Customer loyalty programs – An Advantage or a Disadvantage?

A customer loyalty program can be an advantage for the website owner’s if done well. If up & running properly, loyalty programs can keep your customers turning back for repeated purchases. The ongoing rewards, Cashbacks & sales can convert casual browsers into potential recurring buyers.

But if done wrong, it can be a curse for the website owners. If the running customer loyalty program is below the line, it can lead to a loss of customer’s interest in the offered products & services. Moreover, it will be a waste of time, resources and money.

A potential customer once lost is hard to retain back. But keeping some key factors in mind we can forsure use these loyalty programs as a customer retention tools.

What is Customer Loyalty Program?

A customer loyalty program is a rewards program offered by a company/website to customers who frequently make purchases. A loyalty program may give a customer free merchandise, rewards, coupons, or even advance released products.

Using this technique, we can target both new & existing customers.

Loyalty programs can also be called as ‘incentives’ offered to the buyers against purchase of any product or service. The incentives are directly proportional to the order amount i.e. higher the order amount, higher will be the incentive received by the buyer. The incentivisation can be in terms of discounts, freebies, in cashback points or any other form.

What offerings can churn maximum outputs for you?

From a wide range of offerings, customer loyalty programs can vary on the basis of Product/Services or on the business’s working strategy/planning.

  1. Offer Cashbacks on purchases

The cashback offering program allows customers to earn money back from previous purchases and redeem them after a certain interval of time, amount or purchases. The cashback if often a pre-defined ‘x percentage’ of the order value & is credited back to the user’s online wallet after a certain interval of time. This cashback can then be spend on future purchases, effectively discounting the future purchase.

  1. Offer Discounts

The discount program offers a certain percentage discount or flat amount discount on an order. Discounts can be applied either to a specific product or to the entire order.

These discounts can also be referred to as ‘sales’. The discount amount is offered on the MRP of the product thus reducing the sales prices of it.

This program usually applies instant benefits to customers during check out.

  1. Offer Reward/Royalty points in online wallet

With the royalty points program, customer is offered royalty points in his account based on the behaviour of his previous purchases. The accumulated points can be redeemed as virtual cash in their online wallet which can be redeemed in the next purchases.

With his reward or royalty point program, users are motivated as they earn points upon their actions performed on the website.

  1. Refer & earn

With the refer and earn program, users are rewarded with virtual money in their online wallet for referring their family & friend to make a purchase of any product or from any specific website. Using this program, both the referrer & the referee earns a certain amount in their online wallet which can be redeemed in their next purchase.

This program motivates a user to refer a product/service/website to his family and friends to earn some extra amount in his wallet which in turn is beneficial for the website to increase their visibility and to generate more orders out of the referrals.

  1. Offer membership subscriptions

The membership subscription program entitles the user to subscribe as a premium member on the website. With this premium member subscription, the user gets an advantage of many premium facilities like 1st access to pre-launch products, flash sales and introductory products, free shipping for his orders, access to exclusive shopping events & products etc. For e.g. Amazon Prime.

  1. Offer freebies

With freebies program, the website owner gives away some freebies with every order placed on the website. These freebies can be product dependent & independent. For e.g. while selling a shoe, the buyer can be offered a pair of socks as a freebie and while ordering a mobile the buyer can be offered a screen guard as a freebie.

Offering freebies enhance the user’s buying experience.

  1. Free Shipping

With the free shipping module, the website’s owner offers the buyer a free shipping of his goods over and above a fixed order amount. If the order amount exceeds that threshold limit, no shipping charges are incurred by the buyer.

This program encourages the buyer to purchase the products of a minimum amount of that threshold limit so as to avail free shipping.

  1. Gift cards

Gift cards are the prepaid cards that can be purchased from the respective website by a user. The user when purchasing a gift card is given a unique gift card number which can be used to make purchases by him. No cash transaction is required while redeeming a gift card.

The rules regarding a gift card is set by the admin.

When can these rewards be offered to the buyers?

The above-mentioned rewards can be offered to the buyers based on their actions/tasks. The actions might include:

  • On User registration
  • Buying a specific product
  • Festive season discounts
  • On referring a friend
  • Custom offers based on Birthdays’, anniversary etc.
  • On basis of order amount (higher the order amounts, higher is the cashback/loyalty points)
  • User’s activity on social media page- promotions by user.

Benefits of enabling these customer loyalty programs on your website:

 

  1. Boosts up your sale.
  2. Brand promotions
  3. Existing customer retention
  4. Increased traffic on website
  5. Increased CLV (Customer’s lifetime value)
  6. Recurring orders from customers
  7. More orders means more revenue generation
  8. Customers mouth to mouth publicity of your brand