Chapter 49

How to Create a Profitable Loyalty Program

A loyalty program or VIP Club is a great way to increase sales, strengthen customer relationships and incentivize your customers to keep coming back. You can create your loyalty program using a third-party app or by sending emails to your list. The objective of the loyalty program should be to get repeat sales by retaining your customer base. Acquiring new customers can cost 5-10 times more than retaining one. Customers who’ve already purchased from your store tend to spend about 67% more than new customers. Not only is it more affordable to keep a customer, it’s also more profitable.

Example: Lego created a VIP Loyalty Program for its fanbase. Customers earn points with every Lego purchase they make. Those signed up for the program will have early access to buy new products before the general public. Special offers are also given throughout the year exclusively to members. New members also get a free lego keychain upon registration. The only downside to the program is that children tend to be the key target demographic, however, only those over 18 can sign up for a membership.


Loyalty Program Tips:

Automatically enroll customers into your loyalty program. Asking people to sign up for your loyalty program will keep your numbers low. However, if you automatically enroll all your customers into your loyalty program, you make them feel special. On our online store, we send them an email after they’ve made their first purchase welcoming them into our VIP Club. They’re given a special discount count, only for VIP members that they can use on all future purchases to save money. We typically send an email within 24 hours and it’s drastically increased our repeat purchases for our store.

Your loyalty program should have some sweet perks. While you do want to increase your sales, you don’t want your only club perk to be an amazing discount. You might also offer a free gift on a customer’s birthday. Or an exclusive contest for VIP members only. Giving first access to new products can be an incentive for joining your program. You could even offer exclusive tutorials for your niche. For example, if you sell makeup, hair care or fitness products, you could create special how to videos for your VIP members. If the perks of your loyalty program aren’t compelling enough, your customers likely won’t stay in it.  

Make it easy. Making it impossible for customers to achieve their reward targets can be a loyalty killer. Let them get a small reward with every 3 to 4 purchases with a few surprises in between. Offering a free small gift with a fourth purchase can be a nice incentive that motivates them to keep making more purchases. You can also have a medium priced gift at the 10th purchase. And increase the prize value with purchase. If you make the milestones easy to achieve and frequent, you’ll likely help build stronger customer loyalty.

Using a loyalty program app allows customers to easily track their perks to determine what they’ve achieved and how much further they need to go to. This can help keep them motivated as they make more and more purchases on your store. You might want to include a rewards balance, points per product, FAQ for your rewards program, and more. You can even include a competition to show who’s reached the highest level of your loyalty program to receive exclusive points.

Some brands like Suzy Shier charge for their loyalty program. For Suzy Shier, they charge $25 per year for a card. While it may be pricy for the occasional shopper, those who buy from the brand regularly may feel compelled to buy the card for savings. At one point, they had a birthday bonus where if you get 50% off on your birthday which meant that if you bought two items for the same price it was almost like getting one for free. However, they eventually changed this birthday bonus to create something more sustainable.

Monitor your program’s profitability. Is your average order value higher? Are you making a profit despite perks, freebies and discounts? Do you have more repeat purchases than you did before? Can you afford to keep running the loyalty program the way you have been or do you need to make changes? You’re going to have to crunch some numbers. If you’re getting more sales but losing money overall, it may be time to rework your loyalty program. You need to find the balance between customer retention and profitability. Don’t shut down your loyalty program if it’s generating sales, focus on reworking it to improve your company’s financial health.

Promote your loyalty program. You might include a page about it on your online store, on the top navigation, or regularly send emails out to your customers with special offers. However, if you’re not regularly promoting your loyalty program to your customers, they’re eventually going to stop buying from your brand. Loyalty program emails don’t need to be every week, however, at least once a month you should have an exclusive offer for your VIPs. Keep your VIPs in the loop about how many points they have when you send your personalized emails.

Use your loyalty program as a way to get more data on your customer. When a customer signs up for your loyalty program offer bonus points for filling out their details. You’ll already have their address, email and name because they’re a customer. Use this as an opportunity to learn more about your customer. What’s their birthday? Use this to offer them an exclusive bonus on their birthday. Think of what type of information would be valuable for your loyalty program and ask your customers for it.

Keep in mind that when having a loyalty program that you still need to remain profitable as a business. If you’re dropshipping there’s no point for breaking even. You didn’t buy any inventory you had to sell. You should always be making a profit. Other things you’ll need to look into are the lifetime value of your customer with your loyalty program or cost of retention. Each brand’s loyalty program will yield different results. If you find your loyalty program isn’t profitable either change it or end it. You need to look at your numbers regularly to make sure it’s actually working for you so be sure to look into the data each month.


Loyalty Program Tools:

Loyalty Points by Bold is a points program where customers earn points to buy products. You can assign different point values for all your products. Adjusting customer points, adding an expiration date to the points, and offering bonus points can all be done in the app.

Smile.io Points, VIP, Referral Programs by Smile.io allows store owners to create a customer referral program, reward customers with points while offering rewards to the best customers. Customers can rack up points to receive discounts, free shipping or gift cards. You can also reward customers on their birthday and for sharing your store on social media.

Retention and Loyalty Program by S Loyalty is a loyalty program that allows design and program customization. You can offer rewards such as discounts and free shipping. You can increase the value of points for a special weekend promotion. Urgency can even be created with limited time points and discount codes.

Rewards and Referrals by Swell allows your customers to earn points liking your brand’s Facebook page, minimum spending amounts, and for buying multiple products. Customers can then redeem points to receive discounts and free gifts.

Loyalty, Rewards and Referral by Loyalty Lion offers a system that can reward customers for a variety of behaviors such as social media engagement, birthdays, subscribing to your email list, and buying products. You can reward customers with discounts, free products, free shipping and more. It even integrates with reviews apps to offer points for leaving a review on your store.


Resource:

How to Create a Kickass Loyalty Program shares the exact email I use when sending out loyalty emails. This email template has generated thousands in repeat sales from our customer base. We typically send the email used within 24 hours of a purchase being made as we automatically enroll customers into our loyalty program with one purchase. The email has a 42.6% open rate and a 9.6% click through rate. If you’re on a budget, you’ll want to check out the email I use.


Loyalty Program Expert:

Mike Trakalo of Bold Commerce shares, “Your program needs to be easy to understand. Most online shoppers have the attention span of a toddler, which means the relationship between how points are earned and what rewards they’ll receive needs to be easily understood at a quick glance, or they’ll immediately move onto the next thing. Not only does it need to be easy to understand, it has to offer your customers something they actually want.”

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