How to Increase Customer Retention With a Loyalty Program

E-commerce stores that are only focusing on acquiring new customers, and not figuring out how to get those customers coming back, are in for a long and painful journey. It’s easy to get caught up in the excitement of getting new shoppers placing orders, but the fact of the matter is that the majority of your profits are going to come (directly and indirectly) from the loyal brand advocates that you’ve successfully retained.

“Get shoppers to commit to your client’s brand.”—Shiv Singh

To put it simply, the higher your retention, the more revenue you are going to have because those retained customers spend more - and spend more often. Possibly more importantly though, they are advocates for the value of your brand and bring new customers to your business from their social circles - all on their own.

Retained customers are committed to your brand, so they place orders again and again, which means they also aren’t jumping ship to your competitors. The relationships you build with your customers keep them around no matter the ups and downs your brand, your customers, or the world around us all is experiencing.

“Acquiring new customers costs 5x more than retaining an existing one.” — Invesp

Just how much more profitable are retained customers compared to newly acquired ones? Well, your most likely customers are responsible for 41% of your client’s revenue, are 9x more likely to convert, and your top returning customers spend 3-5 times more per order than the rest of your customer base.

The truth is in the numbers - you need to shift your focus to retention.

How to start a customer retention strategy

How do you actually get started though? Anyone can say they want to work on retention, but knowing the tactics you need to put in place makes the difference between a good idea and a successful one.

Get to know your customers

It’s common sense that you aren’t going to know what your customers care about if you don’t get to know them. So, the first step to figuring out what tactics you can put in place to keep customers coming back is to find out what makes them tick.

You’ve got customers and visitors regularly on your site and engaging with your brand across the web, so why not use all that data to learn about your customers? For instance, you can easily use free web, analytics, and social tools to find out:

  • How are they getting to your site

  • What days/times are they most active

  • What technology are they using (devices, browsers etc.)

  • Where do shoppers drop off in the checkout flow

  • How do they engage with email (open and click-through rates)

  • What are the demographics of social media followers,

  • What kind of posts get the most likes, comments, reposts

  • What info do they share in product reviews

  • Do they give you valuable feedback from surveys

No matter what information you learn about your customers, the key is to use it to build a customer profile so you know what your customers want, when they want it, and how they want you to share it with them.

Make customer support a priority

Customers are only going to come back if they’ve had a good experience, and the easiest way to make sure that every customer feels like they’re building a relationship with your brand is by making customer support a pain-free experience.

Not only does that mean you should respond to inquiries as quickly as possible, but make it easy to get in touch with you in the first place. Nobody wants to hunt down a phone number - so utilize on-site chat, email, and social media as well to make getting support fast and easy.

Better yet, create an area of your website to let your customers self-serve their issue. Whether it’s an FAQ or a customer forum you can use easily available tools to make it a priority to make customers feel supported before, during, and after the purchase.

Make all content value-adding

Everyone knows that “content is king” but the truth is that it only rings true for content that is adding value. You can write 100 blog posts or send 1000 emails, but if they are only self-serving then your audience (customers and not-yet-customers) alike are not going to care.

When you use all that data you’ve gathered about your customers’ needs to inform what you create, you not only position yourself as a thought leader, but you also can reduce the number of support tickets created. Why? Because you’re giving customers what they’re already looking for. They won’t need to ask you twice!

Value-add marketing focuses on exceeding customer expectations by delivering more than they asked for with every interaction.”

Whether you’re making tutorial blogs, unboxing videos, or supporting email workflows, personalized, value-add marketing is truly the only marketing worth doing.

Make loyalty part of your brand experience

There is one retention strategy that rolls all of the other tactics together - launching a rewards program. With rewards, you’re building feelings of loyalty into your brand experience from the get-go, making it valuable for visitors to engage with your brand even before they become customers.

Incentivizing customers for purchases, social engagement, referring their friends, and more motivates them to keep your brand top-of-mind. Data from tens of thousands of loyalty programs has shown that loyal rewards members have a repeat purchase rate that is 2.5 times higher than non-loyalty members. And not only that, but loyalty members have an average order value that is more than 10% higher as well.

