Magento Reward Points System

Have you been selling online for awhile? Even if you’re new to selling online, you’re most likely well aware that you make very little profit, if any, on a first time customer. Almost the entire profit is swallowed up by the advertising required to get that visitor to your website and then persuade them make a purchase. The truly profitable customers are the ones who make purchases again and again. To be completely honest, those repeat orders are the difference between life and death.

We get asked often how to encourage customers to make repeat purchases. Using an online loyalty program can certainly help, but it must be done carefully and with the right tools.
There are a huge amount of factors involved in creating a successful loyalty program. However, before you consider initiating a loyalty program of your own, start by focusing on delivering the best experience you can to your customers. Great experiences, like loyalty programs, will spur repeat business from customers.

Determining your Customers Lifetime Value

When budgeting how much to invest in a loyalty program, a business owner should first weigh up what the life time value of that customer is worth to the business.
Focusing too much on getting a customer to purchase once shouldn’t be the goal of your website. However, we see this daily, business owners failing to calculate the potential lifetime value of a customer when determining how much to invest in a loyalty campaign. So first question you need to ask yourself is what is it worth to the bottom line to attract and keep a quality customer?
There are many ways to estimate the lifetime value of a customer. Probably the simplest method is to multiply the average order value by the number of times an average customer repurchases. An example might look like this,
If the average basket size at my florist store is $85 and the average customer places an order three times per year, the value of the customer is $255 per annum and $1,275 over five years. If you run a 50 percent margin of profit with your business, would you invest a year’s profit of $127.50 to capture and retain one customer that would stay for a lifetime?

A loyalty program is only one way of increasing repeat purchasing, however its right up there with one of the best strategies. Repeat purchasing is based on the old direct marketing premise that it is cheaper to keep an existing customer than it is to attract a new one. Once you have a customer, building a closer relationship with them is critical. It’s through that relationship that a bond is created between consumer and retailer. It’s always great to generate new customers, but it’s usually much less expensive to hold onto existing customers.

Five factors you can implement right away to prompt your customers to return for further purchases:

Fast delivery
Fantastic Customer Service
Customer centric website (Easy to use and navigate)
Targeted Email Newsletters offering promotions or deals
Free shipping

When your site’s navigation and usability make it easy to find products and relevant information, they will want to return again and again. Put simply, the shopping experience must be enjoyable.

Price is not the primary driver of loyalty. To generate loyalty, you have to go beyond price and offer customers an experience, and consider ways to improve the experience your customers receive when they purchase your products. Sometimes the nature of a product or experience can be confusing, and the experience issue is not something that is obvious or what customers are complaining about. Thus, you should use your database to analyze the data to find specific areas that can be addressed.

Implementing a Loyalty Program

For a loyalty program to achieve a high return on investment, a business owner must analyse the existing data and behaviour of their customer base. If business owners don’t feel comfortable analysing their own data, there are eCommerce specialists that specialise in helping build, customise and deploy loyalty programs specific to their business model, products and customers.

For those business owners who want to build and implement a loyalty program on their own,
Magento’s Reward Points functionality allows online merchants to implement unique programs designed to enhance user experience and increase customer loyalty. Points are awarded based on a wide range of transactions and customer actions and can be easily managed through the back end.

Since building loyalty is a long-term initiative, finding a digital agency specific to a loyalty program is critical. We believe there is tremendous value in working with a single agency with specific eCommerce expertise in building and managing loyalty programs, rather than multiple agencies performing independent services. This way, your emphasis can be placed on the customer and the customer experience, and not on coordinating various details with various suppliers, all of which can potentially lead to losing focus on the primary objective.