Customer Loyalty Program for eCommerce business: 10 popular myths debunked

In this article, we dare shed the light on the most popular stereotypes and beliefs that envelop what marketers call “a good eCommerce loyalty strategy”. We’ll talk about how much customer loyalty really costs when measured by time, efforts, mistakes, and of course money.  For our customer loyalty research to be fair and truthful, we addressed the most common customer loyalty myths to Nikita Korchervskyi, Head of Email Marketing at Promodo. So what have we heard about eCommerce customer loyalty strategies?

Myth 1. Each eCommerce business will benefit from a loyalty program

“This is absolutely true. We may look at a brand and be sure it has no customer loyalty program, while it’s successfully up and running. This is so, because what the end customer considers a discount program is actually a loyalty program realisation for a brand, though marketers may still refer to this as a discount to increase the AOV.”

Among the most widely used (and the ancient ones) are the discount mechanics like Points or Cashback programs, that are designed to earn in return to what is spent with a brand. 

Some companies still use the Paid Program, which involves inviting customers to pay a monthly or annual fee to join a VIP member’s club.

Charity programs can unite customers & a brand under common values, like saving the planet from pollution or helping to fight cancer, while Progress programs are built on motivation and competition.

charity loyalty program

Tier and Community programs are aimed to increase brand awareness and make a brand top of mind. They also include the competition component, as consumers aim to reach a higher level to gain social status among other members of the community and get more exclusive gifts.

tier loyalty program

Myth 2. It’s worth starting a loyalty program when you already have a steady stream of customers 

So when is the right time for an online business to launch a loyalty program?

“On one hand, thinking like an entrepreneur, it’s probably reasonable to start when people are already buying from you. If the business is just at launch, its owner is investing a fortune and needs to wait before it starts to bring some revenue. On the other hand, it all depends on the type of business. Let’s recall any recent delivery or taxi service launch. Here discounts went first. And while it rather looks like a situational event than a loyalty strategy, it is still a powerful asset to develop loyalty from scratch. So, there is no good or bad time to launch a loyalty program. It all depends on the situation and business aims at that time. If you are just capturing the market, you need a program that will work here and now. It’s easy and doesn’t usually cost much –  start with something really basic. You can engage to spend $100 at once to get immediate perks or something similar.”

My recommendation here is to start with several levels of the loyalty program at once. In other words, imagine that you are granted a free taxi ride, a % of which already goes to your bonus account and can be used to pay for your next trip with this taxi service. However, this will work in a business, whose customers tend to make frequent purchases.”

Myth 3. Once launching a customer loyalty program, your eCommerce business is bound to get more revenue and brand advocates forever

Once you tempted customers with your free taxi rides and instant discounts if they spend a certain sum with you, you face the exploit phenomenon. Just because hundreds of your competitors have similar conditions, while customers are meant to find what’s cost-effective for them. So, you are still a long way from capturing them once and making them stay with your eCommerce brand.

“Now more and more brands come with the same conditions: delivery, terms of the warranty, services. But once you cross the threshold of their brick-and-mortar stores, you’ll be able to feel the difference. This is so because it takes years to recognise their audience and form the USP. Online retail is no different, meaning there doesn’t exist a special magnet that will pull your customers in and never let them go elsewhere”.

Nikita recommends using gamification to retain customers. We previously talked about this trendy technique in detail and explained how it can help to gain brand awareness, acquire new customers, and thus boost sales of an eCommerce business. Although it is not yet widely used, as it involves lots of UX/UI, back-end work, and marketing, that many brands are simply not ready to because of the time & money factor.

Koto bank is a project that originated from Ukrainian monobank. It has just been launched in the UK and poses an example of implementing gamification. Customers are offered to play with a cat, it sends them messages and is the protagonist of funny quizzes and pop-ups inside the app. In addition, a freshly registered bank card arrives with a set of branded stickers.

kotobank
Another go-to solution is launching an onboarding loyalty system. You can engage consumers to fill in the favorite lists or subscribe to the newsletter. Anything that helps a brand to know more about potential & existing consumers, and at the same time offers bonuses to the latter.

