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eCommerce Loyalty Programs: A Comprehensive Guide (2020)

eCommerce has been on the rise for the past decade, there’s no doubt about it. And now the Coronavirus pandemic has tipped the scale in favor of online shopping. But whether you run an essential business facing higher demand, or a non-essential business that is restructuring, there’s one thing for certain: ecommerce loyalty programs are now more important than ever. 

The reason is simple: people still need to replenish their stock, but now they have more time to spend on the Internet searching for products. And relying solely on discounts won’t be enough to stand up to massive competitors like Amazon. 

This means you need to offer not only good prices and great products, but also a convenient buying process and tons of engagement points that keep customers coming back. Companies that fail to meet expectations in our new reality will struggle to keep customers interested. 

This article is meant not only for purely eCommerce companies, but for any retailer that wants to branch out into online sales or strengthen their eCommerce channels. Ideally, eCommerce loyalty programs will share many similarities with in-store loyalty programs.

The pandemic, as devastating as it is, has definitely pushed more people to try ordering online. In some cases, maybe even for the first time. These new customers are an easy catch as they can only shop online. One of the tactics for online retailers to employ is to have a loyalty program. Online shops should focus on program enrollment, so they can stay in touch with customers post Covid-19.

Marcin Szelag
Partner at Innovation Nest

What Is an eCommerce Loyalty Program?

An eCommerce loyalty program is a customer retention tool geared towards keeping and engaging your existing customers, so they will buy in higher quantities, shop more often, or interact with your brand more frequently. The best programs are easy-to-understand, show a clear path to higher tiers and rewards, and offer a fun experience!

The world of eCommerce sales is generally characterized by high purchase frequency and equally high churn rates. Many companies believe that customer loyalty no longer exists, and use deep discounts in an effort to differentiate themselves. However, this constant price war has conditioned customers to hunt for the best markdowns, which has made brand loyalty even harder to achieve. 

A next-gen eCommerce loyalty program can create a devoted community around your brand, by helping you stand out in the following ways:

  • A redefined buying process, to make online shopping feel seamless
  • Incentivized customer profiling, to generate richer data and boosts other marketing activities, such as personalization
  • Experiential rewards and VIP benefits, to increase overall customer lifetime value
  • Special interest clubs, to build communities and emphasize exclusivity
  • Viral social media contests, to encourage word of mouth and build trust

I think the consumer will come back more slowly than most people think. We may be entering a few years of extended pullback, the primary reason for this is lack of available jobs. This will cause consumers to be more cautious. In general, the biggest area where a loyalty program for eCommerce can help is by making it easier for the consumer to keep purchasing additional items from the same brand, rather than choosing a new brand each time. This is true for both digital, as well as traditional physical loyalty programs.

Rick Watson
CEO and Founder of RMW Commerce Consulting

The Biggest Challenges for eCommerce Companies in Terms of Customer Retention

High purchase frequency and cutthroat competition aren’t the only defining factors of eCommerce. 

Try to Serve, Not to Sell

The Coronavirus has made empathy the latest marketing term on everyone’s mind. eCommerce companies should aim to support their customers instead of pushing purchases. 

For non-essential businesses, the best way to serve customers is to give them useful content: ask your experts to share tips on how to spend their extra free time creatively, teach new hobbies, or share educational videos on social media.

We’re seeing some shifts in expectations and behaviours now, for example, the evolution in creativity in user-generated content. We’ve also seen a very browsy behaviour during this period, so a focus on engagement would be key for brands. There is a greater focus on virtual communities and online shopping in general.

Vanessa Yeo Barger
Head of Brand Marketing at Love, Bonito

Showing Empathy

Businesses can also show sympathy by extending sought after features like free shipping and extended returns to everyone, or participate in humanitarian actions to garner customer goodwill.

In this period of uncertainty, we needed to re-invent our marketing strategies and we needed to do it very quickly. In order to keep up with our competitors, we had to anticipate and increase discounts on spring/summer 2020 collections like never before. We also extended the return period to stay closer to our customers in such a complex moment. Our loyalty program is helping us retain our customers too: the increase in sales we are seeing in this period, indeed, is mainly due to our long-term customers rather than the new ones.

