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Repeating Customers Build Ecommerce Brands: Why Loyalty Makes All the Difference
- Dicken Doe
All e-commerce brands face a daily battle for new customers, and increasing sales invariably looks a lot like increasing ad-spend. CPC is up 10.4% in 2024, for categories like Beauty and Apparel that is more like 20%-25%, and the true cost of acquiring a new customer can be eye-watering.
Returning customers cost far less to advertise to, already know your brand, convert more easily, and are significantly more profitable as a result. Which is why so much effort is spent on email marketing to re-engage the base.
That said, even email conversion is getting harder – 70% of email is unopened, and with the addition of promotion filtering there is an ever-increasing chance that your customers aren’t seeing your offers.
So, it is no surprise that many ecommerce brands are starting to see the value in Loyalty. While more of a commitment in terms of both funding and technology, Loyalty Programs benefit from high levels of cut-through, and the benefit of the perceived value share from a brand to their customers.
Customers in loyalty programs have increased recall of the brand, a vested interest in reusing that company, and have entered into a relationship beyond ‘some place I once bought something from’.
Importantly for growing brands, loyalty offers a legitimate interest for communications – with a majority of customers declining to opt-in to marketing emails, and 40% of consumers unsubscribing from marketing emails each week, the benefit of having a good reason to stay connected is invaluable.
Here are just a few ways in which Loyalty beats simple retention as a mechanism for building your brand:
Loyal customers spend more, and generate more profit
With no acquisition costs to account for, loyal customers are far more profitable each time they purchase. This contributes to the finding that a 5% increase in retention is worth between +25%-95% in terms of overall profitability. And according to Accenture, loyalty program members spend between 12% and 18% more revenue annually, driven by rewards and incentives.
Loyal customers convert at higher rates
Ecommerce companies see open rates for rewards, deals, or product launches to loyalty program members of up to 40% higher than standard promotional emails. They also convert more highly, BCG working with Shopify data suggest that loyalty adds up to +5% to conversion, with many other estimates more significant still.
Loyal customers are more likely to recommend your brand
Loyal customers are more likely to refer your brand to others, KPMG found that 86% of loyal customers will recommend a brand to their family and friends, and in another study 14% of loyal customers will go as far as endorsing or defending a brand on social media.
None of this means loyalty is always the right strategy for your business, it suits some categories better than others, and it is a long-term commitment. It also requires careful planning and design to make sure you have the associated risks under control and can maximise the potential of your investment.
That said, there are few better ways to improve engagement with your customers, and if you can keep your program fresh and interesting both you and your customers can reap the rewards of investing in the relationship.
Getting your loyalty initiative started
There is good news for anyone that is looking to get started in loyalty, it has never been easier or less costly to get set up and moving – here are a few considerations if you are ready to start your own journey:
- Find the right platform
Once upon a time launching a loyalty program was a major technical undertaking, on modern e-commerce platforms there are solutions ready-made to integrate with your existing stack. For Shopify take a look at Antavo and Yotpo, and there are others, all are slightly different in terms of functionality and how they integrate, it is worth taking some time and getting some advice to make sure the option you take is the right one for your brand.
2. Make the big design decisions
There are some obvious calls to make, points or discounts, to tier or not to tier, and decisions like these are vital to ensuring you can set something up that is complimentary to your brand promise and sustainable in the long term. You also have some decisions to make on how to account for loyalty costs, especially when it comes to managing offer, redemption and liability balances.
3. Refine your customer value proposition
Ask not what your customer can do for you but what you can do for your customer – too many loyalty programs are set up with a weak core-value proposition, to build loyalty you need to think through the customer value exchange That is not to say you need to be overly generous, but think through what level of reward will keep a customer coming back for more, and how the redemption process will add to your growth and profitability.
Related Insights
Need an answer to a problem? Take a look at our insights section to find advice, guidance and recommendations across a range of e-commerce topics – from conversion to retention and loyalty, from systems integration to remarketing.
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