By Alex Keats, Rewards Marketing Specialist at Smile.io
Rewarding good behavior is something that every parent and pet owner understands - and it's also a core concept for successful business growth. If you want your customers to choose your brand over your competitors' every time, you'll need to either be consistently the best in every category every time (difficult), or offer them an incentive that makes them love you and form an emotional attachment to your company (easier).
As an e-commerce business, it’s very easy to focus on customer acquisition, to the point of forgetting about those who you've already successfully convinced to purchase. Although the appeal to this is quite high, it can be much more profitable for you to look inwards and instead get more value out of your current customers, rather than always acquiring new ones.
Why You Should Care About Repeat Customers
Repeat customers are often ignored by many businesses, which turns out to be a big mistake. Repeat customers are proven to be more valuable, and lead to more predictable revenue. Let me explain how.
Repeat Customers Spend More
A customer that purchases with you once, has an increasingly large chance of purchasing with you again. After one purchase a customer has a 27% chance of returning, after two, a 45% chance of returning and after 3 purchases a 54% chance.
So, what does this mean for your business? The more purchases a customer makes, the more likely they will do it again. Seems obvious, but each repeat purchase you can generate is creating more repeatable revenue.
Repeat Customers Spend More Per Order
Not only do repeat customers have a greater chance of coming back, they also are more likely to spend more on each of those purchases. Loyal customers that purchase frequently actually have an average cart value that’s triple that of your bottom 90% of customers.
In addition, the amount of time a customer has been with your store, directly correlates to the amount that that customer spends per order. After 30 months, customers were spending around double the amount that they had spent on their original purchases.
Repeat Customers Share Your Store More
Another huge benefit to repeat customers is that they act as some of your strongest marketers. Why spend money on expensive ads when your customers will do the promoting for you? When treated with care, your most loyal customers become active brand advocates.
Each time a customer makes a purchase with you, they are more likely to refer people to your business. On average, apparel customers refer around 3.1 customers, but by the time they’ve made 10+ purchases, those customers have referred around 7 people to the business. This is huge and ends up creating a network effect because the new people coming in now also have a chance to become brand advocates and share the word.
How To Generate Repeat Customers With a Points Balance
Now that you know the importance of focusing on repeat customers, we can discuss how to go about doing that with a points program.
Encourage the First Purchase With Points
Securing the first purchase is always the hardest and luckily a points programs can help. 84% of consumers claimed they were more likely to choose retailers that offer loyalty programs when making purchasing decisions.
This effect is a result of customers liking to feel appreciated and the fact that a rewards program adds value to each order they make. Everyone likes to feel special and cared about. Rewards programs outwardly show to customers that you will reward them for their loyalty and for choosing you to purchase their goods from.
Also, if given the choice between making a purchase and earning no points versus making a purchase and earning 100 points, regardless of the value of the points, I’ll be taking the latter.
Create Switching Costs With Points
One of the key benefits of a points program is that it provides an incentive for your customers to stick with you. As soon as they make that first purchase, they start to accumulate a points balance. Those points act as a lock-in as your customers will now lose the value of those points by choosing to shop elsewhere.
Therefore, offering rewards for every purchase will will naturally ensure that your customers stick with you and refrain from going elsewhere. Why would they want to leave money on the table to shop with your competitor? I know I wouldn’t!
Use Gamification to Encourage Future Purchases
Now that you’ve got the customer to make their first purchase, and they’ve accumulated a points balance, it’s time to prompt them to continue earning these points. A great way to do this is through gamification, the process of turning your points program into somewhat of a game.
You can gamify your program by creating fun rewards as incentives and creating milestone achievements for your customers. Whether those achievements are unlocking certain perks, being able to redeem different rewards or being admitted into exclusive VIP tiers.
You Need a Points Program to Encourage Loyalty and Boost Profitability
Customer retention is an often overlooked as a way to sustainably grow your business. A points program helps you focus on these highly profitable customers and ensures that they will continue to come back and purchase again.
Points programs are designed to make sure that you stop wasting time on expensive acquisition and instead focus on your best customers, the loyal ones.
Alex Keats is a Rewards Marketing Specialist and ecommerce enthusiast at Smile.io. He’s passionate about growing ecommerce businesses, following his favorite YouTubers and competing in Rubik’s Cube competitions.