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Why are Ecommerce Loyalty Rewards program important?

eCommerce Loyalty Rewards program

Technology has introduced new ways of doing business through the implementation of ecommerce loyalty rewards programs. These ecommerce loyalty rewards programs provide significant values, including improving customer retention rates up to 5 percent which, in turn, can help to grow profit by 25-95 percent, according to Bain & Company.

Moreover, consumers who participate in a ecommerce loyalty rewards program tend to be more discerning when it comes to spending and are inclined to purchase more expensive items, their average check size is 12-18% higher as evidenced by Accenture.

In this way, ecommerce loyalty rewards programs support e-commerce businesses in building customer loyalty and, therefore, stimulate customers’ repeated purchases, which enhances the long-term sustainability of the companies’ revenues. However, the effectiveness of these ecommerce loyalty rewards programs depends on taking into account the target audience.

Thus, focusing on rewards systems that are relevant to customers, their preferences, and needs will contribute to increased customer satisfaction and strengthens customer support for ecommerce. Hence, formulating a successful loyalty program strategy is not just as simple as offering a discount; it involves making a relationship with the target niche.

To learn more about how e-commerce loyalty rewards programs can revolutionize your enterprise, get inspired for new loyalty program ideas, and learn more about creating the right strategy – go through the additional information provided in the guide below.

How to Build Your Ecommerce Loyalty Rewards Program?

Implementing an effective customer loyalty program for your ecommerce requires several pervasive strategies to achieve the targeted goal of the business, which is to engage loyal customers for a long-term period. 

This guide will cover key components like picking the right e-commerce software that offers better ecommerce personalization, the implementation of a reward system, the overview of different types of loyalty programs, the determination of the right reward structure, and last but not least, the knowledge of the technical implementation process. To create an effective loyalty program that will motivate customers to return for more and spend more on every visit, you have to understand the following aspects.

A. Selecting Your E-commerce Solution

Choosing the appropriate global ecommerce platform is fundamental for the introduction of a loyalty program. Implementing a reliable platform that aids in ecommerce loyalty rewards program solutions can assist in the management of your customer programs. Below is a detailed look at Shopify, BigCommerce, and Wix, by evaluating each of them for loyalty program integration.

PlatformsBasic FeatureIntegration with Loyalty Programs
ShopifyUser-friendly Interface, Extensive App storeSeamless Connections with leading loyalty apps Yotpo, Smile.io, and LoyaltyLion. Provides customized solutions using API
BigCommerceThe platform can handle big catalogs through its scalable and equipped capabilitiesSeamless connections with leading programs like Smile.io, Zinrelo, and LoyaltyLion. Provides access to the API to offer personalized solutions.
WixComes with an economical drag-and-drop builder.Seamless connections with third-party plugins and apps like Smile.io to get integrated with the loyalty program. Compared with other platforms, Wix offers restricted API features.
Comparing the Integration with Loyalty Programs on Different Brands

B. Choosing the Type of Customer Loyalty Program

There are various types of eCommerce loyalty rewards programs with different rewards and issues for consumers.

Points-Based Programs

Customers get bonus points for buying products and performing certain other activities (e. g. Promoting the brand through word-of-mouth communications (for example, exclusive discounts, recommendations, social networking).

Pros: points-based loyalty programs are easy to comprehend, good for follow-up buys.

Cons: May be less stimulating when the customers to earn points at a slow pace.

Tiered Programs

More benefits go to the omnichannel loyalty program members as they reach different levels depending on their expenditure.

Pros: Gives a feeling of continuity and propels spending levels to the next level.

Cons: It can be quite difficult to deal with and comprehend.

VIP Programs

Customers are willing to incur a cost for the privilege of receiving privileges offered by a business. (e.g. Free shipping, special shop promos).

Pros: VIP benefits create immediate sales, and targets customers who are more engaged with brands.

Cons: May drive away new or infrequent users from VIP club because of the fee.

The kind of program that one wants to develop depends on the business model, the target customers, and their engagement in the long run.

C. Defining Your Rewards Structure

The kind of rewards to offer and the amount of their redemption value are important aspects when it comes to loyalty programs. Here are some of the most popular types of rewards, and advice on how to set the point values of each

Discounts and Coupons: Offer percentage discounts or coupons of a fixed amount.

Exclusive Products: Offer exclusive products that are available only for those customers who joined the loyalty program.

Free expedited Shipping: It can be offered as a reward to customers and it will be particularly useful for those who order products online.

Example: Sephora’s Beauty Insider program is an excellent example. The more a client spends, the more points she or he is awarded to redeem rewards for beauty products or exciting events. It helps continue to capture the customer’s attention and encourage customers to spend more money.

