We have prepared an overview of the most popular types of loyalty programs for online stores. How to choose the one that works? Does your store even need a loyalty program? We will help you understand these issues, as well as tell you in which cases the loyalty program is ineffective and how to avoid it.
Why do you need a loyalty program?
Loyalty program is a sales promotion system, when a client receives bonuses / discounts / gifts for certain actions. The principle is this: the more he spends, the more benefits he receives.
Loyalty programs help:
- Return the client. Most likely, the client will return to your online store if he has accumulated a large discount or bonuses.
- Increase sales and average check. A customer is more likely to add an item to their cart when they find out about a reward for a purchase.
- Attract new clients. Satisfied customers will tell their family and friends about the favorable conditions or invite them to make a joint order to increase the discount.
- Collect customer information. This is useful, as you can use data on customer behavior when building marketing strategies, finalizing the user interface, and planning the product range.
- Build brand loyalty. The customers involved in the loyalty system become your regular customers.
Which online stores will not benefit from the loyalty program?
It must be remembered that the loyalty program stimulates sales, so despite the benefits that we have described, there are times when it does not work or can even be harmful.
The loyalty program is not suitable if:
- You want to be “like everyone else”. There is no need to chase trends and launch a loyalty program if everything is in order with sales. It is better to spend money on improving delivery and customer service.
- Clients leave. It is necessary to find out the reasons for the outflow of customers. This may be a low quality product, long delivery, overpriced, etc. The loyalty program will not save here, since the situation will only get worse with the return of people. Customers who are attracted by the bonus program will face difficulties, be disappointed in your store and not come back.
- You want fast profits. That won’t work. The loyalty program works for the future and its results are not immediately visible. It is necessary to keep a person so that he returns in the future and brings a stable income. Customer loyalty is a long story.
- You sell products that are rarely bought. For example, real estate, cars, wedding dresses. Discounts and bonuses in this case will not affect the customer’s decision to make a purchase. Most often, such goods are presented on the Internet, but the actual purchase takes place offline.
- You are selling unique products. A loyalty program is not needed if you have practically no competitors. Customers will come to you anyway, it makes no sense to spend money on various ways to attract them. It is better to invest in improving the quality of goods, customer service and staff motivation.
What are the loyalty programs
If you did not find yourself in the list above and definitely decided to launch a loyalty program, then the next step is to choose the right one. We have compiled for you five options that work best in online stores. Each loyalty program has its own advantages and disadvantages. Choose based on the goals you want to achieve and the scope of your business.
The easiest loyalty program to implement. Doesn’t make a profit directly, but helps retain customers.
The client is issued a discount card, which gives the right to a percentage discount. The discount can be fixed or cumulative. The fixed discount does not depend on the amount of purchases and does not change. The cumulative discount increases as you make purchases up to a certain maximum. This option is preferable, as it encourages the buyer not only to return, but also to make a purchase in order to increase a future discount.
Discounts can be provided not for all products, but for a specific category or brand. In this way, you can manage your profitability of sales: give discounts on high markup items and keep the full cost of low markup items.
Such a loyalty program is implemented in many online and offline stores. For example, every month, it is necessary to purchase goods there for an amount not lower than that declared in the loyalty program. This will allow you to count on a discount for the whole next month: purchase for $0-50 – 3%; $51-149 – 10%; from $ 150 – 15%.
- understandable and transparent for customers;
- customers like to buy goods at a discount, because the benefits are immediately visible;
- easy and cheap to implement;
- easy to control.
- fixed discounts stimulate only spontaneous purchases and do not motivate the buyer to return to the store;
- there is a risk of loss in the accumulation system if the maximum discount is easily achieved;
- when the client has reached the maximum discount, he is no longer motivated to spend more;
- to get to a good discount, the customer will have to buy often and a lot. If such frequency is not needed, the program is forgotten;
- discount systems are very common and do not distinguish you from competitors;
- discount systems do not take into account the interests and individual needs of the buyer.
Who will suit:
Online stores that sell high-margin goods, FMCG, food and cosmetics, children’s products, toys, mass-market clothing.
Bonus system and cashback
Bonus program is a popular loyalty program for online stores. Customers receive bonuses (points) for purchases or actions: repost and subscription on social networks, for leaving a review on the site, etc. This is how customers will work for your brand recognition.
