Rewarding your customers for making purchases on your online store is a powerful way to encourage repeat business. However, there are different types of loyalty programs for you to choose from, and deciding which is best for your company can be challenging.
The good news is that understanding a little bit about how each type works can better position you to make the smart choice. There are advantages and disadvantages to each kind, so gaining a general overview of each one can go a long way.
In this post, we’ll briefly discuss the benefits of starting a loyalty program for your online store. Then we’ll provide you with a list of three of the most popular types of loyalty programs. For each, we’ll explain how they work and the benefits of using them to help you narrow your decision. Let’s get started!
Why Start a Loyalty Program for Your Online Store?
When you’re running an online store, especially in today’s competitive e-commerce environment, finding new ways to drive revenue can be tricky. However, one of the easiest, low cost, and effective strategies is to start a loyalty program.
There are many reasons to consider doing so. Loyalty programs are an excellent way to incentivize consumers to shop in your store, and perhaps even spend more than they otherwise would. For example, if they know they are going to earn extra points or rewards for spending, let’s say, above $30, they’ll probably be more inclined to reach the total order amount.
Another reason to consider starting a loyalty program for your online store is that it’s a non-discounting type of promotion. In a nutshell, this means that you can promote your products without having to offer them for less than retail price, which is great when you’re trying to make a profit.
Additionally, loyalty programs can help build trust with customers. After all, it feels good to be appreciated and recognized – and even more so if it means getting discounts or free products!
Which Type of Loyalty Program Is Right for Your Online Store? (3 Options)
Now that we understand a little bit more about the benefits of starting a loyalty program, it’s time to look into some of the best options. Below are three of the most popular types of loyalty programs and the benefits of using them.
1. Tiered program
A tiered loyalty program is one of the most popular types of options. It’s used by major brands such as Sephora and Starbucks:
Basically, these types of loyalty programs are membership programs where the benefits and rewards vary depending on the customer’s rank. Typically, the higher up you rank, the bigger the rewards become.
Tiered programs are a solid choice for encouraging long-term loyalty. Shoppers are often encouraged to continuously spend more in order to progress their ranking within the program and, in turn, enjoy greater perks and benefits.
The main advantage of these programs is that they provide high-quality experiences to high-value customers. There’s also an element of convenience to them. For example, companies such as Starbucks and Sephora make it easy to view and use the membership through their mobile apps.
However, the main drawback is that this type of program may not be that incentivizing for customers who are only mildly or moderately engaged with your brand. For some shoppers, there may not be enough immediate reward or gratification to motivate purchasing.
2. Cash back
Another popular type of loyalty program you might consider using is a cash back rewards system. This can be a highly motivating program for dedicated shoppers, and it’s one that is used by many major retailers such as J.C. Penny.
Cash back programs are somewhat similar to points-based systems (which we’ll discuss in a moment). However, rather than earning points, customers can spend a certain amount to eventually get a percentage back in “cash”. Of course, the earnings can typically only be used at that same store or company.
One of the biggest benefits of this type of loyalty program is the transparency. It’s easy for shoppers to see and understand the rewards they’re getting for each purchase, which could help incentivise more spending.
3. Points-based reward system
The last option, and one we highly recommend, is a points-based reward system. With this kind of loyalty program, you can offer your customers coupons. Then they can redeem the coupons to use on future orders. In other words, your customers can earn points for every purchase they make.
However, you can also award points for other actions, such as signing up for an email newsletter. The main benefit of this approach is that it is incredibly cost-effective and extremely flexible.
This type of reward system encourages repeat business. You can also determine how many points shoppers get based on the specific actions they perform. For example, you could offer 20 points for ordering a product in a certain category you’re trying to promote, 5 points for leaving a customer review, etc.
Starting a points-based loyalty program is also quick and easy when you use our WooCommerce Loyalty Program plugin:
You can also set price and point thresholds. This way, you have full control over the points system to help you give customers as many rewards as possible while still maximizing your profits.
Attracting repeat business and increasing revenue can be tricky as an online business owner. However, rewarding your customers for their loyalty is a powerful and cost-effective way of encouraging them to not only come back in the future, but to spend more than they otherwise may have.
As we discussed in this article, there are different types of loyalty programs you can use. The best one will depend on your specific goals and business model. However, if you already use WooCommerce, we recommend pairing it with our Loyalty Program for WooCommerce plugin to create a robust points-based rewards system.
Do you have any questions about the different types of loyalty programs? Let us know in the comments section below!