Loyalty points in online stores: Why they could become your best marketing tool

"Do you collect points?" - You've been confronted with this question at the supermarket checkout for years and it's as much a part of the experience as paying. But this form of loyalty campaign is no longer just used by Kaufland, Rewe & Co. Numerous online stores also use this option to thank customers online for their loyalty.

But how does such a loyalty points program actually work in online stores? Which companies use such reward campaigns, what are the differences between discounts and loyalty campaigns online and the most important question: is it also worthwhile for your store? We have the answers to these and other questions for you here.

Loyalty points in online stores: Show appreciation and generate more growth

Before we go into how you can benefit from loyalty points with your company and successfully implement such a customer loyalty program for your online store, the first question is: What exactly is such a loyalty program?

What are loyalty programs?

Loyalty programs come in many different forms. For example, some stores send their customers discount codes by mail on their birthday, others use cashback systems, and still others resort to loyalty points. We want to take a closer look at the latter in this article.

So how do loyalty points work in online stores? - In most cases, customers are already given points when they decide to take part in a bonus program. The customer can collect these loyalty points and then redeem them in stores in the form of stickers or as digital points online. With every subsequent purchase at the same company, the customer is then usually credited with further points immediately after each purchase. Collecting loyalty points is therefore particularly worthwhile for regular customers of a brand.

In some cases, points are credited in retail stores after payment on the associated app.

The number of points is based on the purchase value. For example, one point can be awarded for every 5 euros of purchase value. In most cases, it is also possible to collect points in partner stores. When the customer has then received a certain number of loyalty points, he or she can exchange them for a bonus, a gift or similar. Although in some cases an additional payment is still necessary for products, the customer should obtain a saving compared to the original price.

Arnd Engeln, a professor of market and advertising research at the Stuttgart Media University, describes the effect of collecting points on customers as follows: "For people, collecting points is an experience. Seeing the points account grow satisfies us emotionally." He continues, "It's a real play instinct that companies generate." This play instinct then often leads to people driving extra miles to distant gas stations just to be able to continue topping up their points account.

It is now clear: collected loyalty points should provide customers with certain benefits. But what's in it for you as a retailer?

What are the benefits of loyalty points for my online store?

To thank your existing customers for their loyalty and to keep them coming to your website in the future, you can offer the possibility to collect loyalty points. This type of customer loyalty program rewards especially those customers who order from you frequently and/or in high value. We have summarized for you here what advantages you can derive from this as a merchant:

Strengthening customer loyalty: A wide range of statistics show that customer loyalty programs are proving their worth. For example, studies by Invesp and Experian show that almost 70 percent of customers stay with retailers who offer a loyalty program. The reason for this is quite clear: they see the loyalty points as an added value and an additional offer.

Encourage people to buy: Loyalty point campaigns are a psychological trick that, according to Florian Becker, business psychologist at Rosenheim University of Applied Sciences, is based on the endowment effect. With this effect, people consider something to be more valuable that they did not have to acquire themselves. In many cases, this even goes so far that customers buy more and more from a company if they know that they will earn points or that their accumulated points will otherwise expire.

Build recommendation marketing: In addition to the fact that loyalty points in online stores strengthen customer loyalty and generate more sales, it has also been shown that customers are more frequently encouraged to make recommendations for the store in this way. And let's be honest: Especially in the highly competitive e-commerce industry, where clicks and conversions are becoming increasingly expensive, this form of marketing can be quite useful.

Capture data: Another clear advantage of loyalty points for you as an online store operator is, of course, that this customer loyalty program allows you to collect detailed data about your customers' buying behavior: At what rate does the customer order? What type of product is he most interested in? etc.

So we now know that loyalty point campaigns are predominantly aimed at existing customers. But why should I still use marketing measures if I have already persuaded the customer to buy once or several times?

Discount or loyalty points: which system is more effective?

Loyalty points and discounts are two popular strategies in retail to retain customers and increase sales. Both approaches have their advantages and disadvantages and their effectiveness depends on various factors.

The choice between loyalty points and discounts depends on the retailer's objectives. Loyalty points are particularly effective for long-term customer retention and engagement, while discounts can provide quick sales boosts. However, many successful programs combine both approaches to maximize the benefits of long-term retention and immediate sales.

Loyalty campaign: Why are returning customers important for my online store?

If you're an e-commerce business operator, you're probably familiar with this: Your focus is often more on customer acquisition than on leveraging the potential of your existing customer base. But precisely because you've already convinced these customers to make a purchase in the past, it's often even more worthwhile not to lose sight of them. After all, as studies have shown, existing customers spend an average of 67% more than new customers. How come?

Customers who make a one-time purchase are more likely to buy from you again. After the first purchase, the probability that a customer will buy there again is 27%, after the second purchase, the probability rises to 45%. So the more often customers buy something from your store, the more likely they are to come back.

Every repeat purchase by a customer means repetitive sales for you.