Received bonuses can be exchanged for discounts or privileges. Customer bonuses can be flexibly managed, just like in the discount system. For example, allow you to pay with points not for everything, but for certain categories of goods. Usually one bonus is equal to one ruble, but each online store can set its own equivalent. Some online stores even allow you to withdraw funds in the form of cashback to the card.
The Bukvoed store accrues bonuses for each purchase; one bonus is equal to one ruble. Additional points can be obtained by activity on the store’s website: registration, filling out a profile, reviews and reviews.
- motivates the buyer to make the next purchase in a particular store, and not go to a competitor;
- wishing to receive a gift or a discount on a certain product, the buyer orders more than usual, as he wants to collect the required number of bonuses faster;
- the system works continuously: when the client has spent the accumulated bonuses, you can start saving again;
- additional incentive – if bonus points burn out after a certain period of time;
- clear and understandable value for the client;
- can be flexibly configured to suit the company’s goals and customer preferences.
- only suitable for frequent low-cost purchases. If the time between receiving bonuses and using them is long, then buyers simply forget about the program and bonuses;
- the buyer does not benefit immediately, but after several purchases. Thus, the purchase motivation is lower than in the discount system;
- conditions must be made as transparent as possible so that the client understands his benefit;
- more difficult to control than a discount system: there may be difficulties with settings and errors in accruing / writing off bonuses.
Who will suit:
Online stores with a regular audience and a high frequency of purchases: grocery, perfume and hardware stores, food delivery, airlines.
“Young” online stores will not be able to motivate people to return just because of bonuses.
This program is similar to the bonus and discount systems, but is even more complicated.
With the first purchase, the client enters the loyalty system, receives a basic status and can buy goods with a minimum discount. As a certain amount of purchases on the account is reached, the client is assigned a new status, with which the discount and privileges are greater. The more money a customer spends in an online store, the higher his status and the higher the value of the privileges he receives. It can be free services, additional options, discounts. As a result, all buyers are divided into groups depending on the amount of money spent in the online store.
The larger the company, the more complex the status system can be and the greater the privileges for high-level clients.
At S7 Airlines, customers receive bonuses and status for accumulated miles.
The Lamoda online store assigns customers statuses from basic (for the first purchase) to diamond (with the accumulation of 10,000 bonuses), which entitles them to a 20% discount.
- encourages customers to spend more to move to the next level;
- encourages returning to the store to spend bonuses and get privileges;
- in addition to bonuses, the client receives a certain status and belonging to a group, which is nice in itself;
- the program is clear to the client. The description of the program is usually published on the website – the client knows exactly what he needs to do to move to the next level;
- segmentation. The ability to reward those customers who buy often and a lot, which means that their loyalty brings more profit;
- reduces the outflow of regular customers;
- getting a new level can be presented as a game that will involve customers even more.
- difficult to implement due to the need for a comprehensive accounting of the accumulated amount of purchases;
- if the card is lost, the previously received discount is difficult to restore, the client again acquires the basic level;
- retains existing customers rather than attracting new ones, as newcomers get little benefit.
Who will suit:
Online stores of luxury goods, luxury cosmetics and perfumes, as this loyalty program requires investments, constant coordination, and the stores have formed a permanent audience that needs to be retained. It also works well in airlines, banks, insurance companies, travel agencies.
The client pays a subscription fee for a month or a year and receives membership in a closed club. This gives the right to special services, services, discounts, VIP service, access to information resources.
Amazon VIP service. For $99 per year, a customer can subscribe to Amazon Prime. With it, you can place an order with free shipping with no minimum purchase amount, get access to premium products and additional discounts.
- attracting paying customers;
- clear benefits for a subscription;
- the buyer pays for the services in advance, even if he does not use them;
- a paid subscription motivates you to visit the online store more often and more likely to make purchases;
- the ability to select personal offers for customers.
- new users will be deterred by subscription fees if the benefits of the subscription are not obvious;
- if customer service is not up to par, additional costs may be required to improve it;
- complex implementation system;
- there is a risk that the implementation of the subscription will not pay off. It is necessary to calculate well what and at what price the client will receive.