Francesca Montanari
Senior CRM Specialist at LuisaViaRoma

Multiple outstanding examples from around the world show how clever marketing activities have helped retailers respond to the global pandemic. Check out the recording of our recent webinar to learn how retailers are responding.

UK beer company BrewDog has turned all of its bars into virtual pubs to keep their community close to the brand, recreating the traditional pub feeling with live music and homebrewing tutorials.

UK beer company BrewDog has turned all of its bars into virtual pubs to keep their community close to the brand, recreating the traditional pub feeling with live music and homebrewing tutorials.

Fear of Amazon

In the US, half of online spending goes through Amazon. But trying to match the service of Amazon Prime without a loyal customer base would be detrimental to your bottom line. But there’s one thing Amazon is missing: the ability to go beyond rewarding transactions. Still, Amazon isn’t the only big fish to look out for. You also have to measure up to other eCommerce businesses, who, just like you, are aiming to attract customers with superior experiences.

eCommerce businesses are the lucky ones in the Corona crisis. Locked down consumers become online shoppers. And with that shift more companies will be entering the fray – and the struggle for customers will become more intense than ever. If you’re an existing ecommerce business you’d better hold on to your current customers and start thinking about loyalty, and not be fooled by growing sales, which may actually be hiding a growth in customer attrition, as consumers are being lured away by competitors.

Sebastian Franck
Executive Director of Strategy & Innovation at Isobar

Simple and Convenient Buying Process

The reason behind Amazon’s popularity is that leaders at the company quickly realized that convenience is just as important to customers as the price itself. In the current economic climate, this lesson rings truer than ever: customers expect a great ecommerce experience: relevant product recommendations, one-click checkout, and lightning-fast delivery.

Discounts Aren’t Enough to Stand Out

In eCommerce, there’s no such thing as ‘footfall’, so the level of engagement is measured by touchpoints. More touchpoints mean more opportunities to interact with customers. For this reason, eCommerce companies need to engage customers outside of the buying cycle as well, to create touchpoints that aren’t only transactional.

As customers become restricted and isolated their brand satisfaction may be more influenced by emotion, availability and trust. Therefore today’s online rewards programs need to constantly fuel a 360-degree view of the customer to make experiences personal, seamless and entertaining. To retain customers, today’s brands need to see beyond the value of transactions and focus on capturing and rewarding data exchanges and interactions, in order to retain customer attention and trust, let alone business. At a time when consumers cannot experience physical shopping, there is still an opportunity to make customers feel special, which in turn results in brand alliance.

Jason Harman
Head of Retail and Travel Division at EPAM

Best Loyalty Program Features for eCommerce Companies

With these key challenges in mind, here’s a list of some of the best online loyalty programs to inspire you.

1. Loyalty Program Types That Fit Your Business

Point-based loyalty programs

One of the oldest loyalty program mechanics, earn & burn is all about earning points, then spending them. In a more up-to-date approach, customers can earn points for a variety of interactions, not only purchase transactions, for example sharing product pages on social media, completing their profile, or subscribing to a newsletter. Point systems are easy to manage and quick to implement, perfect for companies who want to launch quickly. 

Tiered loyalty programs

Tiered programs are a fan-favorite among online shoppers because the system allows them to progress through the program, earning better benefits as they spend more money or earn more points. Higher tiers are associated with more exclusive brand experiences and VIP rewards, rewards which many people will work to achieve. Because tiers represent a status within the brand, customers are more inclined to make additional purchases to avoid losing their status. Lastly, climbing the ranks requires a serious investment, meaning members are less likely to give up their benefits only to start from square one in another brand’s loyalty program.

In this episode of Customer Loyalty Minutes, Zsuzsa Kecsmar, CCO & Co-founder of Antavo and Jörn Roegler, VP of Strategy & Insight at Antavo, discuss what makes tiers so special in the eyes of customers.

Perk programs

Perk programs completely abandon points, giving all members benefits, unconditionally. Perks are a great approach if you have a unique service or are just looking to increase goodwill among your customers. For these reasons, this program type is ideal for brands aiming to make the shopping experience more enjoyable or generate brand awareness. 