Regular customers not only come back more often, but also spend more money on each order. The average shopping cart value of loyal customers is three times that of new customers. In addition, the amount of time customers spend in the store is directly related to the amount they spend on each order. After 30 months, for example, a customer's spend is about twice as much as their initial spend.

Who are loyalty points programs suitable for?

In principle, every entrepreneur can benefit from a loyalty program. However, in the case of online stores, it has been found that some can derive more benefits from it than others. These include the following two:

Online stores with a lot of competition can benefit the most from loyalty points. Such a customer loyalty program can help them avoid losing their customers to competitors. This is because loyalty points suggest to their customers that they are more interested in them than the other market players.

Online stores with price-sensitive customers: Compared to customers who shop in the luxury goods industry, price-sensitive customers respond better to rewards in the form of loyalty points. So if you offer your product on different platforms with different target groups, you should consider offering different customer loyalty programs as well. For example, if your online store focuses on the quality of your product, but on Amazon you have to keep up with low prices, then two different loyalty programs are recommended.

How do I implement a loyalty points program for my online store?

You run an online store and would now like to introduce your own loyalty program? Then here are the three most important steps for you at a glance.

Keep your loyalty points program simple and understandable

When creating the concept, it is important to keep the rules as simple as possible. Make sure that your customers can easily understand the loyalty points program and register quickly. A chatbot can be used for registration, for example.

Also beneficial are clear landing pages, which should not only display the rules of the loyalty program, but also the rewards and benefits for the customer. With an appealing landing page and the USPs of your store visible on it, you can actively encourage customers to participate.

With a user-friendly cross-channel platform, your customers are more likely not to unsubscribe from the loyalty program right away.

Only after you have created the framework concept of your loyalty program, it's time for the finishing touches: Determine the T&Cs for your loyalty points program, the rewards you want to award and the optimal communication channels. Once your program is up and running, don't forget to evaluate the data you've collected so you can make the necessary adjustments.

Use loyalty points correctly

The first purchase is always the hardest, so loyalty points are a great choice - for both existing and new customers. In a survey by TechnologyAdvice, 83% of consumers said they are more likely to choose to buy from a retailer that offers a loyalty program during the checkout process.

Also encourage your customers to continue collecting points from time to time. To do this, you can, for example, send an e-mail to draw attention to the current points balance. Even after the customer has redeemed his points for the first time, it is important not to lose him for the loyalty program.

If your focus is more on increasing brand awareness than generating more sales, you could also offer loyalty points in exchange for interactions with your brand. This could be registrations for the online store or sharing content on social media platforms.

Keep your eye on the pulse with gamification

The principle of loyalty points is based on arousing the customer's desire to collect more and more points. A proven way of doing this is the so-called gamification factor. In other words, collecting loyalty points in your online store should resemble a game. You can achieve this effect, for example, with creative milestones that your customers have to reach.

Before you integrate a loyalty points program into your online store, do you want to spruce up the website first? Then here are a few points you should pay attention to:

• The 1-time-1 of good store design

• 4 tips: How to make your store design successful with mobile first

• Subpages that every e-commerce website needs: You got all 12?

Latori client Shape Rebulic already uses loyalty points

In 2019, we had the pleasure of migrating Shape Republic's online store from Magento to Shopify Plus. The retailer of fitness shakes and other feelgood food offers its customers a loyalty points program, which we implemented with Emarsys Loyalty. Once customers register their account, they earn loyalty points in the online store with every purchase and various other actions.

With Shape Republic we won the Shop Usability Award 2021 in the Category Food & Drinks!

Once registered, Shape Republic clients benefit from a loyalty points program implemented by Latori.

Loyalty points online stores: We recommend these loyalty programs for Shopify

LoyaltyLion

LoyaltyLion is a loyalty program that you can download and use for free in the Shopify App Store. In addition, LoyaltyLion offers other pricing models with different features:

Small Business: $159 / month

Classic: $399 / month

Advanced: $729 / month

LoyaltyLion is also popular with our customers, including Bodyshake and Shape Republic, for example, who are already successfully using the loyalty program.

Download LoyaltyLion from the Shopify App Store here.

Yotpo

Yotpo also offers an option for free use. This variant includes up to 10 loyalty programs with up to 100 monthly orders. In addition, there is a gold version for $199 / month. With this version up to 1000 orders per month can be processed.

Click here to get to Yotpo.

smile.io

smile.io offers four pricing models that include different features:

Free Plan

Starter Plan: $49 / month

Growth Plan: $199 / month

Pro Plan: $599 / month

For more information, and to download smile.io, click here.

Conclusion

When aiming to generate sustainable business growth, the relevance of strong customer loyalty is often underestimated. However, the customer loyalty program with points can help you focus on your existing customers to encourage them to make more purchases. Instead of focusing on expensive new customer acquisition, this way you can thank your most loyal customers and make them your top marketing tool. After all, satisfied customers not only come back more often themselves, they also attract new ones.