When setting redemption values, the issue of relativity should be taken into consideration coupled with ensuring that the ecommerce rewards are not too easy to get as this would reduce their perceived value.

D. Implementation and Integration

Several technical elements need to be considered when implementing a ecommerce loyalty rewards program for your site.

APIs (Application Programming Interfaces): Some solutions enable you to use APIs of the platform to integrate third-party loyalty solutions or create your features.

Plugins and Apps: Today’s e-commerce platforms such as Shopify and BigCommerce have rich app stores that contain plugins for building your ecommerce loyalty rewards programs that can be integrated without much hassle.

Custom Development: ecommerce companies that have individualistic requirements may require development on the platform through API.

Resources and Tutorials

Shopify: The Shopify Help Center also includes information on app addition and the use of custom solutions.

BigCommerce: BigCommerce Developer Documentation offers comprehensive API documentation and useful integration instructions.

Wix: The Wix Help Center has some information on using Wix Apps and Integrations.

It is crucial to identify the right platform for initiating a loyalty program, the type of loyalty program that best fits your business model, the right way to reward customer loyalty, and how you can go about implementing the loyalty program.

Ecommerce Loyalty rewards program lifecycle

Source: https://antavo.com/

E-commerce Loyalty Platforms

Some of the considerations to make when choosing a ecommerce loyalty rewards program platform include the following

Business Needs

Determine what goals you have for your loyalty program whether it be customer retention, higher average order value, or sharing on social media. Make certain it also includes elements that would enable the above goals such as gamification elements, tiered programs, and referral incentives.

Budget

Loyalty program platforms come in different forms and this has a direct impact on their cost structures. For eg. subscription-based loyalty programs may charge subscription fees while others might charge some transaction fees based on the usage of the application. Define your available capital and decide which type of pricing strategy you can apply.

Ease of Use

The ecommerce loyalty rewards program should have a simple and user-friendly interface so you and your team can easily operate the platform and experience seamless ecommerce navigation. Also, determine the level of difficulty in implementing the platform on your e-commerce website. Those that can support integration with major players in the eCommerce industry may increase efficiency and avoid many technical difficulties.

Scalability

Make sure to find a platform that can develop along with your company. In particular, the given platform should be scalable to accommodate more customers, and the increase in the number of activities on the platform should not affect its performance.

Comparison of Popular Ecommerce Loyalty Program Platforms

Here are the details on some of the common loyalty program platforms and loyalty program features for ecommerce

LoyaltyLion: Provides all the basic tools, such as points, tiers, and referrals, necessary for a successful loyalty program. It is popular for its ability to provide detailed analysis and a wide range of customization features.

Yotpo: Combines review management, word-of-mouth marketing, and a customer retention tool into one solution. It is strong in areas such as user-generated content, social proof, and customer engagement.

Smile. io: Is majorly concerned with point incentives, VIP program, and referral programs. Quite intuitive and can be easily implemented in various web-based online shopping systems.

Stamped. io: It combines the concept of ecommerce loyalty rewards programs with the generation of reviews for customers, giving an all-inclusive strategy for customer relations.

A Comparison Chart of the Leading Loyalty Program Platforms

PlatformPoints SystemTiered ProgramsGamificationIntegrationsPricing Model
LoyaltyLionYesYesYesShopify, BigCommerce, MagentoMonthly fees
YotpoYesYesNoShopify, BigCommerce, WixSubscription + transaction fees
Smile.ioYesYesNoShopify, BigCommerce, WixTiered pricing
Stamped.ioYesNoNoShopify, BigCommerce, WooCommerceMonthly subscription
Leading Loyalty Program Platforms & Supported eCommerce Brands

Ecommerce Loyalty Rewards Program Ideas

Ecommerce Loyalty rewards programs can have several benefits, including a rise in CLV, more frequent customer purchases, and better word-of-mouth advertising. To fully capture these exclusive benefits, businesses have changed their loyalty programs over the years through factors such as gamification, tiered rewards, and customization. 

All of these marketing strategies provide loyalty benefits associated with customer acquisition and retention and are valuable in today’s arsenal of any e-commerce company.

We will explore three key ideas for e-commerce loyalty programs, which are gamification, tiered systems, and value-based loyalty programs. Outlining these strategies in more detail, as well as outlining case studies, this article will focus on how these particular components can be incorporated to develop an effective and engaging loyalty framework that will engage consumers and encourage their continued custom.

A. Gamification

Ways of Adopting Games in Learning

Gaming refers to the incorporation of features of games into areas not traditionally associated with gaming to embrace users. In e-commerce loyalty programs, this may be done through

Points Systems: customers can earn points based on their activities such as purchases, a referral program, or on social media. This means that these points can be exchanged for other items.

Badges and Achievements: Customers get points or receive awards/achievements which can be placed on their profiles when they meet a certain number of visits or complete a certain task.

