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Jenny Sponton

Loyalty Programs to Increase Your Shopify Sales

We are continuing to explore 7 Proven Shopify Marketing Strategies To Increase Sales. Today we will cover loyalty programs.

Loyalty programs are ongoing campaigns that use rewards to create repetitive behavior among your customers. Participants take actions regularly and accumulate those actions to what benefits the company and the loyal audience.

A loyalty program to reward your customers is a one of the most effective tactics to increase sales in your Shopify store. 84% of consumers say they’re more apt to stick with a brand that offers a loyalty program. And 66% of customers say the ability to earn rewards changes their spending behavior.

Almost all loyalty programs will fall into one of the four main categories. These are categories are points, tiers, subscriptions and rebates. We will cover each of the above and the pro’s and cons associated with each.

Points Loyalty Program

The concept is simple; it will reward the customer with points for certain steps he or she takes. This is probably the most common type of loyalty program.

Pros:

  • It is easy for customers to understand.
  • It avoids price discounting.
  • Customers may gain lots of points but may not use them.

Cons:

  • Customers may need to have a reminder of their status in the program.
  • Point expiration dates may discourage customers, especially if the expiration is too short of a time frame.

Rebate/Cash Back Program:

Rebate programs allow customers to earn money back from prior purchases and redeem them after a certain amount of time or a set amount. The rebate is often a percentage of the total purchases within a timeframe. They usually do this in some form of a gift certificate to bring customers back into the store but can also be in the form of cash.

Pros:

  • It is usually easy to explain and as a result your customers understand it better.
  • If it is in the form of gift certificates, it drives customers back into the store.
  • Customers often feel like they are accruing value.

Cons:

  • There is no instant gratification.
  • It can be expensive.
  • It may not appeal to infrequent shoppers.

Tiered Programs:

Tiered programs are basically a more advanced point system. After reaching a certain number of points, they will upgrade you to the next tier and will receive exclusive benefits that tier.

Pros:

  • Customers are less likely to abandon your store or program once they have reached a higher tier
  • This program mostly targets your VIP and most valuable customers.

Cons:

  • This can discourage new customers as they are less likely to join this type of program as they will start at the bottom tier.
  • This program is small, which only rewards your select top-tier customers.

Subscription Programs

(Source: Morgan Stanley Research)

A subscription program involves consumers paying a fee in exchange for entry into a loyalty program.

The benefits offered by this program typically cost more money (example: offering free shipping for subscription members), but the money earned from these customers over their lifetime is worth the investment.

On the other hand, would consumers pay to be part of a loyalty program? It may be hard to believe, but there is evidence showing that customers are receptive to the idea. A 2015 study found that 62% out of the 1,005 customers said they would consider joining a fee-based rewards program if it were from their favorite retailer.

Pros:

  • The amount of money spent by customers who use this program is substantially higher than those who do not.
  • The value offered to customers is immediately clear because these programs typically feature very strong benefits.
  • The business makes money upfront on the program.

Cons:

  • First-time customers are not likely to use this program. For instance, they would be more likely to join if they have an ongoing need to purchase the product offered.
  • The initial payment or monthly subscription can form a barrier to entry for some customers.
 

 End Words

In conclusion, loyalty programs are a great way to incentivize customers to return to your online store. Give your customers a reason to keep coming back and reward them for doing so!

Here are some great resources for you to consider implementing a loyalty program of your own.

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