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How Ecommerce Loyalty Programs Work to Increase Revenue

By: Melissa Eggleston

How do you plan to keep customers returning to your online store?

Headshot of Charlie Casey, CEO, Loyalty LionOne increasingly popular strategy for ecommerce retailers is to use a loyalty program. Loyalty programs offer customers rewards for frequent purchases. Rewards are typically coupons, free items or special access to new products.

We interviewed Charlie Casey, the CEO of LoyaltyLion, about ecommerce loyalty programs. Started in London in 2012, LoyaltyLion aims to give retailers innovative ways to engage and retain customers.

Q. What are the benefits of using a loyalty program?
A.
Two main benefits are to retain key customers and to increase sales. By retaining key customers, stores will increase their repeat purchase rate. Customers may also earn points that lead to rewards that incentivize spending. For example, a percentage off coupon could be an attractive reward that leads to a larger order. Customers also can get points for referring their friends to the website. This is a very effective way to gain new customers.

These are not the only benefits a loyalty program can provide. Stores can add value to their customer and differentiate themselves from competitors. Loyalty programs also allow stores to compete without lowering prices. They offer a valuable way to engage and communicate with their customers.

Any customized loyalty program should give retailers the ability to track all related data. You’ll directly see the revenue the loyalty program generates. You’ll also know who your most engaged customers and your biggest advocates are.

The goal is to give a reason for customers to come back on the website, shop, and earn rewards for their loyalty. Both customers and merchants are happy using loyalty programs.

Q. Who is the right fit for a loyalty program?
A.
The store needs to have a repeat purchase potential, meaning customers should be able to buy items a few times. A store selling refrigerators should not implement a loyalty program. But cosmetics, fashion, nutrition and sports sites are examples of perfect candidates.

Screenshot of 100% Pure Website

100% Pure, which sells all natural beauty products, calls its loyalty program “Purist Perks” and integrates it into the main navigation bar on the website.

Q. How much do loyalty programs typically cost? What’s the typical ROI?
A.
There are four main costs associated with creating a loyalty program:

  1. Software is used to create and manage your loyalty program. It can be designed in-house or purchased through subscription from various providers. These tend to range in price depending on complexity and support.
  2. Design costs include the R&D to create the style and branding of your loyalty program. This ensures that the look and functionality of your program appeals to target customers.
  3. Marketing your loyalty program correctly is essential. A loyalty program is a long term strategy so you should mention it in all major communication.
  4. Rewards will be of varying cost depending on the store. Retailers will determine what rewards they’d like to offer. These can be anything from discounts on future purchases, to small or major prizes. We’ve also seen stores offer products as rewards. This can be a great way to use old stock and/or increase sales on high margin products.

As for return on investment, we work with small and large stores alike. They both see ROI of between $14 and $32 for each $1 spent on LoyaltyLion.

Q. How much work does it take to set up a loyalty program?
A.
The time spent on implementing a loyalty program depends on the program design customization. It can take as little as one day for a developer to integrate and style the program look like a part of the website.

Q: Tell us more about the LoyaltyLion program.
A.
You can have the LoyaltyLion program itself set up and running in less than 5 minutes. We integrate with many platforms such as:

  • Shopify (and Shopify POS System)/Shopify Plus
  • Magento
  • Lightspeed
  • PrestaShop
  • Custom-built platforms

We’ve made our loyalty program easy to use for both merchants and customers. It’s fully customizable to preserve the brand experience for customers. Your customers will never see the name “LoyaltyLion.” The program works as a seamless part of your website to increase revenue. The Loyalty panel can be embedded on the website or left as a pop up window.

Screenshot of The Chivery website

 An example of an embedded loyalty panel seen by customers of The Chivery, which sells clothing, home goods and gifts. 

Merchants can reward any onsite activities. Rewards are often given for:

  • making a purchase
  • referring a friend
  • signing up to the newsletter
  • writing a review
  • visiting the website
  • whatever else can be tracked online

This is a powerful marketing tool since stores can use rewards to drive traffic. For example, you can create a special offer saying: “Come this weekend to earn double points on the launch of our new products!” Once customers earn enough points, they can claim their rewards.

We provide 5 different types of rewards:

  1. money off
  2. percentage discount
  3. free product
  4. discount on a specific product
  5. the custom reward (this could be anything, such as a free ticket for a special event)

In terms of analytics, we provide a merchant account where stores can access to their dashboard and all the data generated from the loyalty program.

Screenshot of LoyaltyLion’s Analytics Panel

The main LoyaltyLion dashboard offers a clear interface so you can evaluate how effective your reward program is.

We also provide three types of automated emails – the best way to generate money with no effort! For example, we have “the reward available reminder” email. Customers receive this as soon as they have earned enough points for a reward. This email has a link to take the customer directly to your website – and we have a 35% click through rate on it. The only thing this email needs is customization.

You can find case studies and results of the LoyaltyLion program here. Or learn more about LoyaltyLion and request a demo here.

Thank you, Charlie, for sharing your knowledge with us about ecommerce loyalty programs! 

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