Hybrid programs

In most cases, eCommerce companies chose a hybrid-type loyalty program, mixing and matching elements from the above program types to maximize efficiency and drive specific KPIs. This includes the addition of loyalty logic, such as gamification (e.g. badges and challenges), as well as loyalty communities.

Customers ARE acting differently. And loyalty programs help to identify this new purchase behaviour, e.g. comparing past purchasing habits vs new habits. A loyalty program allows for a more direct, focused approach to customer retention. By knowing program members better, we can be more relevant for them.

Matjaz Butara
CMO at Big Bang

Subscription-based loyalty programs

Generally, the biggest appeal of loyalty programs online is that they’re free to use. Customers view this as getting coupons and gifts for free, even if acquiring these benefits requires them to make a purchase or complete a specific action. However, if you have a well-established brand and offer truly desirable services—think Amazon Prime—you can make the program subscription-based. Some people might pass on the membership, but those who opt in will be much more likely to engage more with the service and make the most out of their subscription.

Child fashion company Okaidi offers a subscription option for customers. By paying a €4 annual fee, members unlock loyalty benefits like birthday rewards, discounts, and vouchers when parents have a new baby on board.

Child fashion company Okaidi offers a subscription option for customers. By paying a €4 annual fee, members unlock loyalty benefits like birthday rewards, discounts, and vouchers when parents have a new baby on board.

2. Loyalty Program Approaches to Stay Relevant

Engage customers outside of the buying cycle

Only rewarding customers when a purchase takes place limits your opportunities to deliver an emotional high. Unless customers are buying constantly, being a loyalty program member is rather uneventful. And, if customers don’t have a reason to log in to their profile, they will forget their credentials, or even forget about the entire program and switch to a competitor. That’s why next-gen loyalty programs for eCommerce should give members a reason to come back day after day by incentivizing frequent logins, friend referrals, user reviews, photo uploads, surveys, competition, or other engaging activities.

This graph illustrates what happens if the Recognition Loyalty formula is applied. By injecting non-purchase related touchpoints (yellow) between transactions (black), people experience an emotional high more frequently, leading to a higher engagement rate.

This graph illustrates what happens if the Recognition Loyalty formula is applied. By injecting non-purchase related touchpoints (yellow) between transactions (black), people experience an emotional high more frequently, leading to a higher engagement rate.

Omnichannel

At the moment, online shopping is the dominant trend. But once the Coronavirus health crisis passes, brick-and-mortars and physical stores will need as much help as possible to recover. If you have a retail presence, bridging the gap between offline and online shopping with a loyalty program can enable you to increase footfall in various ways.   

Membership page

No loyalty program for eCommerce is complete without a loyalty HUB. This is a custom web page that’s seamlessly integrated into your website. The loyalty HUB acts as a gateway. Here customers can learn about the rules of the program, browse and redeem rewards, review their progress, unlock new badges, complete challenges, and more.

A well-designed Loyalty HUB matches the style and feel of your brand perfectly and acts as a second home for loyalty program members.

A well-designed Loyalty HUB matches the style and feel of your brand perfectly and acts as a second home for loyalty program members.

Multicurrency, multilingual

If you’re selling on the global market and have an audience in various countries, it’s imperative to display the spend-to-point ratio in local currency. This helps the audience better understand the value they get by making a purchase. It also increases trust and participation if the loyalty HUB is available in multiple languages.

The Antavo Loyalty Management Platform offers built-in modules to handle multiple currencies and set up multilingual membership areas with ease.

The Antavo Loyalty Management Platform offers built-in modules to handle multiple currencies and set up multilingual membership areas with ease.

3. Advanced Loyalty Logic for Next-Level Engagement

Gamification 

Badges, online challenges, sweepstakes, prize wheels, voting: gamification come in all shapes and sizes. No matter which feature you use, the goal is the same—to make the loyalty program more engaging and fun. Gamification is a valuable program element to incentivize repeated behavior. For instance, offering a badge for members who log in at least twice a week encourages members to make a habit of checking back on a regular basis.

