When you sell on marketplaces like Amazon or Etsy, eventually your sales hit a wall.
For e-commerce entrepreneurs, marketplaces can be a fantastic way to test your market and get started. You put your products on Amazon/Etsy, tap into their brand recognition and get some sales.
But there is one huge problem:
You don’t own the customer experience. They do.
If you want to succeed in the long term, you need to own the customer experience. Smart e-commerce entrepreneurs know that the money is not in the first sale. To maximize customer lifetime value and sustain long term profitability, you need repeat business.
Most customer loyalty programs fail because they push deep discounts that attract the wrong kind of buyers. If you’re ready to level up your e-commerce business, it might be time to start a customer loyalty program.
In this 28 minute episode, customer loyalty expert, Alex McEachern will teach you:
- The ideal time to focus on starting a customer loyalty program
- How to introduce a program that keeps customers coming back
- How to get customers to understand and interact with your program
- How to incentivize customers without discounts
- Examples of effective customer loyalty programs
Show Notes & Resources:
- Sweet Tooth’s Blog
- Sweet Tooth’s Guide On Customer Retention
- Is A Loyalty Program Right for Your Store?
Darren: All right. So, I’m here with Alex from Sweet Tooth and can you tell everyone what your company does, Alex?
Alex: Sure. So, Sweet Tooth is an app for e-commerce stores that allows them to create their own loyalty and points based programs. So, right now we are our application for Magento, BigCommerce and Shopfiy merchants.
Darren: And do you have anything for WooCommerce?
Alex: We don’t have anything for WooCommerce at the moment, but it is the next integration kind of on our timeline. So that will be the next one coming out. You can also kind of preregister for it on our site under WooCommerce area.
When Should eCommerce Site Owners Start Thinking About Customer Loyalty?
Darren: Got you. So, customer loyalty is something I really want to learn a lot more about, and that’s why I wanted you to come on the show. So in terms of customer loyalty, it’s something that everyone wants and no one really knows how to actually get. When should e-commerce site owners start thinking about customer loyalty?
Alex: Yeah, it’s a great question. So, loyalty is a fit for any e-commerce site when they start to kind of get an established customer base.
So, customer loyalty, and customer loyalty extensions and apps aren’t something you should be looking at when you first start your store, because there isn’t anyone to retain. It’s not going to work, but retention and loyalty is something that you add over time.
So, as you’re getting more customers, you start introducing more retention efforts to compliment your acquisitions. So, I would say you can start focusing on that around, maybe when you’re getting like five customers a week is when you can start to sprinkle a little bit of customer loyalty and retention in there.
And then as you continue to grow, you can kind of introduce more to a point where you actually have a large enough customer based set. It might make more sense to actually focus more on the retention side of things than on the acquisition side.
How to Introduce Existing Customers To A New Program
Darren: So, what if you’ve had an e-commerce side for a long time? Let’s say 5 to 10 years, and you’ve done very little in terms of customer loyalty? People buy and then that’s it, there’s really not much follow up.
Now, if you want to start a customer loyalty program, like how should you do that? Should you go retro-active and contact the people that bought from you five years ago, or do you start today with people who buy now, or how should you get started if you already have a customer base?
Alex: Yes, a ton of people come to us already have a really large customer base and they want to launch a loyalty program, and we always recommend that you introduce all your existing customers to the program.
So, anyone whose email information you have, you can email them and let them know that you’re starting a program. And actually a great way to kind of get thing rolling is to give them points, kind of just because they’ve been with your store before.
So, anyone in your database you can go, “Here is hundred points towards our new loyalty program that we’re launching. Because you’re an existing customer, we want to give you like a head start type of deal.”
The other thing with launching when you already have an established customer base, is kind of making sure that you introduce elements of your loyalty program one at a time. Sometimes if you introduce it turn a different aspects of different rewarding, like social sharing, and customer referrals, and account registrations, it can become a little confusing for your customers.
So, if you introduce them in kind of digestible chunks, it makes a lot easier for your customers to understand and interact with your program.
The Components Of A Minimal Viable Customer Loyalty Program
Darren: So, when you say, “Digestible chunks,” what’s a good time frame between…like say, we’re starting a loyalty program today. We want to get everyone who’s been in our customer base, get them on board right now. So I guess the first interaction is going to be introducing them to the reward point system saying, “Hey, are you in? Here some points.”
So, how long before we like continue that process and email them some more, and let them know some other opportunities with rewards?
Alex: Right. I would definitely suggest, like I said before, letting everyone know that you’re starting the program and starting of very simple.
