eCommerce Loyalty Programs: How to Foster Customer Advocacy?

⏱ Reading Time: 10 minutes

In every business, whether it was marketing oriented, Saas, or eCommerce, everything revolves around customers and how to make them happy and satisfied. Customer satisfaction is the key to business success. 

In order to reach customer satisfaction, companies implement so many great strategies. One of them is eCommerce loyalty programs. 

🚀 Read Customer Experience Guide: How to Put your Customers First? 🚀

What Are Ecommerce Loyalty Programs And How They Work?

Loyalty programs are programs made to encourage customers to keep returning to the company they purchased from. BigCommerce pointed out: 

„Online retailers who receive a steady stream of at least ten or more orders a month will see greater benefit from a reward program.“

Customer retention is and should be main goal of every eCommerce loyalty program. Loyal customers are more often converting and spending with brands they are loyal to. And when customers are loyal, they will share their positive experiences with friends and colleagues. And what does that mean for your company? Free referrals.

Investopedia wrote 2 key functions of implementing loyalty programs:

1. Rewarding customers for branding loyalty
2. Providing the issuing company with a wealth of customer data

So, when you integrate eCommerce loyalty programs into customer daily routine, they can establish real brand loyalty. 77%  of smartphone owners say they are more brand loyal to businesses sending discounts, surprises, exclusive content and birthday surprises through their mobile phone.

Related: How to Build Brand Loyalty?

Why Do Customers Join Ecommerce Loyalty Programs in the First Place?

As same as companies benefit from loyal customers, customers also benefit from eCommerce loyalty programs. Some of the perks are discounts, coupons, birthday gifts, special offers, bonus items, surprises and more. And when you personalize all these perks, which is highly important, you will certainly get loyal customers for life. 

Because what customers love most is to feel special and that is the least you can do for them. And for some customers, the fact you tried to help them or did some smallest thing for them means a lot more than you think. 

Also, besides all these perks, one of the main reasons why customers actually join loyalty programs is the fact that the company delivered high-quality products with an amazing customer service.

Picture 1. Perks of eCommerce loyalty programs

3 Things to Look Up When Implementing Loyalty Programs 

1. Getting New Customers And Keeping Existing Ones Is Important 

It is important to let your customers know they can have discounts even before their first purchase. That is how to attract them in the first place. And to keep them, it is important to nurture relationships you created with them in the first place. Because that is where most companies fail. They attract customers and later stop worrying about those same ones. And it is much more expensive to attract new customers than to retain the current ones. So, don’t make the same mistake.

Also, if you want to read more about how to motivate returning customers, check our other article about it: Taking Advantage of Returning Customer Potential.

2. Expand Loyalty Reach with Partnerships 

As countless surveys and case studies have stated, one great way to differentiate from  competitors is the use of strategic partnerships. 

Neil Patel pointed out how: „From earning air miles on credit cards to free Starbucks when using Lyft, large-scale points-building loyalty programs aren’t just for big businesses. In fact, not only can they entice customers to spend more and shop more frequently at member stores, but they also have a significant impact on the revenues of the original (referring) source.“

3. Make Ecommerce Loyalty Programs Easy To Use and Understand 

Customer love when things are easily understood. By keeping things as simple as you can, the customer will become even more loyal. So clarify what rewards customers can get, how many points do they need to have to get rewards and what are the ways to earn points.

Because by making it difficult to earn rewards, customers will simply leave at some point. And nobody wants that.

Picture 2. Loyalty programs research

6 Types of Ecommerce Loyalty Programs

1. Point Program

The most popular and simplest type of eCommerce loyalty program is the point program. It is based on a really simple thing – the more you spend on each purchase, the more points you will earn.

By giving the customer the opportunity to earn different kinds of rewards, you are encouraging customers to invest in your brand. Those rewards can be discounts, coupons, money and similar. Plus, you increase your customer’s average order value.

2. The Paid Program

If you’re interested in joining VIP member’s club, you will need to pay a monthly or annual fee. That’s why it is called the paid program. But with it comes more benefits and rewards that the point program, for example, doesn’t have.

For this loyalty program to be effective, a brand should have a loyal customer base.  Because loyal customers are the ones you target mostly, but frequent buyers also.

3. The Tier Program

The tier program is based on loyalty level. It is a type of program that motivates a customer to earn more points every time they purchase. And with more points come exclusive rewards. So, it is an encouraging program made so customers could participate all the time. 

Besides collecting points, they can also achieve the status that will make them feel special. Brands even put a percentage for each tier so customers are able to see their progress. So, If you offer a tiered loyalty program, your brand will always be in your customer’s mind.

Ruby Garage, development and consulting company points out: „This system also allows eCommerce stores to be exclusive and stand out from competitors, segment their customers into low, medium, and high spenders, and finally use email personalization based on customer tiers.“

4. The Partner Program

It is well known that customers stick to loyalty programs that offer more rewards. That’s why the partner program is created. By partnering with other brands, a brand can strengthen their businesses and boost the loyalty of the customers. And partner programs can be quite effective in boosting customer loyalty and retaining current customers.

Great partnering examples are Nike Plus that made a partnership with Apple or Headspace, and Walmart that made a partnership with Mastercard.

