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Competition is mounting in e-commerce and many businesses are falling behind better-known brands. Given the heated competitive environment, what can we rely on to capture important customers and keep them coming back?
Retention power is a rising topic in e-commerce, and it represents a business's overall ability to motivate and capture leads. It involves many elements like the intrinsic qualities of your product, presentation, pricing, and substitutes. In the battle for customer retention, we have the industry's rising star “loyalty program apps”. They accelerate implementation, bring diverse features, and provide complete solutions.
All jokes aside, loyalty programs are gaining traction as tools designed specifically for customer retention, a widespread problem specific to e-commerce. Their versatility enables them to tackle a broad variety of strategic goals and improve a brand's ability to capture customers. The primary function of loyalty programs is to divert attention away from competitors and to provide incentives to high-intent customers.
Let's first establish one thing. Especially in e-commerce, implementation can be technically challenging so for many people setting up a loyalty program is more than likely a process of choosing the right app. Loyalty programs are comparable to other marketing strategies like seasonal discounts, bundle deals, or even upselling. They are all ultimately a way of trying to extract value from customers, but they do have their differences. This article will lead you step by step on how to set up a loyalty program for Shopify.
A study shows that 84% of customers said that they are more likely to stick with a brand that offers a loyalty program. And 66% of customers said that the ability to earn rewards and spend them later actually changes their spending behavior. It’s also well known that it is much cheaper to promote and sell to your existing customers rather than acquiring new ones. Not only are the new clients more costly to get, but they also don’t generate as much money as regular customers do. So investing in loyalty and rewards programs can become an essential part of sustaining your business.
What are the main features of loyalty programs?
Loyalty programs are primarily designed for customer retention but are commonly associated with average order value and repeat purchases. They utilize a reward system that grants customers in-store points which can be redeemed for a variety of discounts or perks. They are favorable over basic discounts for their versatility and strategic nature. Below are the main features of loyalty programs:
- Continuous Rewards: Unlike standard discounts, loyalty rewards are permanent fixtures and are highly memorable. Customers remember the points they’ve earned and act anticipating discounts at your store. Unlike ordinary discount events, customer can save loyalty points, which makes them think about their next shopping session.
- Versatility of Rewards: Loyalty programs are versatile because of the broad variety of rewards available. This allows you to concentrate customer attention on specific actions by adjusting reward types and values. This is especially useful when trying to accomplish a strategic goal, for example, boosting social media followers or accelerating reviews by increasing the reward for those actions.
- Accumulative Customers: One of the most prominent benefits of using loyalty programs is the ability to accumulate customers over time. As time elapses, your program becomes more valuable as you are able to connect with more and more members. This scaling effect allows you to communicate with a larger and larger customer database. Some businesses like Starbucks make loyalty members central to their business model, knowing the importance of retention and its long-term value.
- Progressive Tiers: Rewards are divided into tiers that reflect the duration a customer has been loyal to your brand. Once shoppers have accumulated enough points they are promoted to their next tier, which has additional benefits. This is another dimension for customers to enjoy, giving them a reason to shop at your store in the long term. By making our programs progressive we keep customers facing the future and the potential benefits that lie ahead.
- Branding: Branding is a way of creating a memorable impression and aligning our business with an image or concept. Businesses often use loyalty programs to boost their branding or to align their business with a social cause. Branding is a general business goal and is supported by loyalty programs which can make them more competitive.
- Analytics: The ability to monitor the performance of your loyalty program is essential to accomplishing your goals. The process will go through a process of adjustment to find the right balance between effective rewards and values.
- Integrate with other apps: Loyalty programs can be integrated into other marketing channels, like social media or email. This enables you to promote your social media or utilize email to boost communication with loyalty members or to spread the word about your rewards.
