How to build loyalty and grow your online business

By: Simon Armstrong

Date: 10 August 2012

A common way to encourage customers to buy from your online store is with reward schemes. Many of us already use loyalty cards or vouchers when shopping in supermarkets to collect points and redeem them for a few pounds off a future purchase. Everyone benefits: the regular customer feels they are valued and retailer gains more repeat business. For every free drink someone is enjoying at their favourite coffee shop there are many customers with a loyalty card that have some, but not sufficient, stamps to gain a reward.

Bigger retailers also gain a huge amount of statistical data to understand customers’ shopping behaviour better.

You can do it too

The good news is if you are a small online retailer you can also set up reward schemes. For example, loyalty programmes that show customers you appreciate their business.

If you decide to implement a loyalty programme, make sure your ecommerce platform offers this functionality as standard. That way you don’t have to use third-party software – or worse still, develop an app that might never fully integrate with your back office. Then you need to consider the following:

  • The starting point has to be research to establish what you want to achieve. Are you trying to acquire new customers, retain current ones or reward your best buyers?
  • A loyalty programme should not cost more than between 0.5-2% of your marketing budget. Spend more on your best customers and set up the scheme so unprofitable customers are not eligible for rewards.
  • Be upfront about why you are running the programme and be consistent with the offer, so customers understand what they will be rewarded for.
  • Prepare a calendar of events and timetable to complete the plan successfully.

However, loyalty programmes aren’t for everyone. If your business offers consistently low prices and great service, such a programme may not be necessary. It's a long-term commitment and it is likely to be at least 18 months before you start to see a return. 

Tell a friend

Another way to gain new customers and build relationships with your existing ones is to offer a referral scheme. This incentivises customers to promote your products and your business. You are much more likely to make a sale if you are recommended by someone who is a trusted source.

If you get a sale as a result of a recommendation, say thank you and send a reward in return, such as a discount that can be used when placing their next order. Your customers’ friends could also receive a one-time referral discount. 

It’s a win-win situation. What else could be the most cost effective way for promoting your company?