, WooCommerce, and Magento, there are a number of apps, extensions, and plugins that can be used to create a customer loyalty program. Popular Shopify apps for customer loyalty reward programs include Smile.io, Swell, LoyaltyLion, Annex Cloud.

Once you’ve set up your customer loyalty program, running it should be almost completely automated, requiring a very minimal amount of work.

Overall setting up a program will attract new customers, encourage them to place another order, and establish a long term relationship with shoppers; improving customer retention. As your customer base grows and orders increase, make sure you can maintain a great delivery experience by using Zenstores to streamline your online dispatch process - find out more here.