Suggested Reading: Examples of Creative Loyalty Programs
How to Build a Loyalty Program in Shopify
1. Determine you Objective
The first step to designing a loyalty program is defining your goal. Loyalty programs are versatile and capable of supporting a variety of objectives. Once you clarify those objectives you can then focus your loyalty program towards your targetted goals, which will affect what rewards you implement and how you structure your program.
Below are a few examples of different reward types. As you can tell, it’s possible to direct customer engagement toward your goals whether it's social media, gathering reviews, or rewarding social shares.
Note: Each reward is a financial cost, it's important to understand how they affect your budget.
Example of Strategic Rewards:
Joshua Lloyd has grown into one of the premier LGTBQ+ brands in Europe as a strong and reputable brand. They have managed to accumulate more than 2,000 positive reviews through their loyalty rewards. These results speak volumes about the effectiveness of rewards in motivating action. Consider how persuasive 2,000 reviews are when compared to competitors with a fraction of that figure.
A few common goals include:
- Referral Traffic
- Average Order Value
- Customer Retention
- Channel Growth
- Social Proof
2. Choose your reward structure
Loyalty programs can take upon many different structures which can alter your outcome. The structure you choose depends heavily on your niche and overall vision for your program. Luxury brands generally prefer in-person experiences as a way of cultivating, while cosmetics brands may prefer tiered programs. Each will leave a different impression on loyal members, finding the right structure is essential for success.
Popular loyalty program structures:
- Point System: These programs grant points for specified actions and award discounts, gifts, or perks when redeemed. They are often considered the easiest to implement and the most common.
- Tiered Based Loyalty Program: Tiered programs are expanded point systems that establish levels with special status. They are structured to increase in value as you progress and to relay exclusivity.
- Exclusive: These programs offer some sort of special access to an exclusive event or access to limited edition catalogs. They award these features to loyal members, often with a minimum required spending.
- Partnerships: These programs establish an affiliation with external businesses, offering discounts or perks from partners. This is a great way of relaying customers and aligning brand images.
- Social Groups: Social programs create communities of like-minded members. Brands generally organize special events and grant access to members for their loyalty. Sporting and lifestyle brands commonly use these programs.
Suggested Post: Complete Guide to Loyalty Programs
3. Selecting a Shopify loyalty app
It's important to remember that Shopify apps are built for general use and as such may not fit your specific needs. Because features may vary greatly between apps, it's important to understand what’s important. Below is a list of basic features that are expected from a successful loyalty program.
Choosing the best loyalty app:
- On-Page Design: Creating an impressionable design is essential. A loyalty program must have the sort of presentation to resonate with customers. Some of the top features include the ability to design custom pages and pop-up tabs.
- Flexibility and Structure: Loyalty programs boil down to rewards and customer motivation. Focusing your rewards towards targetted goals This is why flexibility is detrimental to the success of your program. The first thing you should be checking is the type of rewards your loyalty app has.
- Branding: Branding is an important goal in the long term since people attribute value to the brand image. Your loyalty program must reflect your brand values, so having the ability to adjust images, names, text, and titles is central to an effective loyalty program.
- Analytics: No loyalty program can succeed without analytics. The ability to observe customer behavior is critical as it reveals our opportunities and weaknesses. We need to be able to actualize our goals by evaluating current levels and making adjustments, which is only possible with analytics.
- Integrations: It is common for a Shopify business to use multiple apps to operate their store. A loyalty program is most effective when used in combination with other apps. A loyalty program must integrate with important apps to actualize its true potential. Such examples include social media apps or outreach apps.
- Location: Shopify is a global brand and provides services in many countries and regions. A loyalty program must be able to fit to match geographical needs. A loyalty program that does not offer language options is redundant in relevant markets.
- Customer Service: Necessary for a successful loyalty program is a strong customer service team to guide and support your goals. As these loyalty apps are services, they are expected to have a team on standby should anything break or require attention.
Shopify Customer Loyalty Program: Growave Loyalty, Reviews, Wishlist, Instagram UGC
- Growave has dynamic on-page features like pop-up tabs and the ability to create custom pages to complement your loyalty program.