Picture 3. Apple Watch Nike+

5. Gamification loyalty programs

If you aim to create a fun and unique experience for customers, to motivate them to stick and engage with your brand, then this type of program is just perfect for that. 

It is great for reaching customer loyalty with the help of giveaways, rewards, contents and more. Also, one important form of gamification is customer feedback. So for example, when customers are answering questions on your website, leaving their feedback or making some suggestions, reward them.

Related: Gamification in Digital World and Saas

6. Hybrid programs

Hybrid loyalty programs are a mix of two or more loyalty program options. The point and tiered programs are the most common mix of hybrid eCommerce loyalty programs. But the brand doesn’t have to stick only to existing loyalty programs in order to combine them. They can use one of these 6 and then make their own program. But of course, that program needs to satisfy customers’ needs.

One tip also – when brands combine more than two loyalty programs, sometimes they can get tangled and lost the core of loyalty programs in the first place. So try to combine simpler programs.

2 Great Examples of Ecommerce Loyalty Programs

1. Sephora Beauty Insider

If you’re in search of the best eCommerce loyalty programs, Sephora Beauty Insider is for sure one of the best. 

Sephora is a French multinational chain of beauty supply stores that offers a wide assortment of products from nearly 300 brands. Sephora Beauty Insider is Sephora’s loyalty program launched in 2007. It consists of points and tiers. Spending $1 equals 1 point. Earning enough points enables different rewards.

Three-tiered loyalty program

Sephoras Beauty insider relies on the three-tiered model, as follows:

1. Beauty Insider – this tier you get when you join the loyalty program at the beginning
2. VIB – this is the second tier you get when you spend $350 where you get 350 points
3. VIB ROUGE – the last tier is when you manage to spend $1000 in a year

Picture 4. Three-tiered Sephora’s model

Sephora Beauty Insider Benefits

• Free loyalty program
• Includes mobile app for users
• Signing is simple (with an application form)
• The app contains loyalty card itself
• Personalized program perks
• You can choose from a variety of rewards
• Omnichannel approach

Most of the members of Sephora’s loyalty program are responsible for 80% of the company’s sales. Angel Singh, director of product analytics and optimization at Sephora says:  

“When we think about our clients, we know that they don’t just go into the store and buy something; there is a journey.”

With this approach, it’s no surprise that Sephora generates so many sales.

Related: Customer Journey Mapping 101: The Purpose, Benefits and Positive Outcomes

Beauty Insider Community

Also, if you think this is all from Sephoras great things, you were wrong. There is one more great thing about Sephora’s loyalty program. It is a Beauty Insider community. 

Primary goal of the community is to build emotional connections between shoppers, which Sephora does very well. In that way, shoppers will feel like a part of something bigger. On this community, people can engage in conversations, post pictures and reviews, find inspiration and even participate in community events.

Picture 5. Beauty Insider Community (Sephora page source screenshot)

2. NikePlus

Nike created a product-first customer loyalty program with its NikePlus club. NikePlus is tightly aligned with Nike’s objectives. The loyalty program provides many advantages for customers as they recognize customer value and offer possibilities to deepen relationships with customers. Some of the rewards include Nike’s free t-shirts as well as third-party options.

Nike Plus benefits:

• The Nike Plus app is free and easy to use
• Registration is simple
• Designed a questionnaire about your preferences is amazing
• Same day delivery
• Free shipping
• Unique experiences
• Extended shopping hours (in selected stores)
• Personalized promotions

Picture 6. Nike Plus benefits examples

It is proven that customers who use Nike Plus mobile app are loyal and spend a lot (40% more than other Nike customers). Members that engage with the Nike+ Run Club or Nike + Training Club apps and achieve various milestones in a given month have the opportunity to be rewarded with some of these things: 

• A one-month Apple Music subscription
• Access to Headspace
• A guided meditation and mindfulness app
• Free ClassPass class credits.

“The premise is simple: The more active you are, the more you get rewarded. Whether you run more miles through the Nike Run Club app or do five new strength routines in the Nike Training Club app this month, every time you stride or rep, your physical achievements trigger rewards.” – Nike writes.

Don’t Forget About the Metrics

Metrics are a great thing to see are your ecommerce loyalty programs effective, or what you might need to change or improve. Here are 3 most important ones:

1. Customer retention rate 

This metric measures how many customers did the company retained, and it is usually measured over a given period.  And when implementing ecommerce loyalty programs, the number of customers should increase over time.  

Increasing customer retention rates by 5% increase revenues by 25% to 95%, according to research by Reichheld and Schefter.

It also measures how many new customers you gained as same as how many customers stopped doing business with your company.

Picture 7. Customer retention rate formula

Related: 10 Essential Customer Experience Metrics

2. Net Promoter Score (NPS) 

As Paldesk said: „NPS is the only metric where users have a role in bringing new customers. This metrics refers to how likely a customer is to recommend your service or product to others. Usually, it’s measured via pop-ups on the site or with surveys between certain time periods.“ 

Simply, this metric use scales to show how much would one individual recommend your business to others.

Picture 8. Net Promoter Score formula

3. Churn rate

Customer churn is an essential brand metric representing the percentage of customers who have stopped doing business with your brand, and how fast did that happened.

For businesses whose customers pay on a recurring basis — such as SaaS or other subscription-based businesses, churn rate is a significant metric.

Picture 9. Customer churn rate formula