3 Reasons Why Customer Loyalty Is Important And How Merchants Can Keep It

By Rodney Laws | Business

Apr 28
A woman in a white blouse walks carrying two shopping bags over her left shoulder

The ecommerce landscape becomes more competitive every day. More retailers than ever are focusing their efforts on ecommerce, often with amazing deals, free returns, speedy delivery and one-click shopping. Competing in this market can seem daunting, we know! However, with the right strategies and a focus on customer loyalty, not only can retailers keep up in this ever-growing market, they can find space to thrive.

On average,53% of your revenue comes from the top 20% of your most valuable customers – so it’s clear that harnessing the interest and loyalty of existing shoppers will positively impact your revenue. Implementing a retention strategy is key to achieving long term growth, and improving customer lifetime value.

Rather than striving to always reach new – and increasingly difficult-to-access – audiences, you should value the shoppers you already have and work to keep them on board. Data shows that only 9% of digital ads are viewed for more than one second, meaning that reaching new customers is costing you significant time and money that could instead be invested in an already engaged customer base, with a better return on your investment.

In an ecommerce market that’s growing by 13% every year, stepping up your service with a loyalty program is a great way to differentiate your offering. It offers a practical means of demonstrating to your customers that you value them as a unique individual, not just as a number or statistic on your profit/loss sheet. It puts your money where your mouth is and shows in a tangible way that you’re willing to reward loyalty.

The stats speak for themselves. A first-time buyer who joins a loyalty program spends 40% more than a customer who doesn’t and the likelihood of a loyalty member purchasing from you for a second time is 68% more than a non-member.

This blog post will analyse three key reasons why investing in customer loyalty is so important for long term growth and show you how you can implement a retention strategy of your own.

Customer loyalty increases your bottom line and revenue

Loyal customers tend to have a higher customer lifetime value and larger average order value because they have built up a relationship with your brand – there’s a high level of trust there.

Not only have they come to believe in your authenticity, but they trust in what you have to offer. Customers increase their basket by 36% if they can earn a reward immediately, rather than at some point after a purchase.

These loyal customers can be relied upon to return and repeat purchase, spending more and boosting your revenue. The average basket size of a customer who uses a loyalty reward with their purchase is 39% higher than one who doesn’t.

Women’s fashion store Pulse Boutique is a great example of a brand that has implemented an integrated loyalty program to increase the spend of their members.

Titled “Pulse Perks”, their loyalty landing page immediately motivates customers to sign up through the use of strong imagery, large, vibrant icons and bright colours to give a clear idea of what could be gained by joining. The four main benefits or “perks” of membership are clearly labelled above the fold for clarity: free gifts, VIP access to new collections, product discounts and priority shipping.

The design of Pulse Boutique’s loyalty page closely reflects the visual direction and brand personality of the rest of the site, providing an integrated, smooth customer experience. They use strong imagery and match the landing page colours to the store’s signature pink with rose gold to keep the entire customer journey consistent.

As a result of an easy-to-use, engaging loyalty program, Pulse Boutique has generated a 19% increase in AOV and $200K in earned rewards purchases. The addition of loyalty rewards also delivered a 39% uplift in customers returning to shop again.

Loyal customers help with acquisition

Whether it’s via online reviews or word of mouth recommendations, your customers really value referrals from their fellow shoppers.

Referral marketing – when existing customers tell others about your product or service – is a cost-effective way to acquire new customers who already have a level of trust in your brand.

Overall, it’s a win-win for every party involved. Your business can acquire new customers, while your customers get social validation for recommending something they love.

Referral marketing builds trust in your brand – having a recommendation from a friend or family member who you know and trust is incredibly valuable. In fact, 92% of customers trust recommendations from people they know, while 74% of consumers identify word of mouth as a key influencing factor in their purchasing decisions.

Referrals also create hype around your brand. If people are genuinely excited about your offering, you can feel this in the way your product or service is talked about online, on social media and between friends.

This organic buzz then hooks the interest of others, delivering more custom your way.

You can make referral marketing a key part of your overall marketing strategy by incentivising customers to make active referrals to their friends through a loyalty program.

However, the incentive to refer needs to hit the right note and must be meaningful for both the advocate and the friends they are referring to the scheme. For example, Esquido Lashes gives their advocates 3,000 loyalty points and the referred customer a $5 voucher to spend in-store – so both parties benefit.

Make sure that it’s easy for customers to refer friends by promoting your referral program effectively and making the process as simple as possible.