Offer management 

If you want to avoid giving discounts in your loyalty program, opt for double or triple-point campaigns. These limited-time offers can follow the theme of the current holiday, promote your latest collection, or just get people interested in products you have in stock. Offer management is a tool that helps marketers create and organize this type of campaign more effectively.

If you wish to learn more about how to target specific stores, countries or customer segments with enterprise-grade offer management, check out Antavo’s Prime Steel Winter Release.

If you wish to learn more about how to target specific stores, countries or customer segments with enterprise-grade offer management, check out Antavo’s Prime Steel Winter Release.

Instagram contests

In order to build a relationship with customers, you need to be present on their favorite channels. In terms of an online loyalty program, this means hosting a social media contest. For instance, set up a contest hashtag contest on Twitter, or a photo contest on Instagram, asking people to submit funny content, or photos of themselves enjoying your product. The winner should receive a prize, such as a loyalty point bonus or branded gift. 

Customer profiling

eCommerce lives and dies on being relevant to customers. In order to make email communication and product recommendation personalized, you need more customer data. Fun surveys and questionnaires are a great solution to this problem, but without a loyalty program to incentivize survey completion, customers won’t bother filling them out.

Antavo enables you to encourage customers to fill out various types of surveys at different touchpoints. For example, during loyalty enrollment, after completing a purchase or when entering a sweepstakes or contest. Once the data is collected, you can personalize each member’s loyalty experience using our Segment Builder, or sync this information to your CRM to run targeted campaigns.

Giulia Filoso
Loyalty Strategist at Antavo

Incentivized reviews

Gathering user-generated content, such as customer reviews increases product engagement and lends authenticity to your brand. If you plan to offer rewards to customers to write a review, keep in mind that only those who have actually made a purchase should be allowed to submit a review. Also, consider limiting the number of reviews that are eligible for a reward in any given time span. 

VIP clubs

Special interest groups, or VIP clubs, are niche communities within the loyalty program. They can be invitation-only groups, or customers can buy their way in using their points. In exchange, insiders enjoy additional benefits, like early access to the hottest product releases or members-only content. VIP clubs serve to motivate customers and entice them with exclusive offers and content.

LVR Sneakers Club main page

Luxury fashion retailer LuisaViaRoma introduced their own VIP club, called Sneakers Club. Members spent 2 million points in just one month in order to enter. Not only that, club membership became a frequently discussed topic on social media.

6 Loyalty Programs Examples for Inspiration

Now that we’ve reviewed the ins and outs of eCommerce loyalty programs, it’s time to see—and analyze—how other brands from all around the world approach the topic.

1. Team Tarte from Tarte Cosmetics

Tarte Cosmetics is a cosmetics company headquartered in New York City. The company’s ecommerce loyalty program is famous for incentivizing a wide-range of non-transactional interactions, which, in turn, fuel the brand’s online loyalty marketing efforts. 

  • Customers received a fixed amount of points for each purchase, depending on the product’s size (Full-sized product: 100 points, Mini/Sale item: 50 points)
  • Members receive points for opting in and completing their profile
  • Customers are also rewarded for recurring activities, like friend referral, opening newsletters, answering product questions, or completing quizzes
  • Tarte has a Reward Shop where members can spend their points on cosmetic samples, coupons and merch.
Points can be used not only at the Reward Shop, but they also count towards reaching a higher tier, which unlocks long-lasting benefits, including surprise & delight anniversary gifts.

Points can be used not only at the Reward Shop, but they also count towards reaching a higher tier, which unlocks long-lasting benefits, including surprise & delight anniversary gifts.

2. DSW VIP from Designer Shoe Warehouse

Designer Shoe Warehouse (commonly referred to as DSW) is an American footwear retailer of designer shoes and fashion accessories. DSW operates a hybrid program, mixing together tiers, earn & burn elements and free perks. 

  • Customers earn 1 point for every $1 spent, and receive a $5 Reward after spending $100
  • There’s a $5 birthday coupon, motivating customers to share their birth date
  • DSW VIP has three tiers in total, based on annual spend
  • At higher ranks, tier members gain access to free gifts and double point events
  • Free shipping is available to all members, without a coupon
Reaching the highest tier permanently doubles the points customers earn after each purchase and unlocks triple-point campaigns.

