Acquisition, acquisition, acquisition… Why is everyone so focused on getting a new customer when 41% of an Ecommerce store’s revenue comes from only 8% of its customers?
That’s where launching, and growing, a loyalty rewards program for your business comes in.
Your store can’t survive on new customers alone. By launching a loyalty program, you’ll be able to engage customers in a way that drives repeat purchases, referral, lifetime value, revenue, and most importantly, your profit margins.
Why Do You Need a Loyalty Program?
I want to emphasize the impact this has on profit, because you probably try everything to increase profit, from conversion rate optimization, to upselling, to tweaking pricing, to lowering your shipping costs… But loyalty is the fastest way to stronger profit margins.
Why? Because your cost of acquisition (of a new purchase from an existing customer) is significantly lower than any other channel where you are acquiring a customer for the first time.
And the deeper the loyalty, the true loyalty of the customer to the brand, the more they will refer others to you, share on social, and come back at cheaper and cheaper repeat “cost of acquisition,” or “re-acquisition.
Loyal Customers Cost Less
And to be clear, loyalty does have a cost. You may offer some sort of point rewards, discounts, or free products and that’s the cost you pay to get the customer coming back. But almost always, that cost is significantly lower than the cost you paid to get them to purchase in the first place. In fact, studies show it costs 5-25X more to acquire one customer than to keep one. If you’re not trying to find ways to engage your existing customers, you’re missing out on potential sales.
Also, being able to identify, and getting to know your best customers will allow you to fine tune and reduce your acquisition marketing costs. You may think you know your best customer, (maybe it's “new moms”) but as you go through the process of enriching them, you may find the loyalty program shines through specifically on something different (i.e., certain geographic regions, moms of 2+, working moms, city moms, etc.). You are highly likely to find key insights as you build loyalty with your customers, and that will improve acquisition costs through the improved copywriting and targeting opportunities that come from getting to know them.
Win Back Lost Customers
Sooner or later, a loyal customer will forget about your brand, even if they’ve been buying from you for months or even years.
However, that doesn’t mean you should give up on lost customers.
A loyalty program will help you identify which customers you need to win back. You’ll be able to understand why they left in the first place, and optimize your campaigns to bring them back to your store.
True Brand Differentiation: Stand out From the Competition
A well-executed loyalty program delivers an exceptional user experience that delights and surprises customers. By rewarding customers for various shopping activities (reviews, purchases, etc.), you make them feel valued and give them a reason to come back and buy more products. This process simultaneously indoctrinates them into the brand, and brings them closer to you from a psychological standpoint (in a very healthy way).
A lot of marketing is purely emotional. By rewarding your customers, you’re treating them just like a friend — not like money. (They can be both!)
Boost Your Brands’ Reputation
In the age of the internet and social media, reputation is everything - especially for online brands. 95% of customers are reading online reviews before they make a purchase.
There are two main ways that loyalty programs can boost your online reputation:
- First, you can encourage your store’s customers to leave a review in exchange for a reward. The rewards can include free samples, redeemable loyalty points, or product discounts.
- The second tactic is to ask customers for a review once they receive a reward. During this moment, they just had a positive experience with your brand, which makes them more likely to leave some kind words about your business.
It’s a simple and easy way to boost your online reviews, and position yourself as a brand that customers can trust.
Examples of Best In-Class Loyalty Programs
Loyalty programs have become a staple of many great businesses. Not only do they boost revenue and customer retention, but they also increase credibility and reputation as a brand.
Here are four brands killing it with retention and rewards marketing: