A loyalty rewards program brings benefits that make starting one worth the effort.
"Buy four ice cream cones, get the fifth free!" Every shopper has heard some variant of this phrase. Businesses use such rewards to inspire repeat purchases and ultimately increase sales. Whether the objective is collecting box tops for a prize or punches for a free sandwich, a rewards or loyalty program is a great way to spur consumers into action.
Establishing a rewards program is more difficult for an Internet retailer than a brick-and-mortar store. The latter can rely on face-to-face contact to maintain communication with customers in the program. At the time of purchase, these shoppers simply present their card or other form of identification and either earn credit towards their reward or use it immediately. Online businesses don't have this type of contact and must rely on less personal and immediate forms of communication such as email, social media and notifications on their website.
Still, a loyalty program brings benefits that make starting one worth the effort. According to Business2Community, program members spend up to 13 percent more than other customers. Such a difference stems from either an increase in average order values or frequency of purchases, depending on how the program is designed.
Tips for starting a rewards program
The concept of an online rewards program brings to mind Amazon Prime. Subscribers pay an annual fee and receive free two-day shipping on thousands of products, access to exclusive over-the-top video and music content, cloud storage for Kindle devices and much more. Amazon has been in business for decades, however, and likely has an incredibly large budget to provide these benefits.
Your rewards program doesn't have to be so extensive. Customers are already quite familiar with earning points toward a discount, noted Hubspot, and online businesses can capitalize on this familiarity in their programs. Each order or dollar amount can equal a certain number of points, and enough points rewards customers with 50 percent off their next purchase, free shipping or other benefit. This sort of program works best for businesses that rely on a high number of purchases, but the conditions themselves shouldn't be too confusing. Each point should relate as directly as possible to a reward – customers shouldn't have to earn 16 points for one star, 23 stars for one diamond and two diamonds for a 12 percent discount, for example.
Just as a successful rewards program requires simple terms, it also needs an easy way to sign up. Jeremy Smith, a digital marketing expert, explained that an email sign up is the perfect option for online businesses. Gilt does this well, he said, but Best Buy's Reward Zone does not. Best Buy's sign up form has several requirements, many of which customers find unnecessary or are generally unwilling to provide.
Your program must also include terms your customers agree to and prizes they will enjoy. This idea relates back to the concept of simple conditions but it requires more knowledge about your customer's preferences. Are they likely to spend more with each purchase to receive a reward, or would they rather order more frequently? Knowing the statistical difference between the two helps you create a program more uniquely tailored to your audience.
In addition, you must understand the type of rewards your customers would rather have and then strike a balance between these rewards and your business's goals. For instance, it's been proven that customers, especially international ones, would rather buy from an online store that offers free shipping than one that does not. In fact, this preference is so prevalent that Inc. called free shipping a necessity for all retail websites, large and small. Unfortunately, most businesses can't afford to offer free delivery for every purchase. A rewards program that offers free shipping for a certain total or number of orders finds a healthy medium between the two, encouraging consumers to spend more for a reward while still allowing businesses to profit and collect shipping fees the majority of the time.
If an extensive rewards program is too much for your business to currently handle but you still want to increase online payments, consider offering a first-time benefit. Many online clothing retailers use this technique, offering a discount code when users make their first purchase or sign up for their mailing list. This is a great hook for acquisition, but keep in mind that some shoppers are only inspired to buy because of the offer. These people are less likely to make repeat purchases without additional benefits, so it's up to the businesses to provide top-notch customer service to keep those shoppers coming back.
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