It's so obvious it sounds silly to even say it: money can be traded for goods and services.
Why state the obvious? Because despite money is just a tool, we often develop an emotional attachment towards it which prevents us from spending them or leads us to regret it when we do.
This is rather normal if we consider all the work it took to gain that amount of money and this feeling can be an obstacle for our store, bringing customers to ask themselves “did I do the right thing?” after purchasing something from you.
“That's their own problem” you might think, but that feeling can damage our relationship with customers and undermine the chance of any future purchases.
Sure, there are several ways to create a good relationship with consumers, such as an effective live chat, but only one of these will solve that question: a loyalty program.
It's a simple psychological consequence: thanks to a shopping points system, each purchase brings customers closer to their objective of receiving a discount or reward.
This prevents our relationship with customers from breaking right after the first transaction making them feel like their money was well invested since they are going to get rewarded in the future.
Loyalty programs are so strong they became a common practice both in physical and online stores.
What are the actual benefits of this system?
- It increases the conversion rate on your store, bringing customers to buy more from your store, it was shown that a good loyalty program can make customers willing to pay up to a yearly 27% more and might increase your overall income up to 40%.
- It's a powerful marketing tool which attracts new customers and keep old ones loyal.
- It uses the fixed action pattern known as “Gift-Obligation”
I mentioned fixed action patterns in one of my previous articles in order to explain another marketing strategies: timed deals and offers.
Fixed action patterns are subconscious mechanics based on our social and cultural experience which lead us to a certain specific behaviour and that can be exploited while advertising a product.
In this specific case we are going to exploit a mechanic that makes us feel like we need to reciprocate a gift, so that in case of a reward, customers are going to feel in debt with us and will reciprocate with more purchases and promoting our activity.
Let's analyze two very similar cases that only differ in one element: a shopping points system.
- Amber buys a pair of trousers for 40£. Now, whether she comes back to that store in the future or not depends on how satisfied she is with that product, personal needs and budget.
- Amber buys a pair of trousers for 40£ AND gains 4 loyalty points. Despite the same variables are in play, a new one joins them. Amber feels it like would be a waste not to use those loyalty point, like she could miss out on something.
It's just a detail but, as you can see, adding loyalty points keeps customers coming back to your store. If you offer discounts or interesting rewards then, the effectiveness of this system is greatly enhanced
This system can be used to promote any kind of product, and it is particularly effective for clothing stores, so much so that big names in this field commonly use it.
Namely, Gilt based their shopping points system on sales and store visits, Jeweliq invested on the visual effect and rewards, and so on...
If you want to try out this system for your own store, here are a couple more tips to increase its effectiveness:
- Keep it simple: Let your system be easy to understand and join into!
- Offer true rewards: Offer some worthy rewards, there is nothing worse than working your way to a reward that proves to be ultimately disappointing.
- Mystery: It could prove useful to offer a mystery reward among other visible ones, making customers curious and making it an incentive for them to collect loyalty points.
So this is how and why this marketing strategy works. If you wanna try its effectiveness out yourself I recommend you use the Points and Rewards plugin which allows you to implement a collectable points system to your WooCommerce store and create your own loyalty program.