Again, the numbers tell the story, and loyalty programs simply pay off.

How to increase retention with a loyalty program

Like when you start with general retention, knowing who your customer is will have a large impact on how you get started with rewards. What your shoppers expect from your brand has to align with what you present to them with your loyalty program, or there will be too big of a disconnect and they simply won’t engage with it.

Here are a few key things to consider when launching a rewards program

Utilize existing customer buying behavior data

Looking at how your customers buy and what they are buying should influence how you build your program.

For instance, if you sell very expensive items that customers simply won’t need for months or years to come, you should consider optimizing your program for referrals rather than simply repeat purchases. This works for retention because if your customers have recommended a product to their friends, psychologically they will want to remain consistent and purchase from

Loyalty is an extension of your brand

Consider all the thought and effort you’ve put into building a cohesive brand. That branding doesn’t stop when it comes to loyalty! The colors, textures, aesthetics, and even the “voice” your brand uses should all flow seamlessly into your loyalty program.

Put the same effort that went into your branding into your rewards program to make customers feel at home.

If your brand values luxury and has “red carpet” vibes, make sure your rewards are similarly luxurious. If your aesthetic is bright, loud, and exciting, make your rewards panel reflect that so they can move between your website and loyalty program with ease. No matter what your brand is, matching customer expectations, and knowing what they want out of a loyalty program will help you design.

Keep it simple

The easiest way to make sure your program brings you as much value as possible is to keep it simple. Make sure there are simple ways to earn points, a simple way to view the balance, and a simple way to redeem points for rewards. Don’t make things more complicated than it needs to be for yourself or for your customers.

Relationships > sales

When you know what customers actually want, make loyalty part of your brand experience, and make it as simple as possible, you make it easy for customers to build a relationship with your brand that moves beyond you being just a website they buy things from.

A focus on how you can make engaging with your brand exciting, valuable, and motivating will keep your brand top-of-mind, making it that much easier for customers to remember how much they love what you do and want to make another purchase time and time again.

Measure and optimize for success

One mistake many brands make (even large enterprise brands) is they launch a rewards program but then don’t touch it. To make sure your loyalty program is working like you want it to, there are a couple of key metrics you should keep an eye on.

Participation Rate

If you want to know if you’re properly communicating the value of your rewards program to your brand to customers, the first place you should look is the participation rate. How many of your customers are actually joining the program? If the number is lower than you want, maybe it’s time to send an email to customers who haven’t joined and explain the benefits of the program. Or, maybe add an eye-catching banner to your homepage so every visitor knows the program is available.

Redemption Rate

Points redemption rate is the quickest way to see if the members of your program are being motivated by the rewards you’ve set up. If you’ve got a very high number of unredeemed points, you might consider running a bonus points redemption campaign to help clear the balance sheet.

You might also want to take a look at how hard it is to earn enough points before they can be redeemed too - you may have made your program just a bit too challenging to be enjoyable.

Repeat Purchase Rate

If you’ve got good participation and great redemption, those should be leading indicators for retention. Looking at the repeat purchase rate, you can see how many of your customers came back for that second or third order.

Tracking how that number changes throughout the year will help you plan when you should run different marketing or loyalty specific campaigns to boost engagement and the likelihood of additional purchases.

Conclusion: retention is all about relationships

The most successful brands in the world know that they can’t only focus on acquisition. They’ve set their sights on the value of retention and figuring out how to make one-time shoppers see them as more than just a maker of things.

In short, they are on a mission to build relationships with their customers.

With a loyalty program, you program the value of engaging with your brand into the minds of your customers. With each interaction, they are reminded of why they wanted to make a purchase from you in the first place, cementing the incredible value of your brand in their minds.

Truly understanding your customers, and delivering on what they want from you while staying true to your brand values will keep customers not just engaging with your brand, but telling all their friends about it while they come back again, and again, and again.

This is a guest post by Tim Peckover, Content Manager at Smile. Smile helps over 30,000 businesses turn one-time shoppers into loyal, repeat customers. A proud father of two, when Tim has the spare time you can usually find him in a good book accompanied by a strong cup of coffee.

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