4 signs it's time to inspire more customer loyalty

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As the eCommerce industry grows at a rapid rate so too do the challenges and threats that merchants face, from price wars with competitors to basket abandonment and brand differentiation.

However, the biggest headaches for most retailers, remain the challenges of engaging and retaining customers. As businesses grow, they struggle to build the long-term relationships that go beyond one or two purchases.

Many believe that as an eCommerce retailer, you should wait until you have a larger customer base before investing in loyalty. The fact is, the moment your store begins to generate sales there are opportunities for you to gain valuable insights, build on customer engagement and retention and encourage shoppers to return for their next purchase.

Increasing customer retention by just 2% can have the same impact as reducing costs by 10%, therefore, it could be seen as costly not to consider a loyalty program sooner rather than later.

So, what are the telltale signs that your business is ready to invest in customer loyalty?

Sign #1: My repeat purchase rate isn’t high enough to cover my customer acquisition costs

If you find that your customer acquisition costs keep increasing, bear in mind that customer retention costs five times less than acquisition. Consider your acquisition costs and evaluate whether focusing on purchase frequency and loyalty is more financially beneficial than focusing on acquisition. Loyalty programs are proven to increase purchase frequency, with customers who join and redeem a reward being 68% more likely to purchase a second time that those who don’t.

Your repeat purchase rate is calculated as a percentage, dividing total number of orders over a specific period of time, by the number of unique customers within the same timeframe.

Repeat purchase rate formula

Your best timeframe is based around factors such as your product or services and the expected repurchase time. The higher your percentage the more profitable for your business.

If your repeat purchase rate is not high enough to cover acquisition costs, it might be time to consider how a loyalty program could help you increase it. For example, LoyaltyLion client 100% PURE implemented points and rewards for purchases in order to increase their repeat purchase rate. Using loyalty tiers, they motivated customers to return and continue purchasing at their store to attain exclusive offers and benefits. This resulted in 92% of their customers going on to buy 5 more times after their 4th purchase.


Purist perks loyalty program


Sign #2: Too many of your customers are ‘at-risk’

Do you have a high number of customers who have become disengaged and look unlikely to make another purchase with your store in your expected timeframe? If so, implementing a strategy to identify and re-engage ‘at-risk’ customers should be a priority.

Loyalty-focused emails perform 14 times better than the average marketing email, allowing you to use personalised messages to encourage customers to return and make their next purchase. Those investing in loyalty programs have multiple reasons to get in touch and engage members - from reminding customers of their points balances and available rewards. At-risk customers can also be re-engaged with incentives to return and buy again, such as bonus points on particular products, or free shipping on their next purchase.

The personalised nature of loyalty emails allow you to show at-risk customers that you value and understand their individual preferences. 100% Pure saw a 4x reduction in loyal customer churn when they used personalised email targeting to re-engage at-risk customers.


Purist perks results

Sign #3: You have too many browsers and not enough buyers

If you are concerned about your cart abandonment and browser-only visit numbers, it may be time to look at improving the quality of your traffic. Focusing on turning your existing customers into advocates can help you attain new and higher quality website visitors, more cost-effectively.  

A loyalty program can work as a referral system, allowing you to offer points to your existing loyal customers as an incentive to refer their friends. Your most valuable customers - those who shop most regularly and have the highest average order values - are most likely to act as advocates. Identifying them and motivating them to recommend friends and family could be the key to driving more qualified traffic.

74% of customers agree that word-of-mouth is a key influencer in their purchasing decisions and referrals generate positive awareness and preconceived trust with your brand. Customers acquired through referrals also tend to spend 200% more than the average customer.

One example of the power of your existing customers is LoyaltyLion client June and January, who generated $139k of revenue through referrals.


June&January Perks Program

Sign #4: You're competing in a race to the bottom.

Customers who shop online have the power to effortlessly compare pricing and products against competing stores. For too many retailers, this means getting caught in a race to the bottom. The best way to avoid this, is to ensure that your brand offers a real point-of-difference.

Loyalty points and rewards can help you offer value to your customers, that competitors who stock similar products can’t deliver. Structuring your program in a way that allows customers to earn and redeem within a reasonable timeframe can help you set your brand apart by offering customers immediate gains for their spend. Clearly communicating that structure to prospective members can also help them to see the value of joining the program and shopping with you, rather than shopping around for the cheapest price.

Finally, a loyalty program can also help you shift surplus inventory. By offering double or bonus points on products that you haven’t flown off the shelves, you can get stock moving without having to apply a discount.

Should you be focused on customer loyalty? (Hint: YES!)

The eCommerce industry shows no signs of slowing down, and merchants remain caught between their immediate competition, and Amazon who are now responsible for 43% of transactions that happen online. As such, finding new ways to engage and retain customers is key to securing competitive advantage. If any of these signs are ringing alarm bells for you, it could be time to consider new ways to drive customer loyalty.

About LoyaltyLion

LoyaltyLion is a data-driven loyalty and engagement software for fast-growth eCommerce merchants. Thousands of retailers worldwide use LoyaltyLion to add their own fully customizable loyalty programs and increase customer engagement, retention and spend.  Stores using LoyaltyLion typically generate at least $15 for every $1 they spend on the platform.