Leaderboards: If employees are displayed on the customer leaderboards, then the others might be motivated to increase their activities.

Case Study: Nintendo My Nintendo Rewards

My Nintendo Rewards program is a point-based reward program of Nintendo where customers get points on purchases of Nintendo games and services and also by performing specific missions.

Gamification Elements

One can accumulate “Gold Points” for making digital purchases of games and “Platinum Points” for using Nintendo services, including signing into the eShop or using the mobile application. These points can be exchanged for unique and special offers such as discounted games and other digital products.

Impact

Providing incentives for both purchases and involvement, not only increases user engagement but also broadens their relationship with customers.

B. Tiered Programs

Benefits of putting in place tiered loyalty programs

Enhanced Engagement: To take advantage of the incentives offered, customers are eager to go to the next level.

Customer Retention: Benefits from higher tiers may persuade customers to stick with the business.

Increasing Spending: This is clear from the fact that clients typically spend more money to advance to the next level.

 Advice for Defining tiers

Assess the demographics of your clients to learn about their spending habits and activity levels.

This fosters customers’ loyalty and satisfaction since they receive awards that are specific to their behaviors meaning they feel appreciated and understood.

C. Value-Based Loyalty Program

A Value-Based Loyalty Program is a customer retention and engagement model that has been developed with the idea of offering customers specific values or rewards that would appeal to them and would make them loyal. 

Contrary to the tradition of making general discounts or offering simple rewards, value-based loyalty programs typically focus on networking with the audience on an emotional level, to offer essential and appropriate solutions that contribute to improved reception of the brand.

Case Study: IKEA Family Membership Scheme

A good example of a Value-based loyalty program can be seen in the Swedish furniture manufacturer IKEA which has started the IKEA Family member program. And, as a result, it is necessary to strengthen customer relations and improve the shopping process. 

The main privileges include the possibility of receiving discounts and offers, as well as free coffee or tea in IKEA restaurants, as well as the ability to attend workshops and other events.

These benefits are customized to improve the shopping experience and provide value to the IKEA customers, making them appreciate and stick together for a long time.

Tracking and Measuring Success

Any ecommerce loyalty rewards program should include monitoring of the program’s performance using key indicators and further improvement of the program based on the indicators received. Here’s how to do it

A. Key Metrics

Customer Engagement

This one estimates how much the customers engage in the ecommerce loyalty rewards program. High levels of engagement show that customers get some utility from the program and, in turn, they remain loyal.

How to Track?

This can be done by tracking parameters like login history, promotion participation, and communication with ecommerce loyalty rewards program materials such as emails and clicked-through offers.

B. Repeat Purchase Rate

This could be defined as the proportion of customer who repeatedly shop online within a given period. A higher repeat purchase rate implies that the current loyalty program is bringing the customers back and therefore making more purchases.

How to Track?

Determine the number of repeat customers and divide by the total number of customers.

C. Redemption Rate

The proportion of the earning points or other earned incentives that are cashed in by the customers. Thus, a high redemption rate means that customers consider the reward valuable and would wish to use them boosting the overall satisfaction and loyalty level.

How to Track?

Take the total number of redeemed rewards and divide it by the total number of earned rewards.

D. Customer Lifetime Value (CLV)

The long-term sales potential for a particular customer account within a given business. A rising CLV is an indication that the company can retain existing customers and make them spend more in the future.

How to Track?

Utilizing purchase pattern history to forecast future expenditure and determine ACP (Average Customer Purchase).

E. Customer Retention Rate

The number of people that keep on patronizing the business for some time within a given period. A large value in retention rates means that the ecommerce loyalty rewards program helps to maintain customers’ engagement and satisfaction levels.

How to Track?

Take the total number of customers who continue their usage during a specific period, and divide it by the number of customers at the beginning of the said period.

Optimizing Your Rewards Program

Analyze Customer Feedback

A suggestion can be to get feedback from the users through surveys, reviews, and first-hand interactions. Search for general issues that people face and recommendations concerning their resolution. It would be beneficial to analyze this feedback in terms of ecommerce loyalty rewards program features, rewards, and communication to make the necessary adjustments.

Segment Your Audience

Engagement level, purchase frequency, and purchase history can be used to segment customers. Find out which segments are the most and least active to help you distinguish between a hot prospect and a cold one. Marketing communications should be aligned to each segment’s requirements and expectations of reward and promotion.

Monitor and Adjust Rewards

Closely monitor how popular the reward is and how many people redeem the rewards offered. The decision could be made following factors such as searching for rewards that are underperforming or those that are most preferred by the target audience. Optimize the rewards to make them appealing to the customers and continue to motivate them to be loyal.