Reaching the highest tier permanently doubles the points customers earn after each purchase and unlocks triple-point campaigns.

3. Muscle & Strength Rewards Program

Muscle & Strength is a fitness site and retailer designed to help people achieve their muscle building and fat loss goals. Their loyalty program shows how popular physical rewards can be, and demonstrates how brands can maximize the appeal of completing valuable actions.

  • Customers earn 2 points for every $1 spent
  • Friend referrals are worth 500 points—serious motivation to invite a friends 
  • There’s a built-in share button at the end of the checkout process, where customers can share what they’ve ordered on social media to earn points
  • Gifts and rewards are shipped alongside the order, which makes unboxing a thrilling experience
Muscle & Strength also has tiers and the content of the Reward Catalog depends on each member’s rank.

Muscle & Strength also has tiers and the content of the Reward Catalog depends on each member’s rank. 

4. IKEA Family from IKEA

Unlike other retailers, IKEA doesn’t use points. Instead they rely on members-only perks, benefits, and special content.

  • There are surprise & delight offers that are sent out as emails
  • Members have access to free workshops and events
  • Free Oops-assurance (If something breaks during transport or while assembling IKEA furniture)
  • Members also receive free tea and filtered coffee at their stores
At IKEA Family, there are no points, customers only receive discounts via members-only offers.

At IKEA Family, there are no points, customers only receive discounts via members-only offers.

5. LVR Privilege from Luisa Via Roma

The foundational belief of luxury fashion retailer LuisaViaRoma is that customers seek experiences, not just products. The company wanted a loyalty program that mirrored this sentiment, but also provides an edge in a competitive market.

  • 1€  spent equals 1 LVR point
  • The four-tiered program is based on points earned
  • Their popular Sneakers Club is a private special-interest club where members can access limited edition sneaker drops
  • Customers can make purchases by spending their points on single-use discounts or by acquiring the Privilege Card. The latter gives  online loyalty card owners a 15% off on all purchases for six months

The loyalty program became wildly successful, resulting in an 59% increase in customer retention, and €16m in revenue. Read the case study here.

LuisaViaRoma’s loyalty program also features an award-winning birthday email campaign, which became one of LVR’s highest converting emails, receiving 25% more opens and 40% better clicks than non-loyalty emails.

LuisaViaRoma’s loyalty program also features an award-winning birthday email campaign, which became one of LVR’s highest converting emails, receiving 25% more opens and 40% better clicks than non-loyalty emails.

6. PetSmart Treats

PetSmart Inc. is a retail chain that is engaged in the sale of specialty pet animal products, such as food, furniture, habitats, and accessories. The company is a great example of how to gear loyalty benefits to a specific audience—in this case, pet lovers. 

  • Customers earn 8 points for every $1 spent (including services and donations, which are fairly common in this industry)
  • Exclusive offers are sent via email to boost open rates
  • Members earn 1000 bonus points for completing their profile, showing how important personalization is for PetSmart
  • Free surprise to celebrate pet birthdays
  • Free Doggie Day Camp session when members buy at least 10 products
The loyalty program is available as an app, giving on-the-go users a smooth experience, no matter where or when they want to treat their pets.

The loyalty program is available as an app, giving on-the-go users a smooth experience, no matter where or when they want to treat their pets.

Revving Up the Engine for Your Online Loyalty Program

It doesn’ matter whether you are experiencing a boom in customer interest or are struggling to keep your audience; eCommerce loyalty programs can be essential tools for keeping customers engaged. So don’t let the challenges overwhelm you! If you’re interested in learning more about online loyalty programs and how they are implemented, our definitive guide is a worthwhile read.

Andy Nemes
Andy Nemes
Andy is the CSO and Co-founder of Antavo. He is a natural-born helper who takes the time to understand prospects’ unique business needs and is always ready to pick up the phone. He supports Antavo’s clients in finding a loyalty solution that best fits their business.