Customer lifetime value can make or break your eCommerce business. Simply put, you spend a certain amount of money on customer acquisition, and must earn that back (and then some) throughout the customer’s relationship with your brand.
In this article, we’ll talk about benefits you can provide to attract and encourage fiercely loyal, long-time customers.
Benefits of loyalty programs
It may seem counterintuitive for merchants to “give away” free perks when they could re-invest the savings back into their business instead. However, loyalty programs are an investment into the long-term health of your business, buyer experience, brand relationships, and customer retention.
Here are just a few benefits of customer loyalty programs backed by the numbers:
- 75% of customers would switch to a brand with a better loyalty program, according to KPMG.
- 52% of customers will prioritize shopping with brands they have points and rewards with, according to LoyaltyLion.
- Increasing retention by 5% can increase profits 125% according to Salesforce.
- Customers who sign up for a loyalty program are 47% more likely to make a second purchase with that brand than customers who didn’t, according to LoyaltyLion.
Beyond the statistics, customer loyalty programs do so much more for your brand (and your bottom line).
Attract new customers
Great loyalty programs attract new customers and convince shoppers who are on the fence to convert. You can optimize the perks based on what best captures new customers, what your target audience values the most, and what behavior you want to encourage in your customer base.
Increase average cart volumes
You can tie larger cart volumes to more rewards, encouraging shoppers to order more to unlock perks like free shipping, bonus points, or a free gift for loyalty members.
You can even encourage shoppers to add new items you’d like them to try. For example, offer a free surprise gift when someone purchases a certain product bundle.
Capture customer information
Having a direct line to your customers is a necessity with modern privacy protocols. No one likes it when an ad interrupts a video, or disguises itself as a social post from a friend or family member.
However, loyalty programs get your customers to opt in to communications and willingly give you their information to contact them. That earns your brand more of a welcomed status versus that of an invasive interruption.
Lower marketing costs
Customer loyalty programs boost retention and serve as an additional conversion driver, which helps lower your overall marketing costs. You can even plan out your rewards in advance to boost your ROI.
For example, if you sell custom vitamins, you might offer one batch free during the birthday month of your loyalty program members. You can plan your delivery in advance and use standard shipping instead of express to ensure it arrives on someone’s birthday.
Stop competing on price
A loyalty program gives you a competitive advantage and differentiates you from your competitors. That means you can stop focusing on price, and instead highlight the benefits of your loyalty program.
Build brand advocates
A great loyalty program rewards your biggest fans and turns them into brand advocates. By showing your appreciation and giving back to your best customers, you produce an excellent customer experience that makes them feel valued.
3 Loyalty program structures
Loyalty programs come in different structures, ranging from a point system where customers can claim rewards, to straight cash. Here are a few of the most common.
This type of loyalty program rewards customers with points based on how much they spend. The points can then be used either to redeem rewards or be exchanged for store credit for a discount on their next purchase.
The point system is great for rewarding larger cart values, and providing special offers like “double points on all Black Friday purchases,” for example.
Some loyalty programs give complete access to rewards under a regular membership fee. Although this isn’t as common, it works well for brands who want to turn their loyalty program into an additional revenue stream. For example, membership shopping unlocks access to products for members who pay a fee.
Some loyalty programs offer tiered rewards based on a customer’s purchase history and volume. For example, you could have an entry-level reward for first-time customers that unlocks a free gift with their next purchase (a great way to get them to order again and try a new product).
Tiered rewards programs are excellent for encouraging a specific action or result. If you want to focus on boosting cart values, you can offer rewards the more people spend. If you want to focus on retention, you can offer more rewards the longer someone is part of the loyalty program (provided they make at least one purchase per year, or whatever parameters make sense for your brand). If you want more referrals, you can offer a 20% discount for every successful referral, or free two-day delivery on the first order of a referred customer.
How to encourage and reward customer loyalty
Now that we’ve covered the basics of loyalty programs, let’s discuss what kind of loyalty rewards keep customers coming back.
Provide a discount for customers in your loyalty program, such as 10% off all purchases, and 20% off during their birthday month. You could also offer tiered discounts based on product types, like a larger discount on perishables.
2) Free gifts
You can offer a free gift for multiple criteria, such as: every other purchase, to encourage your customers to shop more often; on a minimum order, to help raise your cart values; or for every purchase of a certain item, to entice customers to try new items.
Free gifts are a great way to surprise and delight your customers, while giving out extra stock or introducing new items.
3) Free shipping
90% of consumers say free shipping is their top incentive to shop online more, according to Invesp. Free shipping also results in larger cart volumes, and 61% of consumers are somewhat likely to cancel their orders due to lack of free shipping.
This benefit is an excellent way to give your shoppers what they want as a reward for their loyalty.
4) Early access
Provide early access to sales and products for your loyalty club members. This promotes an excellent VIP experience, and helps ensure customers snag the deals and items they want as an additional benefit.
5) Exclusive sales and events
Taking the early access concept a step further, you could host private sales and events for your loyalty club members. These would be accessible by invite only, giving shoppers more incentive to make a purchase to avoid missing out.
Offer your loyalty customers the option to subscribe to recurring replenishment or automated purchases. These are excellent because they’re convenient and can be fun (throw in some free stickers).
7) Birthday treats
Show your customers you remember them on their special day with birthday treats. You could provide a birthday discount, gift, or additional points to apply to purchases.
8) Charitable donations
Give your customers a choice in how their purchases make an impact. One of your loyalty rewards can be selecting a charity of their choice to donate a percentage of their purchases.
Wrapping up — Leverage customer loyalty programs to create brand advocates and extend CLV
Brand loyalty is on the rise, and now is the best time to offer your customers what they want with a loyalty program. The longer your buyers stay loyal to you, the higher your customer lifetime value becomes. How pleased your customers are, and how long they stick with you, ultimately depends on your efforts.