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8 Powerful Customer Loyalty Programs for E-Commerce (w/ Examples)

  • Growth Marketing

Acquiring new customers isn’t always as easy as we’d like it to be.

It drains your energy and leaves you with little time for all the other tasks piling up on your desk.

While getting new business is important, there are other ways to grow your business that requires fewer resources and time.

Sounds good, right?

The solution is easy: customer loyalty programs.

New customers don’t generate nearly the same revenue as repeat customers.

In fact, repeat customers spend 67% more than new customers.

But turning new customers into repeat customers doesn’t happen automatically, which is why you should consider a customer loyalty program.

With the right customer loyalty program, your customers will keep coming back to purchase from you, and perhaps turn into brand loyalists.

In this post, I’ll guide you through eight different types of loyalty programs to help you decide which is best for your business.

So, if you’ve ever wanted to retain more customers, increase sales and create brand loyalists, read on…

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What are customer loyalty programs?

Customer loyalty programs are a way of rewarding your repeat customers and encourage them to stay loyal (hence the name).

A good loyalty program is not just about giving away stuff to repeat customers, rather it’s a channel to strengthen customer relationships.

There are several different types of loyalty programs for e-commerce, and choosing one can be difficult.

So today, I’ll guide you through a few different programs and share the possibilities of each one along with examples of how to use them to your advantage.

1. The point system

The point system is one of the simplest reward programs.

It’s based on a simple principle: spend more to get more.

Every time a customer makes a purchase on your website (or in your brick and mortar store), they get a certain amount of points depending on the size of their purchase.

The point system should be easy for customers to understand and calculate, so make it simple.

For instance, $1 could be one point, or every $10 is one point.

That way customers can see the value straight away don’t have to calculate how many points each purchase will give them.

Here’s an example from Walgreens:

Walgreens has included an example below their point system illustrating that for every $50 a customer spends on beauty products they will get 5,000 points.

These points can then be redeemed for discounts on future purchases.

By rewarding customers with points which can be used for discounts, you’re not only increasing your average spend per customer; you’re encouraging them to invest in your brand (thus, reducing the likelihood they’ll switch to a competitor).

Referring to the above example, if a customer buys $45 mascara, they might add $15 makeup remover to get those 5,000 points.

Remember to keep it simple so it’s easy for customers to determine the value of their points.

2. The tier system

The tier system is based on levels of loyalty.

The more loyal your customers are to your brand (read: the more they buy), the greater reward they’ll receive.

Typically used in the travel industry, the tier system is for long term members where the size of the rewards increases over time, encouraging customers to stay loyal.

However, it’s equally applicable in e-commerce.

Here’s an example from EB Games:

They have four levels in their loyalty program: Red, Gold, Platinum, and Onyx.

In this case, customers receive points whenever they purchase something. The more points they receive, the higher the level they’ll reach.

And, the higher the level of loyalty, the more rewards customers will get.

In a study by COLLOQUY, 50% of consumers said they increase their spending or change their purchasing behavior to achieve a higher tier status in a loyalty program.

You need to find a balance between not making it too easy or too hard for customers to reach the next level.

It has to seem realistic for customers to reach next level if you want them to keep pursuing it (and same with next level, and next level).

3. The value-based program

This type of rewards program is for e-commerce businesses who have a large focus on charities—and more importantly, a charitable customer base.

If you structure a loyalty program around your customers’ values, they’re much more likely to become brand loyalists.

So how do you reward your customers without rewarding them?

First, you must define your values.

Let’s say you run an online pet store like Barkbox and you know your audience values animal welfare.

One thing you could do is start a loyalty program similar to the point system where customers’ purchases translate into points or currency.

Then, every time a customer made a $50 purchase, you could donate $5 to an animal rescue organization such as World Animal Protection.

You could then keep customers updated on how much you’ve donated so far and the progress the organization is making due to the donations.

Here are a few other examples of how you can use this for e-commerce:

  • Eco-friendly beauty products.Support environmental organization like Greenpeace and Blueheart.
  • Music equipment or sports equipment. Support local music initiatives and sports clubs.
  • Books and art. Support educational programs, and local art initiatives.

These are just a few examples of how you can incorporate a value-based rewards program into your business.

This type of program creates a unique opportunity to connect with your customers on a deeper level creating a much stronger relationship with them.

