Acquisition and retention are two of the most important challenges facing ecommerce brands, and costs for both are growing. To succeed, you must strike a balance between enticing new customers to make their first purchase, while also encouraging them to return and buy from you again. So, how do you achieve this increase in customer loyalty and build stronger relationships with the customers that you acquire?
One of the most common strategies we fall back on is discounting. We’ve all been there; a 10% off code for signing up to a mailing list, $20 off if you refer a friend. In the short term, this stands a good chance of boosting acquisition and it might help you secure a second purchase (albeit with some damage to your profit margin). However, in the long-term, there’s a strong chance you’ll be doing more harm than good to your business.
In this article, we’ll cover:
- Why discounting is a short-term solution
- 5 alternatives to discounting for increasing customer loyalty
- Key takeaways
So, have we grabbed your attention? Scroll down to discover how you can build lasting customer loyalty with proven strategies that go beyond discounts.
Why discounting is a short-term solution
There’s a very simple reason why discounting is so common in ecommerce – it’s easy to implement. It takes very little effort on the part of a merchant to create and distribute different discount codes. However, when considering loyalty program best practices and building customer loyalty, it’s essential to recognize that discounting alone isn’t a sustainable strategy for increasing customer loyalty in the long run.
Those introductory discounts may initially attract customers, but they often lead to a surge in one-off orders from bargain hunters who lack genuine affinity for your brand. This phenomenon can adversely affect your retention rate, hindering efforts to cultivate a strong, loyal customer base that will consistently support your business.
Moreover, the perception of your brand, products, and pricing is influenced by how customers initially engage with your offerings. If customers are accustomed to discounting prices from the outset, it sets a precedent that may make it challenging to maintain customer loyalty without continual discounting. This risk exacerbates the perception of your brand as solely discount-driven, potentially alienating existing customers who feel excluded if they don’t receive the same discounts as new customers.
To overcome these challenges and increase customer loyalty, it’s crucial to explore alternatives that focus on creating genuine connections with customers and providing value beyond discounts. By embracing loyalty program best practices and offering incentives tailored to customer preferences, businesses can build lasting relationships that go beyond short-term discounting strategies.
Build customer loyalty – 5 alternatives to discounting
Balancing the need to attract new customers with nurturing existing ones is a delicate art. While discounts often serve as a go-to strategy, their efficacy is limited in the long run. Hence, exploring alternatives becomes imperative. This article delves into five key strategies that offer sustainable avenues for increasing customer loyalty, steering away from the short-term allure of discounts:
1. Develop and promote a solid loyalty program
Just because discounting isn’t always a great long-term solution, doesn’t mean that financial incentives aren’t something you should include in your strategy. You can include plenty of these, but you should do it on your own terms in a way that actually improves customer engagement and loyalty.
Taking the time to set up a program that will engage and incentivize your customers can result in big rewards for your retention rates. Research shows that 52% of American consumers will join the loyalty program of brands they make frequent purchases from, and an overwhelming 79% say such programs make them more likely to continue doing business with brands.
Rather than offering a discount straight away, offer it as something they can earn depending on their loyalty program status. You could use a points system, tiers, or even paid access – whatever works best for your business and customers. This strategic approach not only increases customer loyalty but also prevents one-off orders focused solely on discount redemption. By integrating a well-designed loyalty program, you can build a sustainable customer relationship and foster a sense of community around your brand. Utilizing tools like LoyaltyLion can streamline the process, ensuring that your loyalty program perfectly aligns with your brand and customer needs, thus effectively increasing customer loyalty over time.
2. Use gift cards as incentives
One of the difficulties with discounting is the uncertainty around how much of the order value you’ll end up giving away. A few dollars here and there doesn’t sound like much, but over time this will accumulate into a significant amount. This also scales depending on the total cart value of the customer using a discount – 10% on an order value of $50 might be fine, but 10% of a much larger order might start to make a negative impact on your bottom line.
An alternative to this is to utilize gift card rewards, a strategy aligned with loyalty program best practices. These allow you to control exactly how much cash you commit to incentive strategies – you know it will always be $5 or $10 or however much you decide to offer, rather than those variable amounts typical of percentage discounts. This approach not only helps in building customer loyalty by offering a tangible reward but also eliminates the uncertainty associated with discounting.
Moreover, integrating gift cards with your loyalty program can further increase customer loyalty over time. By combining the two, you’re not only incentivizing purchases but also encouraging repeat business through the use of gift card rewards. This can improve the customer’s perception of a reward – instead of giving them money off an order, you’re gifting them cash to spend, enhancing their overall shopping experience.
