6 Stages of Developing a Successful Ecommerce Loyalty Scheme
The 6 Stages of Developing a Successful Ecommerce Loyalty Scheme

The 6 Stages of Developing a Successful Ecommerce Loyalty Scheme

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One of the most popular ways for retailers to prolong the customer relationship and encourage engagement is to operate a loyalty scheme, but with consumers enrolled in an average of 13.3 programs each (Bond), it's important to develop a scheme that stands out. After considerable research, we've identified the steps to take at each stage of the development process to ensure your scheme is successful.

1.    Defining your aims

The first stage of creating a successful loyalty scheme is to identify what your business actually wants to get out of it. It’s easy to say that your aim is to increase customer loyalty, but without digging a little deeper to define more precise objectives, it’s hard to go about creating a system that will have tangible, measurable benefits for your business.

There are a number of key business objectives that can be achieved through a loyalty programme, all of which can have a positive effect on the bottom line.

  • Increase customer acquisition
  • Increase average order value (AOV)
  • Increase profit margin
  • Increase repeat purchases
  • Increase share of wallet
  • Decrease customer churn
  • Increase Net Promoter Score (NPS)

2.    Identifying desired behaviours

Choosing which activities to reward your customers for is a more complex decision than you might immediately think. Unsurprisingly, 97% of loyalty programs that currently exist reward customers based on purchase (Cap Gemini), but there are many other behaviours that could be beneficial for you to cultivate amongst your client base, depending on your objectives.

You could reduce the service costs associated with running your business (and increase your profit margin) by rewarding customers who take a certain path to purchase or approach to customer support. For example, a customer opting to use live chat rather than calling the support line can help to reduce strain on your call centre.

If you’re looking specifically to increase customer acquisition, then behaviours such as referring a friend or sharing product information on social media could be rewarded. Influence through social channels can be extremely powerful if brands target those (through social listening) who regularly mention them and have high influence in terms of reach. Depending on influence, loyalty points or rewards can be weighted using the right technology to encourage those who can help prompt or influence other customers’ ideal behaviours.

A spend of £100 is typically worth more than a positive tweet – unless perhaps the tweeter is highly influential with hundreds of thousands of followers. Intelligent analytics can help you decide on weighting, and adjust the rewards in real-time based on the value to your business. You can track any customer behaviour easily using Intilery’s software, so the sky really is the limit. Whatever you choose, make sure that the system is clear and easy for your customers to understand.

Be aware that one of the top reasons cited for customers leaving a loyalty program is the difficulty of earning rewards to a level perceived as valuable – so make sure that your rewards program is attractive, achievable and transparent.

3.    Choosing your customer rewards

There are three key things to remember when choosing which rewards to offer to your customers:

  1. Affordability of rewards
  2. Choice of rewards
  3. Relevance of rewards

Once you’ve identified the desired behaviours from your customers, and what these behaviours are worth to you as a business, it’s easier to scale rewards accordingly. Ensure that the potential profit you lose from providing the rewards as part of a loyalty scheme rather than for hard cash is less than your business gains.

82% of consumers said loyalty programs would be better if they offered more choice and would let them choose the categories of reward they wanted (Collinson Latitude). Some loyalty schemes allow users to spend points on anything in the product catalogue, whereas others just offer a limited selection of benefits, just as free shipping or a selection of product-specific vouchers. From the customers’ point of view, the more freedom to choose the better, but that might not work for every business, so it’s important to consider what works for you.

One of the classic loyalty programs is the coffee shop stamp card – buy 10 coffees, get your next one free. Here, the reward is directly linked to the purchase – they bought coffee, they get free coffee. The downside is that you’re now giving away for free something that your customer was going to pay for anyway (called revenue cannibalisation). An alternative is to give away a different, but related item, for example a free cake or sandwich, ensuring that you still get the revenue from their regular purchase but exposing them to new products that they may not otherwise have tried. Don’t forget that the objective for many loyalty programmes is to prompt customers to become brand loyal in the long term, not just to give away freebies!

The increasing amount of data held on customers means that loyalty program rewards can be more relevant than ever, with purchase histories and behavioural data informing the selection of rewards presented. According to Cap Gemini, only 11% of loyalty programs personalise rewards based on their data, so there’s a real opportunity to get ahead of the curve here using Intilery’s intelligent analytics.

4.    Redemption methods

The most successful loyalty schemes have two key attributes when it comes to redeeming rewards – they are straightforward and instantaneous. Having too many steps involved in the redemption process makes it laborious and time-consuming for customers to redeem their rewards, increasing the likelihood that they will just give up and stop bothering with the scheme.

The ability to get instant access to benefits is now more important than ever, as consumers become ever more used to instant gratification. Whether it’s online, in-store or in-app, customers should be able to get information on, access and redeem their rewards whenever they want to ‘spend’ them. The easier it is, the more likely it is that people will do it – and once again this is something that many businesses aren’t doing that well right now. 72% of consumers feel like they need better access to rewards online, and 78% want the ability to redeem their rewards more easily (Collinson Latitude).

5.    Communication

There’s a popular saying from Canadian academic Steuart Henderson Britt;

Doing business without advertising is like winking at a girl in the dark. You know what you are doing but nobody else does.” The same principle applies with your loyalty scheme. You have to communicate it correctly or it won’t work. Your customers either won’t sign up, or they won’t understand it, or they’ll just forget about it and stop using it.

Your loyalty scheme communications need to cover three key objectives:

  • Awareness & Interest
  • Understanding
  • Retention

That is to say, you need to make your customers aware of your program and how it will benefit them, to get them interested enough to sign up. You also need to make it clear how the program works, so they understand it well enough to use it regularly. Finally, you need them to keep using it with an ongoing contact strategy.

As with many other areas engagement within the first few days of signing up is critical to retention and ongoing success. Activation early on should be a priority to get customers into the ‘routine’ of collecting and redeeming.

Real-time marketing automation can be used to trigger the most effective customer communications. For example, when the customer makes a purchases that brings them close to a rewards threshold, a message can be sent out to encourage a little extra spend.

6.    Using the data

One of the biggest draws of the modern loyalty scheme for businesses is the ability to collect vast amounts of behavioural data on customers. Even if this isn’t one of your primary aims with a loyalty program, the potential benefits of applying the data has far reaching commercial benefits that will touch every function from customer service, to product development, sales processes and front line training. To not utilise the data would be almost unthinkable in today’s modern market.

The purchase history and behavioural insights you can glean from a loyalty scheme can be used to create a more personal experience for your customers. From product recommendations and personalised communications to cross-selling opportunities, the enhanced experience will help to further increase engagement and encourage customer loyalty and in turn increase Customer Value.

When combined with the insight businesses can acquire by using advanced omni-channel analytics, such as those provided with Intilery’s software, businesses are able to drill right down into the heart of their customer base with a Single Customer View and create truly one-to-one shopping experiences for every one of their clients.

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