So, I would say just rewarding points for account registrations and like signing up for the loyalty program, as well as making a purchase. So for every dollar you spend, we’re going to reward these many points. That’s a loyalty program and its most basic form.
It’s really easy to understand, and your customers are going to start interacting with that.
I wouldn’t say there’s a set time line like after two weeks you should do this, but just kind of monitor the program. See how many people are interacting with it and as you start to get more adoption into the program, then you can start introducing more elements.
So, may be the next thing you look at is rewarding points for customer referrals and if you do it in those digestible chunks, then it gives you an opportunity to email everyone again and kind of remarket your loyalty program every time you introduce something new. So, “Here is our new referral. We’re rewarding for referrals now.” And email everyone and let them know that they can get the points for coming back.
Darren: That’s sound like an awesome thing. So, in your experience, what is a good kind of adoption rate of a loyalty program? So say you have, just to keep the math simple, say you have 1,000 customers and you say let’s launch loyalty program tomorrow, or the next two weeks or so. What kind of adoption rate would you expect?
Alex: It really depends on what you’re selling and your industry. So, I don’t really want to give like an exact adoption rate but…
Alex: …you are going to see a big spike and adoption. You’re going to see ton of people coming in just from that initial excitement and that it’s going to increase gradually, over time. I’m trying to think of kind of like a ball park number I want to give, but it really does vary drastically by industry.
I do have an eBook that I wrote that kind of introduces whether a loyalty program will be right for you, and it based on like on industry store size. So, maybe we can give the viewers the link to that. In the description here they can check that to see for their individual industry.
Darren: Yeah, definitely. I’ll definitely drop a link to that in the show notes. If you can send that over to me, I’d love to share it. So, what’s your most [inaudible 05:59] tip if you want to actually start a customer loyalty program?
Alex: So, I guess number one is to start a customer loyalty program. Clients are seeing a ton of success with getting people to come back.
I think the average e-commerce site sees only 1 in 10 of its customers come back for a repeat purchase so, even if you can get that to two, that’s a huge improvement and a loyalty program can help you with that.
I think in terms of general customer loyalty, not necessarily a loyalty program specifically, is getting into the personalization of things. So, that can be something as small as introducing people by their names in their email, using videos to kind of humanize the e-commerce experience, because what it comes down to, is loyalty is more of an emotion.
So, we’ll have that restaurant or that store in real life that we love to visit, and that’s because they know our order. They know a little bit about us. So any way you can introduce that personalization online is going to be a huge help in establishing customer loyalty.
How To Incentivize Customers without Discounts
Darren: Yeah, I think you said something that’s really interesting there, about it’s an emotion and it really like customer loyalty is more psychological than anything.
So, I work with a lot of clients and they have e-commerce stores, and they’re really reluctant to do any type of e-commerce discounts and rewards because margins are so thin in the e-commerce space.
So, what do you suggest for companies who want to start a loyalty program, but they don’t necessarily make it just about discounts? How can you build loyalty without focusing on discounts alone?
Alex: Right. That’s a com…that’s a question we get all the time especially from more luxury brands, is they really want to get customer loyalty working for their store, but they absolutely are not going to discount their products.
And there’s couple ways you can actually get a loyalty program working without using a discount, and those are what we like to call:
- “points-only programs” and
- “tiered programs.”
So, on a points-only program you can reward points for different actions, but those points aren’t put towards the card as a strict discount, like a percentage off or dollars off. They’re actually used for products.
So you can redeem those points for products in a separate catalogue that’s only accessible with points as the currency. And that becomes really effective if you introduce products that are not available for purchase on your site. So, these are limited edition items or exclusive items that are only available with points.
Darren: That’s a great idea.
Alex: And…sorry. The other one you can use is what we call a “tiered program.” So instead of motivating with the discount, you’re actually motivating with status base rewards. So, you can have your bronze, your silver and your gold tiers, and for how many dollars you spend you’d move closer to the next tier.
Or you can make a number of purchases, number of referrals or whatever. Whatever you want to do. And they’re moving into that next status tier. So, I’m trying to strive towards being a silver member or a gold member, and the more kind of public you make that, the more motivated these people are going to be to reach and strive for that status.
Darren: A lot of what you’re…the two examples you just described is very similar to like what a lot of credit card companies are doing, right?
Alex: Oh yeah. The credit card companies, they know how valuable a customer is over the life and they really want you to…
the thing with the tiered program, especially, is the more invested you are in getting that next tier, the more involved you become with the program, the more committed you are and the longer you’re going to stay with them.
