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Reward point systems are like a box of chocolates, where each piece is like a surprise and full of goodness. Well, at least they intend to be surprising. The point is that, while loyalty programs show potential, but can sometimes miss the mark.
How you build your reward point system can affect your bottom line.
This article will reveal all the secrets of point programs that will turn heads and keep shoppers intrigued.
01. Define your Goal
Reward point programs are versatile tools that can target a variety of goals. You’ll need to focus your program toward your desired outcome. Which can mean anything from branding, quantities, and reward types.
Nudging customers towards your goal is a normal practice. Which is the practice of guiding customers toward specific goal-orientated outcomes. This implies we can “nudge” customers towards the interactions that support our goals.
Without a clear goal - customer engagement will appear random and low value. Defining your goal will help you organize your program with a clear direction. And as customers interact with your program, they will move the needle toward your goals.
- Are you looking to increase the quantity of reviews collected?
- Maybe you want to increase engagement on social media.
- Do you want to prioritize loyalty program registrations?
- Are up & cross sells a priority for you?
- Maybe you want to boost average order value?
02. Knowing your Customer
Something as simple as understanding customers can have a major impact on your loyalty program. You’ll need to align with their interests, which could include elements like branding and rewards. Remember that reward point programs are meant to enhance your brand, but the best way to do that is through fitting into the customer's mold.
The first step will be figuring out what rewards customers are attracted most toward. Some rewards are simply less effective than others. Their interactions will reveal their interests over time, but having an idea of what shoppers are most responsive to is fundamental. This could even result in higher returns from loyalty members.
Check out an example by Mango. They reward points for donations of old garments, which they then donate to NGOs. By aligning their brand with important social values, they found something their shoppers love while also boosting their brand values.
03. Opportunities to Earn Points
One major advantage of a loyalty program is your control over earning opportunities. Think about how you want shoppers to earn points with your reward point program. What activities and behaviors do you wish to allow? Check out a few things you should be considering below.
- Purchases: These are points awarded based on the amount shoppers spend. They are generally seen as an X for Y exchange.
- Frequency: Consider also rewards for repeat visits or purchases, designed primarily to elevate customer status. These appear most commonly as tiers or VIP rewards.
- Referrals: Referrals are a form of organic traffic generated by existing customers. It’s common to offer double rewards for referrals. Loyalty members are the most likely customers to generate referral traffic.
- Social Engagement: Social media is an important platform for ecommerce and an excellent opportunity to market your brand. We commonly see brands promote rewards for social engagement as a means of scaling their reach.
- Surveys or Reviews: To either better understand customers or build trust, it's possible to offer loyalty points for surveys and reviews. Reviews are known to have a real financial effect on ecommerce brands. UGC is central to ecommerce.
- Special Events: Community activities and exclusive events are great rewards in certain cases. We’ve seen brands like Nike provide exclusive workout sessions as an extension of their products.
04. Determine Point Value
Once you’ve cleared up when and how shoppers will earn loyalty points, you’ll need to balance their values. You might need a calculator to figure this part out, just remember that each loyalty point affects your profitability.
Think of loyalty points as an allowance, where you give up a small margin of your revenue as points. Start by determining how much wiggle room you have and establish a target. The goal is to increase your average order value and repeat purchases.
Bear in mind, that points are given after purchase, and redeemed on future purchases. So by sacrificing a small margin, you generate a sale and motivate shoppers towards their next purchase. This makes reward point programs forward-facing or focused on the future.
You’ll know that your loyalty program is working, by tracking one of the big four loyalty metrics; customer lifetime value (CLTV), repeat purchases rate, average order value, and retention rates. These metrics will ultimately determine the viability of your loyalty program and whether your loyalty points are well-balanced.
05. Set Reward Tiers
Tiers are especially useful for retaining shoppers long-term. It's common to see reward multipliers that make tiers more attractive to shoppers depending on their spending. They make customers feel appreciated and encourage them to remain loyal.
Tiers make it so that store rewards get progressively more valuable. This means shoppers can collect more points quickly, and benefit from their status. Knowing that you have points or a special status can keep your brand top of mind, effectively cutting through the competition.
Tiers can be rebranded as VIP tiers, and are known to make your customers feel special. With some clever planning, you can make your higher tiers seem super valuable. This can motivate shoppers to chase tier upgrades and increase their AOV. Exclusivity is a big differentiating factor for shoppers.
06. Make it Easy to Understand
With every loyalty program, you’ll have things to clear up. Reward point programs can be very different from one another. The best practice is keeping things intuitive and featuring FAQs on your program works.
The best loyalty programs have crystal clear instructions, FAQs, or customer service that tells customers everything they need to know. Once you’ve managed to clarify this, you’ll have a smoother experience.
07. Ensure it’s User Friendly
The hallmark of a great loyalty program is something interactive, enjoyable, and easy to use. Making the process as simple as possible for shoppers is always a priority. A well-optimized program will elevate your store and boost your brand image.
Luckily for us, much of the hard work is already completed. Nowadays, most loyalty programs can be installed as apps. This makes it possible to create complete loyalty programs with a fully branded experience.
08. Promote your Reward Point Program
At this point, you’ve spent some time building your loyalty program. It would be a shame if no one knew about your awesome rewards. Now is when we want to start promoting our loyalty program. Remember that your loyalty program is meant to boost your brand values, something we should consider when we craft our visuals. Make sure to feature the benefits as well since that's what interests shoppers.
- Brand Values: What values does your brand represent? Loyalty programs are a perfect opportunity to demonstrate those values. Think about how your loyalty program can help you build those values in an engaging way.
- Customization: Loyalty programs typically start as white labels. You’ll need to make your loyalty program your own. This also includes personalizing your loyalty program and adding your personal touch.
- Highlighting Key Features: Key features can be a drawing point for loyalty members. Is there a primary reward or feature you wish to highlight as part of your loyalty program?
- Marketing Channels: Creating engaging content and choosing the right marketing channels. What are your primary marketing channels? We now want to increase exposure and make our loyalty program known across our top-performing channels. This can only work if you succeed in producing engaging content.
09. Monitor and Adjust
Actively monitoring your programs performance is part of the process. No one can get it perfect the first time. Once the bulk of the work is done, our focus will shift towards optimization and maintenance. We need to accept that managing loyalty programs is a continuous process.
Your loyalty program will produce a huge chunk of data. This data is useful on multiple levels and can even guide your overall strategy. You can monitor things like customer purchasing habits, reward redemptions patterns, and core loyalty metrics. Also consider, that dedicated customers are those most aligned with your brand and often provide the highest-quality information.
10. Engage Actively
Out of all your customer demographics, loyal members stand out as the most engaged. They have expressed the highest degree of interest and openness. We want to normalize interactions with them as they are our prized customers. That means preparing tailored marketing campaigns for them and maintaining active communication.
At a minimum, we want to stay relevant, but ultimately we want to extract the most possible value from them. This could result in a bump across all core loyalty metrics but can be as simple as setting up automated emails.
The keys to success are personalizing messages and creating accurate customer segments. As you analyze customer behavior, you’ll also sharpen your understanding of their behavior. This unlocks the ability to predict their reactions and even guide your overall brand strategy.
Below is an example is an email builder designed for loyalty points:
Ecommerce is an immense industry and it can be difficult to find our ideal customers. We will always prefer dedicated customers over one-time shoppers. Loyal customers are cumulative and highly engaged, while one-time shoppers are as reliable as the wind. Loyalty programs are designed to attract interested customers and retain them for as long as possible.