Who will suit:
Online stores that build long-term relationships with customers based on repeat purchases; B2B companies that regularly supply products for business; media companies.
Product as a gift
The client receives a reward for the purchase of a certain number of goods in the form of another product or service. For example, a customer buys two products for a promotion and receives the third one for free.
Pharmacy “Vita”, which always has goods under the action “1 + 1 = 3”.
Pizzeria “Dodo Pizza”, where when ordering three pizzas you get the fourth one for free.
- simple and cheap to implement;
- transparent to the client;
- it is not necessary to have a loyalty card to participate in the promotion;
- instant and obvious benefit for the client;
- motivates to buy more to get a gift.
- the effect of the program is short-term, as it does not form an audience of loyal customers;
- very common, that is, you will not differ from competitors;
- often the prices for promotional goods are deliberately inflated, and the client feels deceived;
- the strategy should be thought out at least six months before the launch, so as not to lose profit on shares.
Who will suit:
Promotions like “1 + 1 = 3” will suit any business with the right choice of launch time, product or service.
Complex offers or ready-made sets of goods are suitable for online stores with an already formed audience, since in order to make a purchase, the client must like at least 80% of the set.
Why the loyalty system can be ineffective?
You have chosen a suitable loyalty program, launched it, but after some time you found that sales did not increase or the number of regular customers decreased. Here’s why it might have happened:
1. Too complicated mechanics.
A loyalty program shouldn’t be too complicated to implement. Otherwise, it may not pay off, because you will need to spend money on its implementation and maintenance: payment for equipment, employees, technical support. This also includes all kinds of errors when calculating bonuses or discounts. If a program participant does not count his points, then instead of a loyal client you will get a dissatisfied one.
2. It is difficult for the client to join the program.
The simpler the rules for joining the program, the better. For online stores, a request to leave an email and a name will be enough. Do not require customers to store bonus card numbers, promotional codes or discount coupons. Otherwise, it will not be a reward, but torture.
3. The system for accruing and writing off bonuses is incomprehensible.
Describe all the conditions of the loyalty program on the site in the public domain, talk about all the restrictions. The easier your rules are to understand, the more people will agree to them. For example, customers should withdraw and spend bonuses as easily as regular money.
If possible, do not change the rules. This is always difficult for buyers to accept. If changes cannot be avoided, carefully consider innovations, test changes on a test group of customers.
And don’t be in disagreement. Modern buyers are experienced users of online services, so they know that small print and information under the asterisk must be read. Such tricks no longer work, but they annoy and disappoint customers.
4. Complicated interface and system errors.
This problem is acute for online stores. If the user has to take a lot of actions to break through your interface and find out the balance of their points, view promotional products or interact with the loyalty program in some other way, fix it as soon as possible, otherwise you will lose customers.
This also applies to incomplete or untimely accrual of bonuses due to technical breakdowns and system failures. Try to use the automated solutions that every CMS has. They will minimize errors and simplify the work of managers. For example, if your online store is powered by CS-Cart, then you can connect the Cumulative discount add on. Then the accounting of the amount of money spent for each client and the assignment of statuses to users will occur automatically.
5. Buyers just don’t know about the loyalty program.
Start with a loyal customer base. It is easier to attract them to participate in the new program. They are familiar with your online store and will be more willing to take advantage of the privileges.
You can notify regular customers using email newsletters, push notifications and SMS. So you start a kind of “pilot series” of the loyalty program to avoid mistakes with new customers. You will find out whether the program will interest the audience and how clear the terms of participation are.
Then use all notification channels: for example, make a bright banner on the main page of the site, include a link to the loyalty program description in the footer, advertise with partners.
6. The loyalty program does not meet the needs of customers.
The most important point. Evaluate the loyalty program from the customer’s point of view. The offer should be beneficial not only to you, but also to him. Only then will the customer be motivated to buy from you more often. A loyalty program is more about relationships with customers than short-term profit for the company.
Loyalty programs are a good way to stimulate sales and keep customers. But you need to choose the right time, form a portrait of your audience and its needs. Think like a customer, try to imagine what he can only find at your place: a good discount, a useful gift, a convenient bonus system for savings, or premium service. And take this as the basis of a loyalty program.
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