Because you’re so entrenched in the atmosphere of that loyalty program.
Darren: So, did your company do any like type of consulting for loyalty, or it just you get people set up on a software and they kind of do it themselves? Or do you provide consulting and say, “Hey, these are the…we looked at your products and your customers and we think these type of promotions and loyalty programs will work for you,” or how does that work?
Alex: Yes. So, it kind of is different on our different platform. So, our Shopfiy and Bigcommerce software is pretty turnkey. You can get that setup in couple of minutes and we kind of have some best practices.
And then we have our enterprise plans on all the platforms, where we have a consultation package where we’ll actually sit down with the team and figure out what they’re selling, what are their goals of their loyalty program are, and build a loyalty framework that best suits the needs of their individual store.
Loyalty Program Ideas and Examples:
Darren: So, can you share any specific examples of what other successful companies are doing?
Alex: Yeah sure. I think my favorite loyalty program example, and probably one those probably most popular ones out there, is a Sephora’s Beauty Insider program. So, this is a fantastic example.
They’re doing a ton of things right, but the one thing they’re doing extremely well are the tiered programs that I was talking about before. So, Sephora has three tiers.
You’re automatically enrolled into their beauty insider tier, and then after you spend $350 you move up into their VIB tier, and after $1,000 in one year you’re moved into that VIB Rouge status.
And I think this is a fantastic example, because people are extremely motivated by those status rewards. And there are points offered in that program which they allow to do for points-only products, but the main driver of this loyalty program is just that status base reward. Just being able to say I’m a VIB Rouge member.
If you go on Twitter and search #vibrouge, you’re going to see people just gloating and just ecstatic that they’ve reached…that they’ve spent $1,000 in a year. They’re basically bragging that they’ve dropped $1,000 on makeup this year.
Darren: Why do you think that works? Why do you think people are motivated to go from the first tier to the next tier?
Alex: Is just the gamification of it. As humans, we love to kind of strive to be the best and compete against each other, it’s kind of in our nature. And when you create like that rouge level or that gold platinum level, somewhere at the top, if you only let 5% of your customers reach that, then everyone wants to be the best and be able to kind of tell everyone else that they’re part of that upper tier.
And Sephora, I think is kind of rite of passage like, “I’m a makeup expert. I love makeup. Look at me, I’m in that VIB Rouge section of the site.”
Darren: So is really psychologically driven home?
Alex: Oh yeah, for sure.
Darren: So in terms of if you’re customer, are there any benefits to being in the VIB group versus the regular group?
Alex: Yes, there are some advantages. In the rouge, I believe you get invites to Sephora events. I think you get unlimited access to their makeup consultants. So, there are rewards for getting there but if you look at what people are talking about in the program, they’re not necessarily excited that they got those rewards.
They’re more excited just by the fact that they got there. But Sephora again, does an amazing job of knowing their customer and what motivates them. So, all the rewards from moving up these tiers are totally targeted towards like their ideal and target customer.
Darren: So, how do you figure out like what’s going to motivate your target customer? How do you determine, “Well, here is my customer base and these are the type of things they buy, and these are the lifestyle things they’re interested in.” How do you determine that this type of rewards system where it’s based on tiers, is the right fit for them?
Alex: Right. So it’s pretty much like any marketing campaign, just trying figure out what that target audience looks like. Tiered programs and points-only programs work extremely well for luxury brands. I’ve also see them work well for pretty much any generic brand as well, as long as you get those rewards right.
So, figuring out what the motivator is. Maybe you have a tier…maybe you find that your customers are really, really price conscious and they’re actually just looking for the best deal.
You can set up a tiered-program where as you move through the tiers, you’re getting a high, maybe 5% discount in the first tier, 10% discount in the second tier and a 30% percent discount in the third tier, or free shipping moving into those.
You can kind of tailor your rewards based on what’s motivating your customer. And obviously, the store owner is going to know what best is going to motivate their audience.
Darren: Got you. That’s interesting stuff. I’m looking at this Sephora program now, and it looks like they have a pretty well targeted… are you’re addicted to beauty? And they’re really mapping their persona to these benefits, or to the actual program. So, that will be something I’m really interested in learning more about in terms of the process to go from persona to a loyalty program.
Alex: Yeah, and I have ton of articles on the Sweet Tooth blog kind of mapping that journey out, and the road from one-time shopper to loyal customers. So, if anyone listening wants to figure out more about mapping that process, there’s a ton of information on our blog about that.
Darren: Is Sephora, are they one of your clients?
Alex: Sephora is not one of our clients but they’re just in my opinion, kind of the leader in loyalty.
