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Customer Retention: How to Turn New Shoppers into Repeat Customers12 min read

customer-retention:-how-to-turn-new-shoppers-into-repeat-customers

Your holiday sales spiked. But so did your advertising costs for Black Friday and Cyber Monday. Likewise, the discounts and promotions that attracted new customers likely had a negative impact on profit margins. The true measure of holiday success is turning your new customers into repeat loyal customers. 

Here, we’ll show you how to develop a loyalty program to:

  • Shrink the gap between a new holiday customer’s first and second purchase
  • Design a rewards program for customer retention long after the holidays 

Loyalty programs for customer retention

New holiday customers may have been lured into sampling your product by a deep discount. (Or if the purchase was a gift.) The reality is your brand is just one of the many brands your new customers sampled during the holidays. It’s why new holiday customers often lack the affinity existing customers have for your brand.

Reward new holiday customers by immediately inviting them to enroll in your loyalty program. Enrollees who actively participate in rewards programs are higher value customers: Research indicates they spend more per sale and buy more frequently:

Image via: Oracle

The objective of a loyalty program is simple:

  • Get customers to purchase more frequently
  • Get customers to spend more on each purchase

To convert new holiday customers into higher value, long-term customers, use your loyalty program to compress the time between their first purchase and their second one, after Black Friday and Cyber Monday are over. 

Accelerate customer retention

Brands that have segmented their existing customers and mapped the customer lifecycle likely know how many days, on average, it takes first-time buyers to make a second purchase. Your post-holiday goal is to accelerate the time it takes new holiday customers to make a second purchase, which increases the likelihood they’ll become higher value, long-term customers. 

While the time between purchase will vary by company, product, and sales cycle length, some argue new customers must be encouraged to make a second purchase no longer than 45 days after their holiday order. 

It’s proven that enrolling new customers in your loyalty program expedites their second purchase.

Customers who enroll in a loyalty program are 47% more likely to make a second purchase than customers who don’t join.

Rewards members are also worth up to 10 times more than their initial purchase. 

Enroll at the checkout

One of the most natural ways to enroll new customers in your loyalty program is while they’re checking out: Offer a discount on the initial purchase in return for enrolling, or a welcome bonus.

While some advocate automatic enrollment, members who have not voluntarily opted in may be less likely to actively engage. One alternative is to let holiday shoppers, who don’t have an account yet, register and automatically enroll to immediately start earning points. 

Offer irresistible incentives to enroll in a loyalty program

Give your enrollees gift cards or promo cards that can only be redeemed after the holiday season. Enroll holiday customers into your loyalty program by:

  • Making rewards points immediately redeemable 
  • Offering VIP access, exclusivity, or early access to new products
  • Offering enrollees automatic entry in a sweepstakes 
  • Inviting them to join your customer advisory board, which meets shortly after the holiday, and earning points by telling you what they like or don’t like about your product and brand
  • Injecting urgency with limited time points or discount codes, or even a countdown clock to illustrate how soon an offer expires

Remember, new holiday customers may not be familiar with your full range of products, brand personality, or social impact efforts. Weave what differentiates your brand into a rewards program offer that your customers will love.

With decades of combined experience, here are how several leading brands use loyalty programs to retain new holiday customers. 

Customer retention examples after peak selling times

Earning loyalty starts long before the holidays. Top-performing brands offer incentives before, during, and after Black Friday and Cyber Monday. Several brands and loyalty platform providers have generously agreed to reveal how they enroll new holiday shoppers and convert them into loyal repeat customers:

Nanoleaf: Limited time double promotion

The smart lighting solutions brand doubles down on key holiday weekends. It offers outsized incentives to enroll in its loyalty program as well as injecting urgency. Last December 14–16, Nanoleaf ran a ‘Double Points Weekend’ with ‘Last Order Date for Gifting’ promotion:

Buy One Nanoleaf Light Panels Smarter Kit, Get a Second 50% Off

Order by Dec 16th to get it for Christmas. PLUS earn DOUBLE points on every purchase!

The weekend-long program increased loyalty signups by roughly 30% over the previous weekend. The week made up 14% of Nanoleaf’s total loyalty sign ups for the entire year.

On average, paying customers in Nanoleaf’s loyalty program have a 25% higher customer lifetime value (CLV) than those who aren’t in the program. AOV is slightly lower for loyalty program members than non-members (~10%), but the company says the lift in CLV more than makes up for it.