- Growave also offers features that synergetically work with loyalty rewards allowing additional versatility that may not be available with other apps.
- Growave has an automated email feature that can be used to complement your loyalty program.
- Growave tracks every customer interaction with your loyalty program and produces visuals for you to analyze.
4. Improving the Customer Experience
The customer’s experience is inseparable from loyalty programs, it's important to understand this in order to increase engagement and facilitate retention. The tips below are some basic rules for creating an engaging loyalty program
- Simple instructions: Confusing elements can place unnecessary burdens and slow down your loyalty program. Creating clear instructions and features includes any rewards, tiers, FAQs, and any complaints.
- Valuable Rewards: Customers can tell in an instant whether the rewards you structure are worth working towards or not. Establishing value is important for a successful loyalty program as rewards are the real goal.
- Adaptation: It isn’t always clear how customers will react to your program so adaptation is important for an impactful result. This can mean testing different rewards and values to find the right balance or to what customers are drawn towards.
- Freedom of Choice: Shoppers enjoy options and testing different rewards. The more options the better, customer opinions are subjective which affects which rewards they choose to spend their points on.
- Social Alignment: Align your program with a social cause or a project that appeals to your direct user base. This can help you gain some valuable points with customers looking to support a cause.
5. Integrate Additional Features
A stand-alone loyalty program will always be less effective and fail to reach its maximum potential. For this reason, we seek to integrate other parts of our core business into our loyalty program. This can help spread the word about our rewards and brand our program to complement our image. We can see an increase in customer repeat purchases when loyalty programs are combined with email for example. This suggests that loyalty programs perform better when combined with other features. Some Shopify apps include popular features in their loyalty program.
- Email or SMS: Keeping in touch with loyalty members or just sending them simple reminders can support your overall goals.
- Social Media: Social media can be central to some businesses for important leads. Integrating with your loyalty program can produce a mutually beneficial effect.
- Reviews: Reviews are essential in e-commerce and loyalty programs speed up their collection and make your program more trustworthy.
- Customer Service: Creating FAQs or integrating customer service into your loyalty program is a great way to learn from comments and smoothen processes.
6. Regularly review and update your loyalty program
Adaptation is central to the success of a loyalty program. We need to know what rewards would be most effective, and how much value they should carry. This can only happen after observing customer behavior. What starts as an estimation quickly becomes a race towards optimization. The data discovery process, involving gathering feedback, analyzing data, and pivoting to align with your strengths, is crucial in this journey. This is part of the reason why our choice of loyalty app needs to track and visualize analytics.
Loyalty programs are widely thought of as being essential custom retention tools in e-commerce. Shopify loyalty apps are gaining traction as complete solutions to one of the biggest problems in e-commerce. As such this guide on how to set up loyalty programs on Shopify stores leads you through the process and establishes a few guidelines for improving your own loyalty program.
Frequently asked questions
Why is customer loyalty so important?
E-commerce figures suggest that as high as 65% of a company's revenue originates from repeat purchases.
What metrics monitor Loyalty Program performance?
Loyalty Programs have analytics sections that monitor direct performance. You should be able to see all customer interactions at your store from this analytics section. Loyalty programs have a direct effect on your Conversion Rates, Average Order Value and Customer Life Time Value.
How much more do loyal customers spend over new customers?
It is known that a 5% increase in customer retention results in a 25% increase in profit, and that there is a 65% greater chance to sell to existing customers than to new ones.
Is personalization important for loyalty programs?
Consumers have expressed a major desire for a personalized experience, as many as 80% of shoppers suggest that they prefer brands that recognize their shopping preferences.
Are Loyalty Programs profitable?
While there is no definitive answer, industry figures suggest a clear improvement in engagement rates and customer lifetime value. Keep in mind that points have a financial value that affects your bottom line. There is a balance between point value and their cost.