The Science Behind Successful WooCommerce Loyalty Programs

Staying competitive in the highly dynamic e-commerce landscape is a serious challenge, one that requires constant innovation and quick strategic decisions. One way to stay ahead of your competition is to implement a WooCommerce loyalty program.

Unlike most solutions offered out there, WooCommerce loyalty programs are not a marketing gimmick. They are excellent strategic tools that can become a real game-changer if set up properly. A quality loyalty program offers a powerful combination of benefits for both your business and your customer base.

How can your business benefit from a loyalty program?

Here are some of the key reasons that make these programs important in today’s e-commerce landscape.

• Customer retention – what better way to increase customer retention than to offer incentives? Good incentives keep your customers coming back for more and create a sense of loyalty to your brand. Additionally, research shows that a 5% boost in customer retention is associated with a substantial 25% rise in profitability.
• Increased sales – to stimulate repeat purchases and get a boost in sales revenue, all you need to do is offer rewards and discounts. This can be easily achieved with a WooCommere points and rewards program.
• Data and insights – if you want to generate valuable data on your customer preferences and maintain a detailed purchase history, use a loyalty program. Such programs can help you make informed and strategic decisions because they are considered a data gold mine.
• Competitive edge – we’ve already mentioned that staying competitive in a dynamic e-commerce landscape is challenging. However, it is also a must, if you want your business to succeed. A well-structured loyalty program can set you apart from others and give you a competitive edge over your competition.
• Customer engagement – the success of your business is directly related to customer engagement. A loyalty program can help you keep communicating with your customers beyond the points of their purchase and maintain a relationship that will keep them coming back.

How can your customers benefit from a loyalty program?

A Woocommerce loyalty program brings a lot of benefits to your business, but what makes it valuable for your customers? Well, loyalty programs are designed to build and maintain long-term relationships by rewarding loyalty with various incentives and rewards.

These are the benefits customers get by joining your loyalty program:

• Savings and rewards – a loyalty program makes customer purchases more cost-effective as they benefit from discounts and rewards that come with every purchase
• Enhanced user experience – a seamless shopping experience can be further enhanced by a personalized loyalty program. This takes your program to the next level and acts as a secret ingredient that keeps your customers engaged.
• Appreciation – a loyalty program can enhance the emotional connection between customers and your brand. Research shows that customers who share an emotional connection with your brand have a 306% higher lifetime value than those who don’t. Customers who feel appreciated and recognized for their engagement with the program will surely become advocates of your brand. A good way to achieve that is by tracking your top program performers. Something you can easily achieve with LoyalGenie Points and rewards plugin.
• Engagement incentives – to increase program engagement, you need to reward customers. You need to offer a way for customers to earn more rewards the more they engage with your business.

Think of your Loyalty program as a win-win situation where both you and your customers benefit from it.

Your program provides incentives not only for your most loyal customers but for your new customers, as well. Nevertheless, when you reward loyal customers, you also boost loyalty. This makes your loyalty program a great way to create a mutually beneficial relationship between your business and your customers.

The psychology of customer loyalty

To understand why customers like to engage with loyalty programs, we need to understand the psychology of customer loyalty. Why?

Well, loyalty is not just a result of coincidence. Loyalty is rooted in different psychological principles that influence the behavior of your customers and their decision-making. By learning how to leverage these principles to your advantage, you can build a successful business while maintaining a strong relationship with your customers.

Here’s what you need to have in mind when designing a loyalty program.

Reciprocity

Customer loyalty is driven by reciprocity, which is based on the idea that when a person receives something of value, they feel the need to reciprocate. For example, your business provides value to loyalty program members through various incentives. This is perceived as a generous gesture by the customer and it makes them feel like they need to return the favor.

It also makes customers more likely to make repeat purchases and establishes a sense of obligation and trust between your business and the customers.

How to apply reciprocity to your loyalty program?

Customers who feel that they are given value for their engagement with the program are more likely to stay loyal. To achieve this, you should create a sense of reciprocity by offering your customers rewards, discounts, and exclusive offers through your loyalty program.

Commitment

Another great driver of customer loyalty is commitment. The reason why is that people tend to align their actions with their commitments. For example, when new customers join your loyalty program they receive a reward as a token of gratitude. This gesture signifies a commitment to your brand.

How to apply commitment to your loyalty program?

From the moment a customer invests their time and effort into your program, they are more likely to continue being an active and loyal member. You should always seek ways to encourage new customers to join your program.

Cognitive bias

Confirmation bias and choice-supportive bias can also affect customer loyalty. Confirmation bias is the tendency to seek and interpret information in a way that confirms one’s preexisting beliefs. On the other hand, choice-supportive bias is the inclination to remember one’s choices in a positive light.

Customers who choose to become members of your loyalty program will probably view their choice as the right one and try to find the information that confirms their belief. Cognitive bias can also help them remember their previous experiences with your business in a more positive light.

How to apply cognitive bias to your loyalty program?

If you consistently provide positive experiences, you will reinforce the idea that your loyalty program is a wise choice. Additionally, by referencing positive experiences through customer relationships you can capitalize on choice-supportive bias. Research shows that brands that offer positive experiences receive three times more word-of-mouth marketing than brands that offer ‘uninteresting’ experiences.

Data-driven decision making

We are living in a digital age where data is considered (and often referred to) as the new oil for businesses. This includes online store businesses that run loyalty programs. Data offered by a quality loyalty program presents a foundation upon which effective strategies can be built.