4. The coalition program

With loyalty programs becoming more popular, customers are looking for flexibility in rewards.

By partnering up with other businesses, you can create a loyalty program that not only gives more opportunities to customers but also lets you build new business relationships.

Studies show that 68% of millennials will remain loyal to a program that offers them the most rewards.

Moreover, Collinson Latitude found 82 percent of their researched consumers said loyalty programs would be better if they offered more choices.

Partnering with other businesses gives you that possibility.

Here’s an example from a Danish online beauty store, Matas:

Matas has a point-based rewards system and has partnered up with more than 15 different other businesses, so customers can earn points when shopping at any of the partner businesses.

Depending on the number of points customers have, they can log into their Matas account and use their points to shop for different products.

The more points a customer has, the higher-priced product they can get.

Remember that such a program needs to be beneficial for both businesses.

In Matas’ case, the program creates brand awareness and drives sales to all businesses involved. Customers want to quickly obtain more points to get their hands on the more exclusive products.

5. The game program

Who doesn’t love a great game?

By turning your loyalty program into a game app, you can increase customer loyalty, sales, and entertain your customers all at once.

Creating a rewards program based on a game is not that difficult.

A great example is MasterCard, who recently launched such an app on the Danish market.

It’s called “Scan, Spin & Win,” and the concept is simple.

Every time a customer purchases something with their MasterCard, they can scan their receipt and spin the wheel.

The prices vary from free magazine subscriptions, discounts on movie tickets, to golden tickets that enter the user into competitions where they can win large prizes such as travel gift certificates worth $4,600.

One advantage of the game program is you can run sweepstakes to encourage repeat purchases.

If you run an online furniture store, you can use your own products for prices, and every time a customer makes a purchase they get to play a game where they have a chance to win prizes varying from discount vouchers to some of your more expensive products like a new sofa.

6. The paid program

This one’s fairly simple:

Customers pay a monthly or annual fee to join your VIP member club.

For this type of loyalty program to be effective, you need a solid customer base.

It’s unlikely new customers will pay to join a rewards program, so use this type of program to retain existing customers and frequent buyers.

Editor’s note:

You can show a bar at the top of your website for returning visitors only, promoting your loyalty program. Here’s how you can do this with Sleeknote.

Your paid program must include benefits that are exclusive to members or it’ll lose its value.

Here’s an example from Barnes & Noble:

Their VIP program costs $25 a year, and it offers discounts, free shipping, and other benefits that are highly valuable to repeat customers.

7. Hybrid loyalty programs

A hybrid loyalty program is a combination of more than one type of loyalty system.

You can merge two different systems such as the tier based system and the game program, where customers reach new levels of loyalty every time they complete a new level in your game (participation in the game should, of course, entail a purchase first).

Walmart recently launched a hybrid loyalty program:

Their hybrid consists of a coalition program between Walmart, Murphy USA Gas Stations, Neighborhood Markets, Sam’s Clubs and MasterCard.

Members of this loyalty program get discounts on products, gas, and obtain monthly rewards based on how much they’ve spent, and which products they’ve bought.

One important note: Don’t combine too many different systems as it will confuse your customers and they won’t know how to use it.

You can combine a point-based system with a tier system to make it easy for customers to calculate their points, and encourage them to pursue next loyalty level – and thus, purchase more.

8. No program at all

Lastly, I want to emphasize that not all businesses benefit from having a loyalty program.

In some cases, the product is so unique that no incentive is needed to encourage repeat customers.

A great example of such a business is Apple.

Apple has managed to create a brand and product that is so strong that they can rely on their products to generate brand loyalists.

Don’t we all have that one (or more) friend who always has the newest and smartest Apple product and frowns whenever we pull out our PC?

You might even be that friend yourself (no judgment here).

Apple’s customer loyalty is organic and long lasting.

But, only a few businesses can rely solely on their products to increase customer loyalty.

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Keep it simple

Finding the right loyalty program for your business is the hard part.

Once you’ve got your program up and running, it will run automatically and require a minimum of work compared to how much work you put into acquiring new customers.

The key here is to understand your customers and know how you provide value to them.

If your value proposition aligns with your business and you keep your program simple, you’ll generate more sales and increase brand loyalty.

What types of loyalty program are you using? Or do you have any not mentioned on this list? Let us know in the comments below.

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