Myth 4. An eCommerce loyalty program can double the AOV with no additional actions needed on the business’ side

Of course, it is not enough to simply invent a system of rewards, trigger emails, and relax in anticipation of conversions. We previously wrote about key retention metrics to monitor and provided formulas to calculate them. Also, let’s not write off the good old NPS.

But what are the peculiarities of an email marketing campaign and how long will it really take to see the effect, be this an increased AOV or significant growth of the existing customer base?

“For email marketing to work for the sake of increasing the AOV, we should offer additional items before or at the checkout. This is not about loyalty, but about business itself.”

But here is what email marketing can help with:

  • Increasing awareness about the existing marketing offer and spreading it all around the audience. 

“Here post-checkout emails work fine. Even if a customer didn’t pay attention to a certain offer on the website, there is a high chance that he will be interested in it after placing an order.

  • Retention indicator, meaning customers would buy less but for email marketing.

Receiving an email about additional items that could supplement the major purchase or making them aware of a certain number of bonuses/cashback obtained from the purchase are likely to trigger more purchases with the brand. You can even use the hypothesis that, in general, a USB cable is valid during 1 year and send a corresponding email when the purchase is due.”

However, no loyalty program will work with no additional actions on the marketing side. Make sure it’s embedded into all types of ads, clearly visible on the website, and distributed by the Sales and Customer Support channels. Lots of actions don’t require high budgets or lots of design & development. You can demonstrate loyalty by adding your regular customers to a chat with special discounts or invent something similar. The main aim is to demonstrate that they don’t need to go elsewhere, as all the best is already prepared by your brand. Such actions are also good as the effect will not take long to come: SMS or time-limited offers distributed in messengers usually result in purchases within one week.

Myth 5. Email is the best channel for distribution of an eCommerce loyalty program

Since the first email marketing blast was sent in 1978, this channel seems to never lose its popularity in retention marketing. Why is it so and are we still in the email era when it comes to a loyalty strategy?

“People can’t drop using email, simply because the majority of services require you to fill in address at the registration. They have their Facebook and everything tied to one electronic address. This is the main reason why despite multiple predictions, email is still alive and it will be so in the next 10-20 years. ”

Of course, it would be a mistake to review the topic of loyalty programs through the prism of email marketing only. For brands, simply putting the number of bonuses received from certain items in front of them is indeed expressing loyalty to a consumer. Another way of its realisation is the usage of chatbots.

mastercard chatbot

The core advantage of chatbots used in eCommerce business is that you can work with them at the stage of growing your online audience (and will not have to pay thousands of dollars) as well as when your client base is large enough and you can afford investing in chatbot services. With this topic being really popular all over the world, the markets are constantly updated with the relevant chatbot solutions. The most popular ones are Chatfuel and ManyChat, both support Facebook messenger.

“Chatbots are about to replace traditional websites once. People simply don’t need them if everything, including making a purchase is available with no additional actions required.”

Similar to an old friend barman with the anticipated “Need a refill, man?” on a Friday night, chatbots are able to guess consumer’s mood and fulfill orders just in one click. Moreover, they are able to bring you home: if the address is saved in your favorites, it’s enough to let the chatbot know that you need a ride.  Being a consumer, would you resist?

Myth 6. A customer loyalty program realised by email helps to achieve high ROI

In some sources “high” means up to 4400%! Sounds impressive, doesn’t it? But what does it actually mean and who is in charge of calculating the ROI of an email campaign designed for retention? 

“It’s quite unrealistic to speak about the number above on a permanent basis. Moreover, for large companies, it’s difficult to preserve such a high ROI. So, it’s more likely a situational indicator, like the one on Black Friday or similar. Aside from that, the statement is true and reasonable: to send a dozen emails, one spends $1-2, while PPC will never be that cheap. Simply because conversion rates are significantly lower for contextual advertising – this is all about trust and loyalty. And roughly speaking, anyone who has access to Google Analytics can see what actual ROI is of a certain project and make sure the number is quite impressive.”

