Ecommerce is more crowded than ever, new shops are popping up in your industry every day. With more stores comes more competition, and with more competition comes more expensive ads. But don't worry, a loyalty extension can help.
Traditional online advertising isn’t cutting it
More sites competing for the same number of eyeballs means that you are going to have to pay more for each ad you purchase. Since 2012 the average cost per click on Google Adwords is going up and the average position you receive is going down. This means that every customer you acquire is costing you more and more every year. The solution, customer retention.
Customer retention is the act of getting more of your existing customers to buy again, and buy more often. An effective customer retention strategy is a great way to offset the rising cost of ads. When you have to pay more to get each customer, you need to make sure every customer is profitable. According to Kissmetrics acquiring a customer is 7x more expensive than retaining one. A loyalty extension is a great way to start a solid customer retention strategy.
Benefits of a Loyalty Extension
A points based loyalty program is a fantastic way to increase customer retention. When shoppers are given points they now have a switching cost associated with choosing a competitor. If they don't come back they are leaving money (points) on the table, which is very hard for us to do. A loyalty program also allows you to incentivize other profitable actions like reviews, social shares, and referrals. I will break these important actions into separate sections.
Establish credibility with more reviews
Reviews are one of the most important things on your site. They establish credibility, build SEO, and are a part of a customer's decision process. Think of the last time you found a new site, visited a product page and saw no reviews. I bet you were turned off of that site or at least were reluctant to place an order.
90% of shoppers say that a customer review impacts their purchase decision. Do you have product reviews on every product listing? If not a loyalty program can help.
You can encourage shoppers to leave reviews by offering points. Points are great for motivating reviews because they have a higher perceived value than the monetary value you are willing to give. For example: you may be willing to pay 0.05 cents for a review (not likely to motivate anyone) instead of offering money you can offer points. 50 points looks a lot better than 0.05 cents.
Expand your reach through your customer
Social media is the ultimate gold mine for an ecommerce merchant, it lets you take one shopper and expand the reach of your message by their entire network. The average American has 634 ties in their social network, that is a lot of potential visits!
The problem for many merchants is getting people to actually share within those networks. Many customers are reluctant to share products and purchases without some sort of incentive. Some retailers offer a coupon for a percentage off the first purchase if a shopper shares on social. This is effective but not sustainable, you don't want to be offering 15% every time a customer shares. A loyalty program offers a more sustainable solution.
With a loyalty program you can reward points for social sharing. This encourages customer to share more than once and is not going to break the bank to do it. Don’t worry, you can set a limit on how many times a person can share to prevent abuse.
Boost profitability with referrals
Referrals are the most trusted form of advertising according to Nielsen’s trust in advertising report. A customer is 30% more likely to trust a referral than they are an online banner ad. This is why referrals are a great way to grow an online business.
The only problem is referrals are hard to get. Most people are willing to leave a review, but very few actually do. Just like with social shares a shopper is much more likely to act if provided with an incentive. With a Magento loyalty program you can reward your customers for referring friends; but more importantly you can restrict when the reward is offered.
Just inviting a friend to shop at a store is not all that profitable. The action is profitable when the referred friend makes a purchase. That is why a Sweet Tooth program allows you to only reward points when the friend makes their first purchase. This ensures that you are only rewarding points for truly profitable actions.
One tool, so many benefits
A loyalty program is an amazing way to boost many areas of your business with one tool. An effective loyalty program can increase reviews, expand your reach, and grow profitability. The greatest benefit you will receive from a loyalty extension is a greater customer retention rate. A higher retention rate means your store is set up for long term success.
If you are new to ecommerce or just want to learn more about generating repeat purchases, you can read more in our book “The Beginner’s Guide to Starting an eCommerce Store.” You can also tweet us if you have any loyalty or retention questions @sweettooth.