Type of data you can collect with a loyalty program

• Purchase history – learn what products/services your customers prefer, how often they make purchases, and what their spending habits are (in general)
• Demographics – to create a well-targeted marketing campaign, you need to have information about your customers, such as age, location, gender, etc.
• Behavioral data – learn how customers engage with your program, how many referrals they have, how often they refer new customers to your business, how many points they have (their points balance), how they earn points, how they redeem points, do they prefer your Referral program or your Points and rewards program, etc.
• Feedback & reviews – customer feedback is one of the richest data sources out there. Customer feedback tells all you need to know about customer satisfaction, program pain points, and potential areas for improvement.

How to make quality data-driven decisions

• Insight generation – by looking into customer interactions, preferences, and overall behavior, you can get insights that will help you understand what motivates your customers and how/why they interact with your program.
• Personalization – the more data you have, the more personalized marketing and offers you can make. This includes rewards and incentives tailored to the needs of each customer. Personalization also helps create a deeper connection between your brand and your customer base.
• Performance tracking – tracking program performance in real-time can help you assess whether your strategy is working or if it needs to be adjusted for optimum performance.

How to enhance program effectiveness with data-driven decisions

To unlock the full potential of your loyalty program, you need to focus on making data-driven decisions.

• Targeted rewards – if you gather enough data, you can analyze it and determine which rewards are most appealing to your customers. And if you have different customer segments, you can tailor your offers to each of them to make them more compelling.
• Predictive analytics – you can predict customer customer churn and take measures to retain those customers, as long as you listen to the data coming from your program.
• A/B testing – you can easily conduct A/B testing to see how effective your program is and fine-tune it accordingly.
• Feedback integration – analyzing customer feedback and concerns and then acting based on it leads to continuous program improvement.
• Real-time adjustments – real-time data helps you make decisions on the spot. You can adjust your program quickly to address different market conditions.

Data-driven decisions can help you optimize your program, make proactive decisions, and enhance its effectiveness, which in turn leads to increased customer retention, higher engagement, and overall long-term success.

Building trust and transparency

Trust is the foundation of any strong and enduring relationship, and transparency is the key that unlocks its full potential. That quote gives a good summary as to why you need to build trust and transparency into your loyalty program, but let’s break it down and see why each of these is important.

The importance of trust

According to a survey, 83% of consumers identified trustworthiness as the primary emotional factor associated with their preferred brands. Here’s why trust should be the fundamental element of your program.

• Security and privacy – in this day and age, e-commerce customers are extremely cautious when it comes to sharing their personal data and making online transactions. This means that in order to create a successful program, whether it’s a Referral program or a Points and rewards program, you need to make sure to create a sense of trust. Trust is a prerequisite for customers to feel confident in providing any sort of information to your business, whether it’s their email or their billing information.
• Financial transactions – your program will require customers to make financial transactions. You should make sure your customers know that their payments are encrypted and secure.
• Program reliability – for your program to work, customers must trust it. They must trust that the program rewards or incentives will be given as advertised and their products (or services) will be delivered as promised.

The importance of transparency

If trust is the foundation, then transparency should be the cornerstone of your loyalty program. When your business is honest and open about the loyalty program – how it works, what your customers can expect from it, how they can earn and redeem rewards, etc.

Here’s how you can use transparency to build trust among your customers.

• Introduce concise program rules – make sure to be clear about the rules and terms of your program. The clearer you are, the fewer misunderstandings and dissatisfaction you will have to deal with. It’s important that your customers understand what they are getting themselves into, and concise program rules will help you achieve that.
• Honest communication – be open and vocal about any program changes that you make. Make your communication clear and transparent, as that builds trust. Even if you have to make your program more expensive, be honest with your customers. Honesty is not overrated, it is appreciated.
• Data usage transparency – your program should clearly state what data is required to be a part of it. Additionally, you should be transparent about how you collect and use your customer data, as it demonstrates respect for their privacy and builds trust.

Examples of Successful WooCommerce Loyalty Programs

We’ve picked a few of our favorite examples of inspiring success stories that should give you guidance on how to create effective programs.

Harry’s – Tangibility

If you haven’t heard about the legendary success behind Harry’s loyalty program, then you’re in for a treat. Harry’s sells high-quality grooming products at reasonable prices, without quality compromise. But the thing that helped their program blow up is tangibility.

Harry’s would ship their products to any customer who redeemed their reward. This meant that customers would get a product they could hold, use, and experience, which enhanced the perceived value of the program. It was a win-win.

Tesla – Exclusivity

When we say exclusivity, we are not talking about earning rewards through the program. We are talking about experiencing the exclusivity of Tesla, which is directly attached to owning a Tesla vehicle. This unique model of exclusivity amplifies the desirability of their program.

Tesla wants their customers to be a part of an exclusive club. A club where being a member outweighs the rewards customers receive. Tesla’s exclusive rewards range from discounts to experiences such as attending a Tesla product launch – this not only makes their rewards tangible, but highly unique, as well.

Harry’s and Tesla may be our favorite examples, but we share more success stories in our article titled 10 Examples of Great Refer a Friend Programs.

Conclusion

Program success is not always about giving expensive rewards. Sometimes program success lies in the tangibility and unique aspects of the rewards.

By considering the science behind loyalty programs and integrating it into your program, you can enhance the effectiveness of your loyalty initiatives, boost customer engagement, and cultivate long-term success in the competitive world of e-commerce.