Advice on building post-holiday loyalty

“Focus on building real loyalty instead of deal loyalty. It’s really tough to do,” says Paul  Austin-Menear, Nanoleaf’s Director of Digital Strategy. “Discounting is easy and effective in the short term but if you just blindly race to the bottom, you’ll eventually hit it. Then what?”

Inkbox: Early VIP access

The brand sells temporary tattoos for adults and creates a feeling of exclusivity to encourage customers to enroll. Inkbox’s last Black Friday and Cyber Monday campaign included early access to special holiday sales for loyalty program members. 

In this email, Inkbox is nudging existing customers who have not yet enrolled to do so:

Image via: Inkbox

Only after the company gave its loyal customers early access did it make the promotion available to everybody else. Notice that after unveiling the 30% off promotion to everyone on Black Friday, Inkbox increased the discount to 35% for Cyber Monday:

Image via: Common Thread

Jimmy Joy: Nudges

The meal replacement brand keeps its rewards program top of mind for customers. Jimmy Joy’s loyalty program platform, Smile, calls these subtle reminders nudges. Notice how Jimmy Joy’s rewards program launch button is displayed on the lower right-hand side of the screen:

Image via: Jimmy Joy

Customers who touch or click on the nudge are instantly introduced to the program and can easily enroll:

Image via: Jimmy Joy

Nudges, or contextually relevant on-page notifications, should be sprinkled across every stage of the holiday shopping experience:

  • Display a program launcher button
  • Remind shoppers of the rewards they could be earning by joining
  • Include a program explainer on your home page
  • Highlight program benefits in post-purchase email

Advice on building post-holiday loyalty

“Running a bonus points earning campaign during the holidays can actually offset having to offer as deep a discount as you normally would,” says Tim Peckover, Smile’s growth and content marketer. “Giving enough points for a discount reward will look like a great deal and locks in a customer’s loyalty while they have the points balance. And, if you run a bonus point redemption campaign in the weeks and months afterward, you can re-market to all those delighted customers and get them back to your website to make more purchases, and redeem and earn more points—and the cycle continues!”

Rhone: Gamify rewards quiz to personalize

Rhone, a leading brand in the premier men’s activewear space, gamifies loyalty program enrollment with a quiz designed to help the brand to quickly understand customer preferences.

To understand how its products may be used, Rhone asks questions surrounding how customers get to work and where they like to go on vacation:

Next, the company asks for detailed color preferences:

Afterward, Rhone asks for measurements and follows up with questions about size and fit preferences:

The reward for taking the quiz is free two-day shipping on all orders with no minimums or annual fees:

The survey data lets Rhone personalize not only the rewards, but also the overall customer experience. This has resulted in rewards members spending 50% more than non-rewards members.

“It’s massive,” says Adam Bridegan, Rhone’s CMO. “The key is creating an experience that encourages customers to come back to your website and incentivizes them to shop during non-discounted times.”

Post-holiday, long-term loyalty

Under pressure to convert holiday buyers into loyal repeat customers, the post-holiday period is also a good time to assess how your program is performing. Enrolling holiday customers is important. But earning long-term loyalty that results in a sales lift is what counts.  Understanding why loyalty programs succeed and fail can help you assess your loyalty program and make necessary adjustments.

Why loyalty programs succeed

The success of a rewards program can be measured by increased purchase frequency, AOV, and CLV. Programs succeed when:

  • They meet the member’s needs
  • Members enjoy participating
  • They make the brand experience better
  • They’re consistent with brand expectations
  • Rewards and benefits are appealing

In their infancy, rewards programs were little more than mechanisms to deliver points, but rewards are no longer enough. In fact, the experiences that drive member satisfaction aren’t about the actual rewards—how to earn points faster, and in more places. What drives satisfaction is a more personalized experience. Especially for younger customers, successful programs include new redemption techniques:

Image via: Bond

Improving the redemption experience, on average, results in a 1.6x lift in satisfaction among redeemers versus non-redeemers. Members expect programs to anticipate, fulfill, and even refill the redemption with immediacy, simplicity, and ease:

Image via: Bond

Members crave personalization. But nearly 80% of rewards program members are not satisfied with the level of personalization they receive. This is due, in part, to not segmenting your rewards customers into tiers. More on this later in the piece.

Personalization means four things: Delivering the right message, to the right customer, at the right time, via the appropriate channel:

Image via: Bond

Loyalty marketers also succeed by gamifying their programs. In loyalty programs, gamification includes statuses and tiers, unlocks, missions and challenges, goal setting, and progress feedback. The elements that make games so enjoyable (even addictive), have the potential to increase member engagement.