Use A/B Testing

Experiment with different versions of program elements (e. g., the templates of emails, and the types of rewards) for a sample of customers. And determine which version engages more people and has a higher redemption rate. Apply the best strategies at every stage of the ecommerce loyalty rewards program.

Leverage Data Analytics

To monitor and analyze important indexes, use quantitative tools and instruments. Seek out the details of customer preference and service usage, the effectiveness of the overall program, or components in need of enhancement. Take effective appropriate decisions that help to improve and develop the ecommerce loyalty rewards program for the future.

Due to this, businesses should consider using the above key performance metrics and optimization techniques when implementing their ecommerce loyalty rewards programs to guarantee the desired customer interactions, satisfaction, and retention outcomes.

Additional Considerations

When thinking about a loyalty program it is also necessary to include several parameters that go beyond rewards and interactions. Other factors that should be considered when implementing the e-commerce loyalty programs are as follows.

A. Cost of an e-commerce loyalty program

Let’s outline the possible expenses that may arise while employing the loyalty program.

Platform Fees

When using a specialized platform for your loyalty program management, the use of subscription or licensing fees is common. These platforms provide functionalities such as point tracking, reward management, and customer analysis features.

Examples: Costs may also differ concerning the provider and the functions you require. Platforms like LoyaltyLion, and Smile. for different prices. Itoro and Yotpo offer different prices depending on the business size and the program’s complexity.

Program Management

Contingent expenses are the expenses incurred in the day-to-day running of the program such as costs incurred in managing and administering the program, costs of marketing the program, and costs incurred in responding to customer inquiries and complaints.

Examples: This entails the expense for hiring program managers, funds required for marketing campaigns, as well as any expenses for educating customer service representatives on matters regarding ecommerce loyalty rewards program inquiries.

Reward Costs

Specific expenses for gifts and other benefits that can be given to a customer, including discounts, free-of-charge products and services.

Examples: This is specifically true if you are giving away an item for free or offering a 10% discount in exchange for loyalty. You must factor in the cost of these products and how they affect your profitability.

B. Legal Considerations for Ecommerce Businesses

Set a better appreciation of the role of Legal Requirements and Restrictions.

Compliance with Local Laws

It is important to know that many types of loyalty programs are regulated by contemporary legislation, and these regulations can be quite different depending on the country or the state. Such laws could include consumer protection laws, data privacy and protection laws, and laws against misleading advertising.

Examples: Loyalty programs, that operate in the United States, must conform to the FTC regulations and guidelines. In Europe, for instance, a law known as the General Data Protection Regulation (GDPR) puts many constraints on how customer data can be collected and processed.

Terms and Conditions

This implies the necessity of precise staking out of terms and conditions, especially since legal issues and disputes with customers should be minimized. These should include aspects such as how members can earn points, how to use this point-based loyalty, the validity period, and any restrictions and exceptions.

Examples: It is also important that terms and conditions be well placed and the customers be informed of them on joining the ecommerce loyalty rewards program in the business.

C. Data Security and Privacy

Data Protection

It is essential to guarantee that customer data does not fall into the wrong hands and is safely stored to avoid breaches. This includes personal data, buying behaviors, and interaction records.

Examples: Measures that can help protect customer data are encryption, access control, and security audits done regularly. It is also necessary to adhere to such legal requirements as GDPR, the California Consumer Privacy Act (CCPA), etc.

Customer Privacy with Mobile App

Treating customers as individuals by being honest about the company’s policies regarding the collection and use of their information. Customers must be able to own their data and possibly unsubscribe if they wish to do so.

Examples: Ensuring that consumer’s privacy is respected by putting up clear privacy policies and seeking permission to collect the data. Some others are to enable customers to exercise access, modification, and delete rights on their data to boost trust and loyalty.

Conclusion

Having a well-designed loyalty system is essential for the success of any e-commerce business, it helps improve customers’ loyalty, interest, and satisfaction. 

Next to eCommerce frictionless checkout, some of the strategies include the use of games to enhance customers’ participation and, the creation of elite programs like Sephora’s Beauty Insider requiring the customer to spend more money and offer individualized rewards based on the customers’ likes.

Engagement, repeat purchase rates, and customer lifetime value need to be documented to monitor program success and growth. Also contemplate the costs such as platform, management charge, legal formalities, and data safety.

To ensure a good integration procedure, contact a trustworthy e-commerce app development company that will help you launch a proper loyalty program that will suit your business needs.

Starting as an iOS developer and moving up to lead a mobile team at a startup, I've expanded my expertise into Project Management, DevOps and eventually becoming a COO in the IT sector. As a COO, I excel in team leadership, technical advice, and managing complex business functions, focusing on combining technology and operations to drive growth. I'm keen to connect for collaborations or to exchange insights in the tech world!

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