A CCO Explains How to Run a Successful Ecommerce Loyalty Program

Many ecommerce brands don't have effective customer retention policies. They rely on ‘price wars' where they undercut the competition by offering lower prices or larger discounts. This is fine when they're offering the lowest price, but the moment someone outbids them customers will leave for the next cheapest option.

And, since we're talking about an industry that's predicted to reach $4.2 billion in global sales by 2020, letting the competition take a single morsel (or in this case, customer) from your table could add up to significant revenue loss. The fact is, ecommerce giants like Amazon — which is already said to own almost half of the online spend in the US — are easily capable of undercutting the competition.

Fortunately, there are alternative strategies you can use to build trust and retain your customer base. With the right mindset, a customer loyalty program can be more than a simple rewards program; it can be the reason why customers continue to come back to your website.

In this article, let's discuss the reasons why ecommerce businesses should adopt a customer loyalty program, then look at some best practices that can make your program more successful.

How Customer Loyalty Programs Support Ecommerce

Modern loyalty programs started out with stamps or cards and places like coffee shops would offer special promotions to build customer loyalty. But, when people's wallets got full of cards from all the coffee shops in the town, the concept lost its appeal and stopped being an effective differentiator — just like discounts and coupons in today's ecommerce.

Nowadays, customer loyalty programs focus more on emotional engagement than incentivizing transactions. Since there's no footfall in ecommerce, the only way to keep buyers involved is to increase the number of customer touchpoints.

As a result, reward systems have become more gamified, now including tiers, badges, and challenges. They're also coupled with the ability to collect points in new ways, like answering quizzes or rating products. Customers can customize online profiles and create accounts that manage their loyalty rewards.

Features like these make it less likely that customers will churn because that would mean forfeiting their progress with your program. This might make them more willing to overlook a poor experience, especially when they have their eye on a reward for a long time. It's like tending a garden: harvesting the fruits of your labor is even sweeter knowing all the effort you put into it.

Let's look at a few more features you should consider adding to your ecommerce loyalty program.

Ecommerce Loyalty Program Features

If you're not sure what you should offer in your loyalty program, here are a few ideas that can help you get started.

Touchpoints for New and Existing Customers

Your program should create touchpoints that engage both new and existing customers. You should create content that caters to new users — like self-service and community forums — and you should offer perks for long-term advocates of your brand — like free shipping or priority service.

Unique Ecommerce Rewards

If you're working in ecommerce, you'll need to adapt your strategies to fit your digital landscape. This means your rewards should be desirable for an audience who's ordering products online. Free shipping, extended warranties, early access to upcoming products: these are benefits that the ecommerce crowd is looking for because it removes friction from their customer journey and makes their experience more delightful.

More Value Than Discounts

You shouldn't have to rely on offering discounts and coupons to make your loyalty program work. It's possible to design an effective loyalty program that engages customers without financial incentives. Even if you think your customers expect you to offer coupons, remember, true brand loyalty can't be achieved through discounts alone.

A Memorable Customer Experience

Your customer loyalty experience should be creative and stand out from your competition. From the name of the program to the design and its tiers, everything should be tailored to reflect the unique atmosphere of your brand.

Now that you know what to offer, let's review some best practices to keep in mind when running your program.

Ecommerce Loyalty Program Best Practices

1. Organize your loyalty program using tiers.

Tiered loyalty programs are very popular for a variety of reasons. They present a clear objective, motivate people to constantly engage with the brand, have high-end and low-end reward economies, and customers with a higher rank are less likely to switch to another brand because that would mean giving up their hard-earned benefits.

The image below provides an example of what a tiered loyalty program might look like. 

2. Provide different channels to earn rewards.

Having a point-based loyalty program can also work, but ecommerce should provide multiple ways to earn rewards. This includes friend referrals, newsletter signups, profile completions, review submissions, and more. You can also incentivize charitable behavior, like offer points for donating clothes, returning used electronics, giving to charity, and so on.

3. Offer enticing rewards in your shop.

Modern loyalty programs rely heavily on offering rewards that are valuable to their target audience. This includes discounts (since they can't be completely forsaken), but also incentives that are exciting and one of a kind.

Depending on your type of business, the reward catalog should have things like branded merchandise, autographed memorabilia from influencers, entry tickets to anniversary parties or fan events, and more.

4. Integrate gamification throughout your loyalty program.

Another great way to give customers a sense of achievement is to shower them with badges, challenges, and minigames that are entertaining and keep them browsing on your site. These features ensure users log into their profile and engage with the program even if they don't intend to buy from your company — creating the habit of visiting the brand frequently, so they won't forget about your products.

5. Gather and distribute customer data.

What makes loyalty programs valuable is that they directly and indirectly impact the customer experience. The rewards, promotions, and perks you offer provide direct value to customers, but, the data and information gathered from your customer base indirectly helps you improve experiences down the road.

For example, by offering rewards for completing surveys, brands would have information they can use to hyper-personalize email communication or suggest relevant product recommendations. They'll also know who's an ideal fit for the company's products and who they'll need to provide more value to in order to win their business.

With these best practices in mind, there are a few pitfalls one could easily fall into while running an ecommerce loyalty program.

Mistakes to Avoid in Ecommerce Customer Loyalty

First, you need a strong CRM. Customer data and segmentation are the bedrock of any loyalty program and without knowing who your core audience is, you won't be able to build sustainable loyalty logic.

The second mistake to avoid is overconfidence. Having a feature-rich program is necessary for keeping customers engaged, but pushing out a complex reward system — with little to no testing — can backfire. It's far more reasonable to launch a simpler program, and methodically add new features based on people's feedback.

The same goes for your redemption rules. It's better to be strict at the beginning, and have customers work more for their rewards. This way you can always lower what you're asking, and people will perceive it as an act of kindness. On the other hand, making rewards harder to obtain will likely lead to frustrated customers.

Building an ecommerce reward program is an exciting adventure, capable of redefining how customers look and interact with your brand. Just remember, there's no challenge a loyalty program can't solve; you just need to mold and shape it to your needs.

For more loyalty program tips, read how to improve customer retention and loyalty.