Myth 7. Returning customers is 5 times cheaper than acquiring the new ones

This is 100% true. The only thing is that you need to invest heavily at the start. It usually takes about a year to set up the retention system and make it running as it should. Thus, brands need to be ready to sacrifice instant revenues. To make it less painful for a young business, we offer to proceed step by step: adjust application forms, welcome series, set up basic triggers, abandoned cart. It may often seem that the $5000 we spent on retention marketing (development, marketing, etc) could have been better invested in PPC advertising. But in the end, you understand that you no longer spend more than $1500 but receive much more. Just you need to be ready to tighten the belt. And of course, a little patience until it positively affects revenues. ”

Myth 8. A clear CTA is the guarantee of success in emails, messages and push notifications

If you want your customers to buy, you need to point them in the right direction. But while the content of a CTA is quite obvious as well as the requirement to be non-intrusive, it’s interesting to understand how to make it literally call the desired action from a consumer.

Content format topic is very adaptive to different niches. But there is one trick: the more products you place in the content of an email or notification, the more clicks (and logically, purchases) you get. This is how merchandising in offline stores also work. Make more items, words, and names clickable – this will also increase your chance to be seen and loved. Here I will only mention the main rule: your customer’s attention should always be at the main product or service. Do not distract them by highlighting supplementary offers. Try to keep first things first. And large, when it comes to the image size.”

Myth 9. A good loyalty program is able to atone poor customer service

“The only thing that could spoil a day was people. People were always the limiters of happiness except for the very few that were as good as spring itself”. Ernest Hemingway

No matter how personal your emails are or what an impressive discount your offer, it all goes in vain if your customer service is poor. Each loyalty program must have a logical fulfillment provided by friendly and helpful representatives of Customer Support and Success departments. And what is more important is that this collaboration is circular. Because only satisfied customers have the potential to become loyal customers. Make sure your Customer Support agents are well-informed about the special conditions you offer to clients and are able to differentiate the latter ones from the crowd. Of course, a good loyalty strategy minimizes the need of interaction from the client’s side, but forewarned is forearmed. 

Myth 10. Frequent emails sent to customers in terms of an eCommerce loyalty program are a key to its success

26 % of customers say they are annoyed/ never buy from a brand they receive too many emails from. Trigger emails really save the precious time of marketers, but there is a fine line between being at your customer’s hand and simply creating traffic in their inbox.

unsubscribe rate

Another vital thing to do is understand why customers actually unsubscribe. Most often, clients are likely to share their POV, but they are likely to do it if the last message of your trigger chain itself is not annoying. A couple of years ago we had a case on e-mail marketing with one of our clients. This is how we see a polite and nice unsubscribe email.

why people unsubscribe

Wrapping Up

There exist dozens of stereotypes about eCommerce customer loyalty programs. Not all of them, however, have something to do with a brand’s real-life. At the same time, loyalty programs are now a matter of course, and are often implemented so naturally that consumers simply take them for granted. This, beyond any doubt, creates competition. For brands to stand out, there are some essential points to take into account.

  1. Start as early as possible. When it comes to customer loyalty, it’s worth investing at the start in order to double the revenues, get impressive ROI, save money on acquisition and gain customers that love you for real within half a year.
  2. Retention programs are far more than email marketing. To find the key to your consumers’ hearts, make sure your website, corporate culture, and communication with the client are saturated with loyalty.
  3. Try trending solutions like chatbots. They will soon replace a traditional website.
  4. Keep first things first when it comes to additional offers. Highlight your major products, but do not forget to increase your potential by adding more clickable items to the content you spread to your customers via marketing channels.

Promodo has successfully developed and launched loyalty programs for lots of eCommerce businesses. If you are ready to taste the benefits of a professional strategy, contact us

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Customer Loyalty Program for eCommerce business: 10 popular myths debunked

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