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Bring ‘Em Back with Online Loyalty Programs

Posted by | February 11, 2010 eCommerce Business Issues | 2 Comments

As every business owner knows, the best customer is a repeat customer. A customer who visits your site and makes a purchase every week, or even every couple of months, is immeasurably more valuable than a casual, “one-off” customer who places one order and is never heard from again. Even so, many online businesses fail to take advantage of the intrinsic profit potential in repeat customers.

Sustaining Repeat Online Business

It can be difficult for online businesses to build customer loyalty, especially if there are a large number of competing websites peddling the same products and services. Successful eCommerce sites start by focusing on the basic objectives for shopping satisfaction—after all, if your repeat customers share one common trait, it’s approval of your business.

Below are some of the most simplistic—yet effective—things you should strive to deliver:

  • Prompt shipment of products
  • Thorough, accurate descriptions of what you’re offering
  • Large, clear images
  • An easy, quick checkout process
  • Great customer service

The single most important thing you can do to sustain repeat business is to make your product presentation, sales process, and customer service as friendly, easy, and enjoyable as possible for every customer, every time. Skip this step and no loyalty program in the world will make a single dollar of difference. Strive for an excellent customer experience and your business will have infinite potential.

What is a Loyalty Program Worth?

Loyalty programs and incentives can be a great way to turn a repeat customer into a regular repeat customer, or to convince a one-time buyer to come back again. But before you start designing your program, consider the value of your customers and how much of that value you’re willing to sacrifice to win their long-term allegiance.

Advertising costs money, and there are no guarantees that it will result in a purchase. The same holds true for a loyalty program or incentive offer. Just as you would with an advertising campaign, it’s prudent to compare the costs you’ll incur with the potential rewards.

Say you have a website that sells beauty products. Your target customer will purchase many cosmetic products in her lifetime—the key is convincing her that your site is the best place to do so. If you win her over as a loyal customer, she could wind up buying all of her beauty products from you, resulting in a repeat purchase every month, or even every couple of weeks.

If your average order size is roughly $50, then a monthly customer is worth $600 in annual sales. Say your profit margin is 10%, or $60. How much of that are you willing to sacrifice to bring a customer back? How much would you be willing to invest in a loyalty plan that would “buy” her repeat business for the next three years?

Types of Online Loyalty Programs

There are a number of ways to gently persuade customers to choose you as their primary source of tennis balls, stiletto heels, tax services, or whatever you’re selling. Some online stores offer bonus gifts for certain purchase amounts, while others encourage repeat customers with a points program that will eventually earn them gift certificates toward more products. You may want to consider polling your customers to find out which types of incentives would interest them the most.

It’s not necessarily a good idea to experiment with different programs, since unexpected changes can confuse and annoy your regular customers. If you’ve been adding a bonus book to every book order you ship on a Tuesday, it’s probably not wise to abruptly start offering a points program instead – good businesses have lost regular customers over less.

Some of the most popular loyalty programs include:

  • A free item or gift card with regular purchases of a certain size
  • Cash back or special discounts for loyal customers
  • A points program that can be cashed in for free products

How to Create a Great Loyalty Program

It’s important to know your customers well, and to choose a loyalty program that matches their interests and buying habits. It’s also important to ensure that the program is easy to join, easy to use, and plugs in seamlessly with your existing ordering process.

For these reasons, it may be a good idea to enlist the services of an experienced consultant who can help you build a custom loyalty program. A marketing agency or freelance marketing specialist can recommend specific incentives to fit the size, budget, and goals of your business.

Implementing a loyalty program also requires a little help from your eCommerce platform.  Many shopping cart platforms have built in loyalty program functionality, or have third party plugins to provide these capabilities, or have the flexibility for this functionality to be created an added on to your store.

Measuring the Success of your Loyalty Program

As with all online marketing initiatives, it is important to implement a loyalty program in a manner that provides measurable results.  Your loyalty program should have reporting functionality that can provide insight as to the value this system brings to the table, and in particular, understanding the differences between customers that take advantage of your loyalty program, and those that don’t.

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