You can do this by letting existing customers know the benefits of the program through your email marketing and by setting up an automation email for customers who have already left a positive review, encouraging them to refer a friend in return for loyalty points.

You could also try targeting customers at the point when they’re most invested in your business (i.e. directly after they’ve made a purchase) by displaying a pop-up on checkout that prompts them to sign up to your referral program.

Providing an easy way for customers to copy and share their referral URL to earn loyalty points is crucial. Bikini brand Cupshe does this well, sending an email to their loyalty members after they’ve left a review, giving them a unique URL they can simply copy in a single click.

Loyal customers build community

Beyond quality and price, social responsibility and shared values are key to maintaining customer loyalty.

68% of customers have said they are motivated to be loyal when they know that a brand shares the same values as them.

It’s clear that customers now expect the same things from brands as they do from friends and family – a sense that the brand understands them and knows what is important to them.

In fact, 71% of 16-24-year-olds say that they feel strongly or very strongly about corporate social responsibility and 89% of shoppers would switch to a brand that is associated with a good cause, given similar quality and price considerations. It’s no longer enough that the product ticks the right boxes – the customer also wants to know what role the company plays within society at large. Overwhelmingly, they want it to be a positive one.

47% of customers say they are motivated to be loyal when they feel that they are becoming part of a community of like-minded people by doing so. When shopping with a brand, sharing values with other like-minded customers is an important part of the experience. Community platforms make community-building easier than ever and Disciple is a great alternative to Facebook Group.

Customers want their money to go towards supporting something they believe in – 62% of consumers feel that they would join a loyalty program if they knew the rewards had a positive social impact on the causes they care about.

Your loyalty program is an incredibly useful tool to help you build a community with shared values at its heart. Welcome emails are a great way to communicate your shared values to new customers. Use them as a way to educate new members of your community about social causes you care about, charitable donations you make, or even how you do things differently to other businesses.

You can also show your customers how aligned you are with them by letting them earn points for completing thoughtful actions, such as returning packaging to be reused or redeeming rewards against charitable donations.

For example, Pacifica Beauty has visibly incorporated a recycling program into the customer experience to show how much they care about responsible plastic use. Customers can now send their used bottles back to Pacifica Beauty for them to be reused and given new life. To encourage customers to follow through with this action, they include a prepaid shipping label and award customers 100 loyalty points each time they do this.

Pet food brand Edgard Cooper also offers loyalty program rewards that support ethical causes customers care about. As animal welfare is at the heart of their brand values, they donate 10% of their profits to animal care clinics. They encourage their customers to exchange “Belly Rubs” – loyalty points – for donating meals to dog shelters.

A loyalty program is also a social space where you can bring like-minded customers together. Organic and cruelty-free skincare brand, Annmarie Skincare, uses its loyalty program to build a group of kindred spirits with much in common.

They welcome members into an exclusive Facebook group, where community members can share ideas and anecdotes to work towards a less damaging beauty regime. This emotional bond further drives customers to engage on more than a transactional level and helps to establish a strong and lasting customer-brand relationship.

In Summary

The ecommerce landscape is hugely competitive with new businesses launching online offerings every day with ever more tempting discounts and deals. Using a robust loyalty strategy, retailers can not only compete, but find a route to online sales success.

With53% of your revenue coming from the top 20% of your most valuable customers – harnessing the interest and loyalty of existing shoppers is a must. There are three key reasons why investing in customer loyalty is so important for long term growth:

  • Customer loyalty increases your bottom line and revenue

  • Loyal customers help with the acquisition of new customers

  • Loyal customers can build up a community that organically promotes your brand

In terms of strategies to implement right now that can increase customer loyalty, we recommend:

  • An integrated, easy-to-use loyalty program that blends seamlessly with your website

  • Easy, one-click referral marketing

  • An emphasis on shared values using your email marketing to build a greater sense of community

Revisit our Loyalty Up Close and Personal report to find out more about what motivates customers to be loyal in 2020.

Author Bio: This article was written by the great team at LoyaltyLion.

LoyaltyLion is a data-driven loyalty and engagement platform that powers ecommerce growth.

A loyalty program is about more than points and rewards. It is about unlocking real insights to increase customer lifetime value.

With LoyaltyLion, you can build a better understanding of what drives longer-lasting customer relationships, and use those insights to connect and accelerate your existing marketing efforts.

Proven to increase retention and spend, LoyaltyLion is trusted by thousands of fast-growth ecommerce merchants worldwide.