3. Consider other incentives that attract customers
As we’ve already mentioned, part of the popularity of discounting is around its ease of implementation. It’s so easy to create a 10% off code, and add it to an automated email flow for new subscribers. However, other non-financial rewards can be included in loyalty program best practices that are just as powerful
For example, a popular promotion in ecommerce is free shipping, and for good reason – 90% of consumers say free shipping is their top incentive to shop online more. There is the obvious question of if we’re trying to get away from discounting eating into our revenue on orders, then surely free shipping can’t be the answer? Well, the option of free shipping actually encourages higher order values to the tune of around 30% more on average, and 93% of customers say they feel encouraged to buy more products if free shipping is available.
If you don’t want to offer a blanket free shipping policy, you can instead offer it above a certain spend threshold, or make it available for your most loyal customers, which will encourage higher spending. If you want to make a push for acquisition or even retention, you can run a limited-time offer of free shipping on all orders for new, existing, or all customers.
There is more beyond just shipping incentives too, and it all comes down to what your customers will best respond to. That might be free products, samples, exclusive launch access to new products, and so on. To determine what incentives excite your customers the most, run tests in different audience segments and channels using different perks and offers outside of discounts.
4. Offer charity donations as a percentage of orders
Most of the time when we discuss incentives, we’re talking about the customer getting something for free in exchange for placing an order. However, what about the customer giving something back?
While that may sound unusual, 86% of consumers say they’re likely to buy from purpose-driven companies and 71% of millennials say they’d pay more for a product if some of the proceeds go to charity. Cause marketing is growing in ecommerce, and can play a big role in creating customer loyalty and has the potential to increase AOV by as much as 30%.
Instead of a discount, offer customers the ability to donate to a charity of choice once they place their order, for example 10% of their order total goes to charity. You can select charities related to your products or story, which strengthens both your brand and community. Make use of technology apps like Givz, which makes it easy to offer charity donations at checkout for your customers and manage the handover of funds to your chosen charities.
5. Personalization and exclusivity
Don’t underestimate the power of making your customers feel special! Personalization is a key strategy in building customer loyalty without relying solely on discounts. By leveraging customer data effectively, you can recommend products tailored to their preferences, increasing their satisfaction and ultimately encouraging repeat purchases. Imagine a customer who frequently buys hiking boots – personalized recommendations for high-quality socks or a lightweight backpack would undoubtedly resonate more than a generic discount on a product they may not necessarily need.
Moreover, exclusivity serves as another potent tool in increasing customer loyalty. By rewarding your loyal customers with exclusive access to new products before they hit the general market, you convey a sense of value and privilege, making them feel “in the know” and appreciated. This exclusivity not only cultivates a deeper connection with your brand but also generates excitement and buzz surrounding your brand launch. Offering early access to upcoming sales further reinforces this sense of exclusivity, allowing loyal customers to seize the best deals before the general public.
Lastly, small gestures such as personalized birthday greetings or heartfelt “thank you” messages for reaching loyalty milestones play a pivotal role in fostering customer loyalty. These thoughtful acts demonstrate a genuine appreciation for their business, building a sense of connection that transcends mere transactions. By incorporating these loyalty program best practices into your customer engagement strategy, you can effectively increase customer loyalty and establish long-lasting relationships with your clientele.
Key Takeaways
By embracing these key takeaways, businesses can forge stronger connections with their customer base, drive repeat purchases, and ultimately foster sustainable growth in an increasingly competitive marketplace:
- Discounts and price dynamics: While discounts can stimulate one-time purchases, they also risk initiating a race to the bottom on price, potentially undermining long-term profitability and brand perception.
- Relationship building: Prioritizing the establishment and nurturing of customer relationships forms the bedrock of sustainable business growth. This involves initiatives such as loyalty programs, personalized experiences, and fostering a sense of community around the brand.
- Loyalty programs and rewards: Tiered loyalty programs offer a structured approach to incentivizing repeat purchases, reducing reliance on discounts while enhancing customer retention and engagement.
- Strategic use of gift cards: Gift cards provide a controlled incentive mechanism that can seamlessly integrate with loyalty programs, adding value and flexibility to customer rewards.
- Encouraging higher order values: Offering free shipping and other incentives not only enhances customer satisfaction but also encourages larger order values, boosting overall revenue.
- Cause marketing and social responsibility: Integrating cause marketing initiatives enables customers to align their purchases with charitable causes, fostering brand loyalty and demonstrating corporate social responsibility.
- Personalization and exclusivity: Tailoring product recommendations and exclusive offers to individual preferences enhances customer experience, making them feel valued and appreciated.
- Celebrating milestones and rewarding loyalty: Acknowledging customer milestones and offering exclusive access to new products or sales serves as a powerful tool for reinforcing brand loyalty and deepening customer relationships.
Ready to elevate your customer loyalty strategy? Book a demo to discover how to implement loyalty program best practices and build lasting relationships with your customers. Increase customer loyalty and boost retention rates with LoyaltyLion.
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