Darren: Got you. So, what are some of your clients? Can you share any of those that have systems that, not necessarily just the tier program, but just other programs we had talked about.
Alex: Yeah sure. So, some of our clients include like Philip Kingsley who does hair products, StriVectin which is like anti-aging stuff. We have a lot of supplement, beauty, and any consumables as well. A lot of our clients are listed on our website as well that you can check out but yeah, the most popular components of our loyalty programs are definitely creating those tiered programs that we seen a lot of interest in that lately.
Alex: And again, like pretty much every one of our clients has tailored their rewards to their audience. So it’s kind of interesting to see what different industries are doing for these rewards and what they’re basically seeing in their audiences.
The Reality Of Implementing A Loyalty Program
Darren: It’s hard to imagine that a company who’s pretty much running their own e-commerce marketing would be able to start a loyalty program and just nail it right out the gate. Do you see that a lot? Where they start and maybe they try this type of loyalty program, then they try something else, or do you find that they pretty much nail right out of the gate?
Alex: So, very few people nail it right out of the gate.
A loyalty program is definitely not a “set it and forget it” type of tool. It’s something where…this comes back to launching in stages as well. You can kind of do the basics to start, see what’s working and then kind of tailor and tinker with it, and go in different directions to figure out what’s best motivating your customers and your audience. And the biggest thing is just being aware of what’s happening.
If you’ve just launched something and you’re not monitoring it, then you’re never going to know if it’s working and you’re not going to be able to come up with the data to drive, basically a smart decision with your loyalty program.
Darren: So, do you think does the A/B testing come into play here?
Alex: Oh for sure. A/B testing comes into play in absolutely everything in e-commerce, and loyalty is no different.
Darren: Got you. So, do you have A/B testing built into Sweet Tooth?
Alex: We do not have A/B testing built into Sweet Tooth. A lot of people who are using Sweet Tooth already have some sort of A/B testing software, whether that’s like optimized or something like that, where they can actually test that stuff out.
Newsletter Opt-In Or New Customer Account?
Darren: Got you. I’m looking at this Philip Kingsley website and the first thing I’m reading is, “Welcome to Philip Kingsley. Signup to our newsletter and receive $10 off your next purchase.” So, it looks like here, they’re trying to capture people right at the beginning just to get that first discount. And I’ve seen other sites do it differently where it’s, “Create an account”.
So, how do you figure out which one is better and is that something that you should test?
Alex: So, there’s a lot of debate here. I won’t say one is better than the other. They have their advantages and disadvantages.
So, if you’re looking to capture emails, that’s a lot easier than trying to capture a customer account. They just have to insert their email, hit submit, and they’re enrolled in a newsletter or whatever you want to enroll them in.
For account registration, you’ve got to get user name, their name, their email, password, all of that. So, it’s more involved process.
So, it kind of comes down to what angle do you want to take? The email is easier to capture, but the customer account provides a ton more value because you can use the email in that customer account to enroll them in the list that you would put them in anyway, and they’ve made that commitment to your store by making an account. And when someone makes an account and has put a stamp that they’re committed to your store, you’re going to see them come back again.
So, there’s a lot more benefits of going for that customer account. So, if you’re going to say, “I’m going to reward $5 worth of points for one of these, then I would send you $5 and points for the account registration because it’s going to provide more value for you. You’re getting a higher return on that $5.”
Darren: Yeah, I get that totally.
Alex: But if you wanted to kind of like choose one or the other, I would do a little bit of digging into how much you think each of those actions is worth to your site, and then maybe reward less points for that email capture and more points for the account registration.
Darren: There’s a ton of benefits to having accounts created because and can do a [inaudible 00:20:19] emails and stuff like that.
Darren: So, I’m wondering why Philip Kingsley is deciding to do the newsletter opt-in versus the account creation opt-in and if you did decide to actually run this as a legit test and A/B test, how long would you give it to really…and this is more of like a customer lifetime value question is, if you put this opt-in for 10% off just email opt-in.
you’re going to get a lot of people who are really just either not super interested or really discount hunters, but then if you put the people who create actual accounts, you’re going to get people who are more qualified. And so I would imagine like you said, that there’s a higher value in that. But in terms of just saying when the actual payout at the end of the day, like how long should you run that test before you determine this is the right direction.
Alex: I mean it’s really going to depend. If you’re only getting a couple of visits to your site every week, then it’s going to take a really long time to figure out if you made the right choice.
