Any Seinfeld fans out there? As a marketer, one of the most intriguing episodes for me was where the character Elaine suffers through a series of tribulations to accumulate enough points to be eligible for and then redeem a free sub sandwich. It's an interesting message around incentives that ecommerce companies can learn some lessons from.
Two clear strategies exist for creating loyalty programs that will keep buyers coming back for more. Before you put either strategy into place, it’s a good idea to determine the LTV of the customers you’re targeting and decide how much you’re willing to spend to retain those customers. Some customers may not be worth investing in retaining. By rewarding buyers too soon or too often, you may build a nice fan base while losing money.
Once you’ve determined how much a buyer needs to spend to earn loyalty rewards, you must then decide how to share those points. For instance, you might advertise that customers earn five points for every $50 they spend. Those points could then translate to a dollar amount once enough have been amassed. As buyers check out, your page could show how many points they earned with their purchase. The next time the customer logs in to browse your site, a total could be posted on the front page of the site, or you could use the points total in email marketing to re-engage stale contacts.
In terms of determining point values, start with what metric you're trying to enhance and align your points with that. Foodler does a pretty good job with this - they show the points you've accumulated after each transaction to build a perception of sunken costs in the customer so that the customer feels they already have value invested in the next transaction. However, their points are structured in such a way that you need to purchase 3-4 times before you get free food, and at that volume promotion redeemers are building a habit that makes the free food well worth it.
To create a sense of urgency, you might show a list of products that could be purchased and share how many points that buyer needs to reach the necessary number. For instance, you should show:
Hello Andrew! You have earned 50 reward points.
This scarf requires 60 reward points for purchase.
This iPhone case requires 75 reward points for purchase.
This custom leather wallet requires 150 reward points for purchase.
When the customer is making a new purchase, he will most certainly check to see how many points he’s earned and how close he is to “winning” one of the items listed.
Another way to foster loyalty might be to surprise your buyers with rewards after a certain amount of purchases have been made. Of course, you’ll want to keep track of the “points” the customer has amassed, but you may not want to share that number with them.
How could this work?
If the customer knows to expect rewards for loyalty but isn’t told how, or why, or when, receiving a surprise reward is a special delight. What you tell the customer with these secret rewards is that you’re aware of them, that you appreciate their purchases, and that you’re willing to go above and beyond to keep them happy.
Local businesses often reward customers in such a fashion, though perhaps not with as much effort into calculating the money earned and money spent. If you’ve ever received a free pint from your favorite bar, you understand the concept. Isn’t it exciting to get that free drink and wonder just why you’re so special?
Delivering Surprise Rewards
Never underestimate the value of random acts of customer delightion. The fun part of surprise rewards is, of course, that the customer doesn’t know they’re coming. Should you let them know when they’ve reached a certain amount of purchases that they’ve qualified for a reward? In this scenario, they then have the chance to choose the reward, which definitely ensures the buyer is happy with the result.
Another option might be to deliver a free product with the purchase of another. While the customer doesn’t have control over what he or she receives, the delight of a surprise overshadows the desire for choice.
How to Choose
Choosing between the two rewards program types may not be easy. You do need to take into account several different factors. The first, of course, is the price point of your products. If many of your products are larger and more expensive, building up points may not be hard for customers, but choosing a new product on which to spend those points might be frustrating or even impossible for your customers. In this case, a small surprise sent with a purchase could be the best option.
The surprise reward option may also be better for younger, trendier buyers. Those who purchase inexpensive clothing by the bagful will certainly appreciate a free accessory tossed in after reaching a specific spending point.
However, serious shoppers who think long and hard before purchases and count every cent spent would more likely appreciate knowing how many points they’ve earned and how those points could be redeemed. A site selling technology products is just one example, but the model could apply to many different buyer personas.
Predictable rewards programs are ideal for conditioning and encouraging specific consumer behaviors, whereas surprise rewards are - by their nature - targeted at non-specific behavioral conditioning since the consumer doesn't know what to do to trigger additional rewards. Because of this, they'll have a significantly more positive overall perception of the relationship with the brand.
Implementing the Program
You want your reward program to stand out from others - especially your competitors. Choosing a clever program name is a great first start. Be sure to create a page on your ecommerce site that explains the program in detail. Include contact information so consumers can ask any questions they feel necessary before signing up for the loyalty program. Then, go crazy promoting your new rewards program on social media and various other outlets. We’re certain you’ll see an excellent return on your time and effort in the form of loyal customers who return again and again to purchase your products.
What other ways could you inspire loyalty in your customers? If a reward program has worked well for your company, we’d love to hear about it in the comments.
Originally published Jan 13, 2014 2:00:00 PM, updated October 20 2016