How to Start a Loyalty Program That Keeps Customers Coming Back

How to Start a Loyalty Program That Keeps Customers Coming Back

loyalty laptop dog couch

If no one is visiting your online store, it’s impossible to get conversions.

Since it costs more to acquire a new customer than to keep a current one, it’s important to focus on getting your current customers to shop with you as much as possible. This is known as retention marketing.

In this post, we’ll take a look at how you can set up a loyalty program for your online store and give your customers a reason to keep coming back.

Let’s get into it.

How to Set up a Loyalty Program

Before we dive into how to setup a loyalty program, I want to make one thing clear. You do not have to build a loyalty program from scratch. There are many turn-key solutions available in the Shopify App Store.

Step 1: Decide What You Will Reward Points For

We are all familiar with basic loyalty programs. You buy something and you get points for it. When you earn enough points, you get some sort of reward.

Ecommerce has opened up so many more possibilities for potential loyalty programs that you can integrate into your business. Now, you can reward your customers for more than just purchases.

Obviously you’ll still want to reward your customers for making purchases, but here are a few other actions that you can choose to reward for as well.

  • Account Registrations
  • Purchases
  • Referrals
  • Birthdays
  • Facebook Likes
  • Instagram Follows
  •  

    sweet tooth app customer loyalty

    Source: Smile.io

    But what you really want to know is why you might choose these specific actions. Let’s take a look at each one to give you a better understanding.

    Account Registrations

    It’s good to reward account registrations because they are high value actions. Account registrations enable your customers to checkout faster in the future. More importantly, after they register you'll be able to take advantage of valuable email marketing opportunities.

    Referrals

    A loyalty program is an amazing retention tool, but it also provides a few opportunities to acquire new customers as well. When you reward points for a referral, you are getting increased commitment from your existing customers, while also turning them into brand ambassadors.

    A referral is an amazing thing. Nielsen ranks it as the most trusted form of advertising. When you give a little incentive for your customers to tell their friends, your shoppers are more than happy to spread the word.

    The best part about rewarding referrals is that you don't have to give referrer their points until their friend makes a purchase. This means you can set the reward at whatever you are willing to pay to acquire a customer since they only get the reward when they create a sale for you.

    loyalty program rewards

    Source: Smile.io

    Birthdays

    Birthdays are amazing! You feel like the whole world treats you differently for a day. If you give your customers a present of points on their birthday, they might have some birthday cash burning a hole in their pocket.

    Social Following

    A strong social following is vital to ecommerce success. It creates an audience that you can market to, but it also creates purchase channels. Social commerce is here and you need to be on board.

    You can increase your social following by giving customers points when they engage with your business' different social channels.

    Facebook Likes are especially valuable if you are adopting a content strategy that includes a YouTube channel or a company blog. Your Facebook page acts as a distribution channel for new content, letting you get it in front of your customers right away.

    If your store is on Shopify, all of these options are available with Smile.io app. 

    Step 2: Give Your Program and Points a Name

    When it comes to creating loyalty programs, this step is often underrated. The thing is, loyalty programs perform better when they have a unique and identifiable name.

    The same goes for your loyalty point currency. If you just call them points, they can be seen as boring or even worse, worthless. Give your program and currency an interesting name that your shoppers can get excited about! 

    Step 3: Decide Point Value

    Points are worth money at your store, so be sure you know how much they are worth. If you decide to use Smile.io, it will set you up with a 1% back program by default.

    Each $1 spent will get your customer one point. They can then redeem 500 of those points for $5 off their next purchase. This means each point is worth 1 cent, creating a 1% back loyalty program.

    loyalty program spending levels

    Source: Spearhead

    The value of your loyalty points is known as the redemption value. If you’re going to change up your redemption value from the default, do some research first.

    If you don’t have at least a year's worth of data, it’s advised to keep things the way they are and track your audience’s behavior. If you do have the data to support a change, you can read up on more advanced strategies.

    Step 4: How Many Points Should You Reward

    Now that you’ve decided what your points are worth, you need to assign the number of points that you will reward for different actions.

    While it seems logical to reward points for an action equal to the value it drives to your store, businesses don’t always have access to the data that would help them understand the value of every action their audience takes.

    sweet tooth shopify app features

    Source: Smile.io

    To decide how many points you should reward for an action, you need to decide how much that action is worth to you.

    For instance, if you give your customers $5 worth of points for their account registration, you can consider that $5 as an investment into that customer. If that $5 is enough to convince that shopper to give you their email and make it easier to checkout next time, it’s is already worth it.  

    And when you show them the true value of your points, you’re drastically increasing the odds they’ll return and shop with you again.

    This initial investment provides instant benefits as you build your email list and encourages your customers to make a purchase. It also provides longer term benefits as you are now actively encouraging that customer to return, increasing their lifetime value.

    Referrals are another high value activity for your store. Getting a customer to tell their friends is incredibly valuable. By giving points for a referral, you’re essentially turning your customers into marketers. You should also give their friend an incentive to shop. For instance, you could give them 10% off for their first purchase.

    Actions like birthdays are lower value for your business, so you'll likely want to assign them lower rewards.

    Social follows allow you to keep your product and brand in front of your potential customers, but they don’t provide immediate value to your store. You’ll want to give enough points to inspire action without breaking the bank.

    Step 5: Create Your Explainer Page

    Create a page that outlines your loyalty program including what it's called, what actions get rewarded, how many points get rewarded, and how your points can be redeemed. 

    When your explainer page is included in your navigation menu, it acts as a constant reminder to your customers. The more visible you make your program, the more effective it is. You wouldn't run a sale without making your customers aware, so don’t do it with your loyalty program.

    Keep Your Customers Coming Back

    Customer retention as important as ever. With a well-built loyalty program, you’ll give your customers a great reason to come back again and again.

    Have any questions about setting up your loyalty program? Let me know in the comments below.


    shopify-author Alex

    About The Author

    Alex is a Loyalty Marketing Specialist at Smile.io, a loyalty and rewards app for Shopify stores. He blogs frequently on ecommerce, customer loyalty, and customer retention on the Smile.io Blog.

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