It’s going to take a while for that become statistically significant. In terms of like a timeline you want to look at, I would let it run for maybe a couple of weeks and take at what you see, and maybe implement what you’re seeing from that initial data set, and then keep testing it over time and basically allow that to run while you’re doing…like chosen one course of action, continue to test it to see if you’ve chosen the right one, or if you should pivot once you see more data.
A Quick History About Sweet Tooth
Darren: So do you guys…does Sweet Tooth just do e-commerce, or what are some other customers that use your software?
Alex: We’re focused e-commerce. We have a couple clients that have implemented Sweet Tooth in-store, so basically allowing people to earn their points that they are on their e-commerce site, in-store. Usually that’s done with some sort of a partner on their end to try to integrate the two. We’re focused on the e-commerce software side of things.
Alex: So, it’s not necessarily that we choose do it last. We actually started out as a Magento Development Agency. And we found that a ton of people were asking to build, basically custom loyalty programs and after doing a couple or enough of those, we realized, “Hey, there’s business here.” And we pivoted to making Magento loyalty programs.
So after seeing a ton of success in the Magento community, we decided that in the rise of basically the Saas base platforms, like Shopify and Bigcommerce, they’re basically taking off. So, we said we need to move our expertise in to these other platforms as well. So, taking what we learn from Magento and basically making a loyalty program that’s tailored to the audience on those platforms.
So, more of a turnkey kind of “start it in a couple of minutes” solution for those smaller merchants like Shopify, Bigcommerce. And it was just kind of we said we’d start Shopify and Bigcommence was…it was easy to use into the Bigcommerce space well and WooCommerce is kind of just next on the progression forward.
Darren: Got you. So, I want to ask you a little bit about email marketing and customer loyalty. I think at the end of the day like when you’re talking about customer loyalty and reward programs, that’s most are the communications is going to be via emails, right?
Darren: So, what kind of integration do you do with email and as a follow-up question, how can you take your basic emails, like your transactional emails or shipping emails, and things that customers expect to get, and turn that into an opportunity to build loyalty, if you even think you should do that?
Alex: You definitely should be integrating your email marketing and your loyalty marketing. With our solutions, all three of our three solutions come with kind of built-in email notifications. Our Magento one is a lot more extensive with what you can do. We also partnered with MageMail and MageMonkey on Magento to kind of offer basically what you’re talking about there.
Like bring everything together. So, like with MageMoneky you can actually take your transactional emails and add the points into them or you can use banding car emails and have points automatically be displayed. So, hey you abandon your cary with whatever you’re looking at that cause this amount. Here’s the amount points you have so you would be able to get this amount off of that purchase or even just in your every day email kind of communication with customer just displaying how points they have.
Because when they see that they’re getting closer for rewards, you might be just having that in the email might be enough to get them and come back and make that the next purchase.
Darren: So, just like as soon as they purchase they get a confirmation saying, “Hey, thanks for your purchase. You got 50 points now”, or whatever that number is.
Alex: Exactly. So, they’re always aware of how many points they have. Every time they make a purchase you’re going to see how many points you have, and when you use your points is going to show you kind of the remaining balance you have after that as well.
Darren: So, what kind of onside integration do you have? Like do you have–can you do where you have like a page that has products instead of price you put points there or is that going to have to be done by separate developer?
Alex: This is kind of we have a lot more time in the Magento space than in the other ones. So, in Magento you can do that, you can easily create points-only products catalogue. That isn’t available in our Shopify and Bigcommerce integrations yet but we’re kind of like full on the gas with those and you’re going to see a lot more similarity to a Magento offering in the next coming months.
Darren: So, is that why a lot of customers really…Magento customers really like having?
Alex: The points-only products are really popular with kind of those luxury brands. So, like I said before, if someone is really against discounting like their brandish is not going to discount, a points-only product page is fantastic solution to drive customer loyalty for them.
Darren: Got you. So, is there anything else you want to mention before we sign off?
Alex: I think just if anyone is listening is interested in loyalty programs, we have ton of resources on our site to help you out. So, our learning center has some videos that like kind of walk through what you need to know before you start a loyalty program, and we got some great eBooks as well kind of showing you retention marketing. So, not even loyalty just retention marketing in general and how loyalty program can help.
Darren: So if you had one key takeaway for our listeners today who are interested in starting a loyalty program, what will that takeaway be?
Alex: Get started and don’t make a complicated. You need to get started today and the more complicated you make it, the more confused your customers are going to be. So, get started and keep it simple at the start.
Darren: That’s awesome advice, Alex. Thank you so much for joining me today.
Alex: No problem.
Darren: Right. Take care.