Learn more about gamification and how Starbucks incorporates it into its rewards program.

Why loyalty programs fail

Loyalty programs are struggling to keep up with rising consumer expectations. In 2019, 44% of members say they’re very satisfied with their program, down from 47% in 2018.

Program operators often emphasize member acquisition rather than customer experience. Not meeting customer expectations, or allowing a program to go stale, is a customer experience killer. Here’s a telltale sign: membership is up but engagement is dismal.

Program members are active in less than half of the programs in which they’re enrolled:

Image via: Bond

Central to the customer experience is the redemption experience. Your members are likely to be inactive if:

  • It takes too long to earn points or rewards
  • The program doesn’t provide rewards members are interested in
  • The program sends too many communications
  • Loyalty marketers send irrelevant communications

Separately, earning real loyalty, the kind that retains customers and lifts average order values, isn’t accomplished with a one-size-fits-all loyalty program. A lack of program differentiation can lead to inactivity. Off-the-shelf programs lacking customization can fail to provide members a compelling reason to engage. 

The lesson is to carefully design a program that can be measured and provides value to both you and your customers. 

Customer retention techniques

Weave your rewards program throughout the customer journey to keep your customers engaged. Remember, it’s more than just earning points which can feel impersonal, and transactional (rather than experiential) in nature. In fact, transactional programs are a major reason loyalty members become dissatisfied. Sophisticated programs are often a blend of the other two models, combining personal recognition with data to offer a personalized and highly relevant rewards experience.

When integrating your rewards throughout the customer journey, consider the following techniques used by top-performing brands with successful rewards programs:

Dedicated rewards pages

Include a dedicated rewards page so your program is easy to find, join, and use. Thirdlove,  positions its rewards program prominently on the site’s top navigation menu:

Image from Thirdlove

Rewards pages should look and feel like every other site page. When members log in, the page  should be personalized, allowing program members to:

  • View their points balance
  • See how to earn points
  • Redeem points  

Likewise, members can also see how they can redeem points.

Integrate rewards at the checkout

Customers with points discount codes expect to be able to redeem those rewards easily when checking out. If not, your conversion rate may suffer as customers abandon cart. Integrating rewards with the checkout can increase program engagement and conversion rates.

Note the drop down box that allows customers to easily apply their rewards:

Image via: Smile

Loyalty platform Smile suggests businesses use a drop down box to display a wide variety of reward types, like dollar off discounts, free shipping, and percentage off.

Loyalty tiers

Not all program members are equal. Treating customers differently based on their value creates incentives for customers to spend more. Consider adding tiers to rewards program based on customer total lifetime spend.

Thirdlove incorporates three tiers. Everyone who enrolls is in the first tier. But to receive additional rewards (like free gift with purchase, or early access to new arrivals), customers must spend enough to move into the second and third tiers. 

In the brand’s top tier, customers can even get access to limited edition products.

Referral program

Ninety-two percent of people trust recommendations from people they know. Use your new holiday customers to sell your brand to their social circles. Offering referral codes can drive sales or other desired behaviors like reviews or social media engagement.

Vanity Planet, which sells beauty and skincare products, allows customers to earn points for referring a friend:

When a user shares a referral link on Facebook they also can share an automatically populated piece of content illustrating how others can earn rewards with Vanity Planet:

Rather than paying upfront to acquire customers as you would with PPC ads, referral links allow brands to reduce customer acquisition costs (CAC) by using points or discounts and existing customers as salespeople.

Customer retention’s goal: Lifetime loyalty

Deep seasonal discounts likely attracted many of your new holiday customers. Quickly enrolling them in your loyalty program will turn them into repeat customers in the long term.

Remember to segment your new program members by CLV. Target rewards that are commensurate with a segment’s lifetime value, similar to tiers. For example, offering free shipping, larger discounts, or exclusive VIP access for those who spend more. Rewarding holiday customers based on their value is a gift you should give yourself.

This article was originally published by our friends at Shopify Plus.

About the author

Steve Hutt

I'm obsessed with entrepreneurship, commerce, and Shopify. If you have the desire to implement what's working today for direct-to-consumer brands on Shopify, I'm excited you're here! Get the Shopify help you need. This industry blog and podcast is my digital brain where my guests and I share cutting-edge marketing strategy, must-have Shopify apps, and marketing platforms that will help you build and scale lifetime customer loyalty. To do this, I'm part of the Merchant Success Team at Shopify Plus and host of the eCommerce Fastlane Podcast.