Decoding Top Loyalty Rewards Program Dos and Don'ts With Examples

Everyone loves to save money, so customer loyalty rewards program are a great way to reward your returning e-commerce buyers with discount codes and rewards. Points, badges, and other incentives can get consumers excited about interacting with your business. However, if you aren't careful, you can cheapen your brand so much that people aren't willing to pay regular price for your products. Here are some tips to use rewards strategically to boost your sales without breaking the bank.

What is Customer Loyalty?

You earn customer loyalty when consumers choose your brand over others, based on their previous interactions with your e-commerce storefront. The way to win this kind of devotion is positive customer experiences, but to keep it, consider implementing customer loyalty programs, which reward returning shoppers.

This approach is good for most online retailers. Stitch Labs published a recent report indicating that rewarding loyal customers resulted in an average increase 120 percent over a one-year period. On the other hand, though customer loyalty is measured via the number and frequency of purchases and customer lifetime value, real loyalty is inspired by emotional attachment to your brand. Creating brand ambassadors gets you the mentions, likes and shares you need on social media.

Example: Starbucks Loyalty Program

One way to drive customer loyalty is by offering discounts, giveaways and other deals.

Starbucks strives to reach its customers from an omnichannel model and uses its Starbucks Rewards system to make the coffee buying experience convenient. As a result, there is about $1.2 billion “stored” on the Starbucks mobile app and loyalty cards.

What are the Dos and Don'ts of the Loyalty Rewards Program?

Let's look at some dos and don'ts of building a strategic loyalty rewards program.

Loyalty Program Dos

Brick-and-mortar storefronts make it easy for customers to join loyalty rewards programs. For example, Walgreens and Safeway only require a phone number to sign up. Similarly, it should be easy for customers to join your program online. Make it convenient with multiple channels, so guests can sign up on social media, your website or mobile apps.

• Use loyalty rewards software or app to make purchases and point redemption convenient.
• Make it easy to sign up.
• Register users to join so that you can collect value contact information for promotions and product launches.
• Notify buyers when they are close to earning a reward and give them a status based on point value and the number and amount of their purchases.
• Reward customers based on how much and how often they but, not only the number of visits. Customers love rewards, so brainstorm a point-per-dollar spent strategy that is fun and valuable without breaking the bank. After all, getting people to spend more money at your storefront is the whole point of loyalty programs.
• Distribute rewards based on the customer's personal preferences. During the signup process, your loyalty rewards program application needs to ask whether the consumer wants their notification to be via push notifications, texts or emails. This is the best way to get a high response rate and fewer opt-outs.

Loyalty Program Don'ts

Here are some things that successful customer loyalty rewards programs avoid.

• Don't over-complicate the platform or app for your reward system. When you make too many rules and limits or have points that expire too quickly, it's bound to drive customers away.
• Don't overdo the discounts on shipping and prices without crunching the numbers to ensure the strategy is paying off in profit increases too.

Sephora Loyalty Program

Sephora promotes customers to new tiers when they spend a certain amount of money during the calendar year. This creates exclusivity for committed customers and fosters pride in a new status with additional opportunities to save.

Reward tiers represent gamification in Sephora's program and positively influences customer behavior and engagement.

Sephora Rewards Programs: Summary

• Beauty Insider – Free to join, basic membership.
• VIB (Very Important Beauty Insider) – Earn this new status when you spend $350 within the current calendar year.
• VIB Rouge – Spend $1000 for this premium reward program and status.

Rewards increase at each tier and include free products, beauty makeovers, invitations to exclusive events, and access to a Sephora hotline for beauty emergencies. Only a small percentage of shoppers make it to the VIB and VIB Rouge Tiers, making the Sephora program exclusive and coveted.

What is Gamification in Loyalty Programs?

Gamification is using game thinking and mechanics in non-game contexts, such as e-Commerce purchasing. Introducing gamification elements increases sales, user engagement, data quality and return on investment.

5 Types of Gamification in Rewards Program

Gamification in loyalty programs plays upon people's love of competition and desire for status to achieve your e-Commerce business objectives. Here's an overview of some of the more common applications of this approach.

1. Giving out rewards for customers who achieve certain goals (money spent, and frequency of purchase are common measures). Rewards include gift cards, badges, points, discounts, levels, and free shipping.
2. Progress bars give people a clear idea of how close they are to the next goal or tier and motivate customers to work harder for the new status. They are used for online surveys and can be used effectively with a tiered loyalty rewards program.
3. Virtual currency (points, products, status) is used in online games and other applications via mobile devices, Facebook and others.
4. Competitive customers enjoy loyalty plans and work hard to achieve the next level, especially when it promises savings.
5. Add game-like elements to boring processes to encourage engagement.

The game tactic should clearly indicate the benefits of each level of membership and why it's worthwhile to pursue. For example, customer-written product reviews may lead to higher conversion rates, so it makes sense to add points for likes, shares, and testimonials for your products.

Evolving Loyalty Programs

One of the common features of the most popular reward programs is that they are often updated and improved. Businesses that have been around a long time have the most to gain by being innovative with loyalty rewards programs. PaperMart is a stationery and packaging firm that evolved from a brick-and-mortar store to a mail-order catalog business and then an e-commerce enterprise. It added a tiered rebate program in 2015, 94 years after it was founded. It's never too late to create a loyalty rewards program or add new features to an existing one.

More About The Author: Laura Gayle

Laura Gayle is a full-time blogger who has ghostwritten more than 350 articles for major software companies, tech startups, and online retailers.
Founder of Business Woman Guide, she created her site to be a trusted resource for women trying to start or grow businesses on their own terms. She has written about everything from crowdfunding and inventory management to product launches, cyber security trends, web analytics, and innovations in digital marketing.