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A loyalty program is a strategy for rewarding customers with structured discounts and exclusive offers for behaviour that has a positive impact on your brand, such as purchases, reviews or collaborations. With the growth of the e-commerce industry, acquiring and retaining customers is more expensive and challenging than ever before. Knowing that it costs 5 times more to acquire a new customer than it does to retain existing customers, ecommerce stores that focus on customer retention have higher and more efficient revenue streams. Loyalty programs are becoming increasingly popular and many customers prefer to shop at e-stores that reward them for their purchases.
"It is much more challenging and five times more expensive for us to acquire a new customer than to retain an existing customer."
Tomas Bata
Loyalty programmes vary from company to company depending on the type of products sold and the purchasing behaviour of customers. Despite these differences, successful loyalty programs share the following key elements:
A dedicated loyalty page and widget ensure that customers know about your program and can find resources for their questions on their own. The easier your loyalty program is to find, sign up for and engage with, the more likely customers are to actually use the program. If you have a complicated registration process or customers have to contact support frequently, chances are they won't participate in the program. With this in mind, your loyalty page & widget should include the following information:
Ellity recommends having both a loyalty page, which is a custom landing page embedded into your online store, and a widget, which is a branded pop-up that customers can use from any page of your online store. Again, finding ways to make the loyalty program easily accessible will increase participation rates.
You can easily design your branded landing page and widget with Ellity and customize them to match your store's visual aesthetic, ensuring a lasting loyalty experience for your customers.
Points are rewards that your customers earn for shopping or working with your e-shop. Customers use these points for discounts on future purchases. Customers earn points for promotions such as:
E-shops should keep in mind the percentage of cashback within their points program or the ratio of points to the value of the Crown/Euro paid out. There is no hard and fast rule for the cashback percentage, but knowing your profit margin and how much you want to set aside for rewards will give you a clue as to what percentage you will ultimately choose.
The starting point is the rule of 1 point earned for every 1 CZK/Euro spent and the rule of 10 points redeemed to get back 1 CZK/Euro. This means that the cashback amount is 10% of the original amount.
You will also base your cashback percentage on the average order value (AOV). If your AOV is higher, you can allocate more points or cashback. For smaller AOVs, you'll want to be careful about allowing significant cashback to preserve profits.
VIP programs motivate repeat purchases and help turn returning customers into fans of the e-shop. They can increase customer lifetime value (CLV) by increasing the number of orders and money a customer spends over time.
VIP levels increase rewards as customers move up to different categories based on spend. These rewards commonly look like:
E-shops can also customize their VIP program and add additional rewards:
As with the points programme, overall margins need to be taken into account when designing VIP levels. Two other metrics to consider are repeat purchase rate (how often your customers purchase more than once) and average order value for repeat customers (whether customers who purchase more than once spend more per order). This will help you determine if offering accelerated points and cashbacks is a lucrative way to incentivize customers to make future purchases while remaining profitable.
Some e-shops have decided to let points expire after a certain period of time to reduce the risk of customers accumulating points and not redeeming them. This largely depends on the type of product your e-shop sells and how often customers buy your products. For example, perishable goods such as food or dietary supplements will need to be replaced by customers in a shorter period of time than household goods or technology. Knowing your customers' buying behaviour and the frequency with which your products are replaced will help you make decisions about points expiry.
Short-term points are on average 3-6 months and work well for perishable goods. Longer-term points expiration dates are 1-2 years on average for fashion/skincare/household goods. Over time, too short an expiration period could discourage your loyalty program customers.
The integration of reviews and loyalty programs creates an effective mechanism for your store's supporters. Customers who make their first purchase can join a loyalty program and be rewarded for leaving product reviews. Product reviews make it easy to attract new customers who may eventually join your loyalty program and become fans.
Create and start your own loyalty program on Shoptet is easy with the Ellity app. We integrate with all the leading ecommerce platforms and installation is a breeze. Because we know that every e-store is unique, we offer different pricing optionsto help you grow your e-commerce store at any scale. We would love to connect with you to introduce our solution. We encourage you to start with a free 20 day trial.
Start an effective loyalty system for Shoptet today that will work for you forever.
Loyalty programs are one of the most important tools for e-shops that want to increase customer loyalty and encourage repeat purchases. These programs allow e-shops to effectively reward their customers for their loyalty, thereby strengthening relationships and ensuring a stable customer base.
At a time when the era of third-party cookies is coming to an end, Ellity comes to the aid of Shoptet's e-shopping system with an innovative solution. It not only offers an adaptation to the new marketing reality, but also opens the way to greater customer loyalty and a better understanding of their needs.
A major change is coming in digital marketing that will affect all online stores, including those on the Shoptet platform. The end of third-party cookies, small files that websites use to track users and personalise ads, is around the corner.
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