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How Loyalty Programs Boost Your Conversion Rates

Conversion rate optimization is the concept of boosting the ratio of web users who perform the desired task on your website. Fundamentally, it’s a matter of looking at your existing user base and strategically encouraging specific forms of engagement.

This could be anything from how often a customer shops at your store to how they engage with your social media channels.

Many people will tell you to improve your customer flows or to make your shopping cart more visible, but I’m here to tell you there’s a better way. Loyalty programs and conversion rate optimization go hand-in-hand: they boost engagement, increase retention, and encourage brand advocacy. A single loyalty program perk can be powerful enough to pull your customers all the way through the customer journey.

Conversions come in all shapes and sizes, but the easiest way to think about them is to divide them by micro and macro conversions:

Micro conversions: Customer activities that have no direct impact on the bottom line, but play an important role in progressing the customer journey. This could include blog engagement, social shares, reviews, and newsletter subscriptions.

Macro conversion: Customer activities with direct impact on the bottom line. These types of conversions include product sales, quote request, and service subscriptions.

Rather than painstakingly optimizing micro and macro conversions on an individual basis, you can apply loyalty program methodologies to various conversions across the customer journey.  Let’s take a look at what that looks like.

Leveraging Loyalty Programs to Drive Micro Conversions

Micro conversions won’t pay the bills, but they’ll pave the path. A micro conversion is a measurable customer activity that ultimately leads to a macro (or revenue-generating) conversion. Browsing for merchandise, creating an account, and social sharing are a couple examples of micro-conversions, and there is numerous way you can leverage loyalty programs to both accelerate and increase their frequency.

Loyalty Programs Encourage Users to Go Beyond the Homepage

Offering a loyalty program represents a commitment to a positive customer experience and long-term relationships. It tells your customers: “Hey, we’re not just in it for ourselves. We care about your business and we care about our relationship with each of our customers.” It projects a sense of sincerity and credibility which encourages shoppers to further engage with your store.

You can help peak your customer’s interest by making your rewards program a unique extension of your brand.  Even if your competitors have loyalty programs of their own, they aren’t your loyalty program. At the end of the day, a loyalty program should be creative, so take this chance to prove to customers why your brand will deliver an experience unlike any other in the space.  

Your program’s presentation also plays a role in this micro conversion process.  Loyalty programs in the form of invasive pop-ups or interstitials are a sure way to drive customers away from the homepage. An annoying pop-up is an unneeded stress on the customer experience, and worse yet blocks access to the navigation bar.

Instead, give customers a chance to breathe, assess their fit with the brand, and decide on their next move. Try something simple like a “Reward Points” widget in the corner, or a call-to-action in the feature image. These should be enough to inform the visitor of your unique value proposition without negatively impacting the customer experience.

Loyalty Programs Encourage More Account Signups with Strong Rewards

Loyalty programs present the unique opportunity to encourage account creations well before checkout. Since users need to create an account in order to collect and manage rewards, this conversion will rely on the program’s delivery, attitude, and value proposition.

Welcome points are a great way to spark curiosity in new customers and increase the chances of that customer actually creating an account. With a powerful enough call-to-action, welcome points can be the catalyst that pulls a customer all the way through the customer journey.

Similarly, offering a loyalty program with a number of diverse rewards can motivate customers to create an account in order to take advantage of these desirable perks.  Knowing that they have the chance to earn significant discounts and invites to exclusive events will motivate customers to make more purchases, keeping your brand (and program) top of mind.  

When it comes to micro conversions, it’s important to remember that they don’t  only occur leading up to the first purchase. These conversions are constantly happening as a user interacts with your site.

So what happens after they’ve interacted with your site?  Let’s dive into one of the most valuable post-purchase conversions.

Loyalty Programs Reward Customers for Writing Reviews

Reviews are paramount to the success of your business for many of reasons, but one of the greatest is that reviews boost conversion rates. This is due to a number of factors.  For one thing, they facilitate the buying process by helping new customers to understand your product line. Secondly, the presence of reviews projects a sense of credibility that will decrease bounce rates and ultimately increase conversions.

Finally, with more feedback, you’ll be able to tailor your product offerings to what your audience truly desires.  In fact, a survey by BrightLocal found that 40% percent of buyers formed an opinion of a business after reading 1 – 3 reviews. But how can you convince a user to leave a review?

Thankfully, loyalty programs are intentionally built to incentivize this type of behavior. In fact, at Smile.io we actually built an integration with YOTPO that allows business owners to reward customers for leaving reviews.  Retailers can encourage customers to leave reviews by offering a bonus points reward. It’s a win-win for both you and the customer: potential consumers will be more likely to purchase the product because of the positive reviews while existing customers will have more points to spend.

Ultimately, the value of reviews lies in their ability to convert users into first-time buyers.

Leveraging Loyalty to Drive Macro Conversions

Now that we’ve looked at what loyalty can do for micro conversions, let’s look at the other end of the scale.  

Macro conversions are the end goal of any online retailer. They are defined as any key customer activity that has a direct impact on the bottom line. While micro conversions play a significant role in reaching macro conversions, a retailer must remember to keep their eyes on the prize and to not get caught up in optimizing for the wrong metrics. At the end of the day, building a strong and loyal customer base is the key to long-term growth and business success.

Loyalty Programs Can Convert More First-Time Customers

Reducing shopping cart abandonment is the key to increasing first-time purchase conversion.

One of the most common reasons for shopping cart abandonment is surprise fees at checkout.   This could be either a high shipping cost or excessive handling fees. In order to mitigate this issue, vendors can leverage a loyalty program to offer redeemable free shipping offers, or offer points redemption at checkout.

With point redemption at checkout, customers will be delighted by surprise savings at checkout instead of being scared away by high shipping fees. Similarly, a frictionless checkout process is invaluable for first-time buyers. This could include a guest checkout option or simply an easier registration process.

Your rewards program can also help turn these new account creations into a lasting marketing opportunity.  With effective customer segmentation and email marketing, you can begin to send them marketing material that keeps them engaged and interested in your brand. That’s why email marketing platforms like MailChimp are such essential tools for online retailers. You can use these platforms to intelligently segment your audience to ensure potential customers remain in the pipeline while existing customers are continuously engaged.

Loyalty Programs Convert First-Time Customers to Repeat Customers

It may seem obvious that a returning customer is more likely to convert than a first-time buyer, but did you know that their likelihood to convert increases every time they make a purchase?

After one purchase, there’s a 27% chance a customer will return to your store. After a second purchase, that conversion jumps to 45%. As a result, repeat customers are more profitable because they are more likely to convert and they will likely spend more per order.

Running the right type of rewards program for your brand will dramatically increase your program’s conversion power. The right loyalty program for you depends on many factors, including industry, business stage, and customer profile. However, while most people think of points when it comes to loyalty programs, points aren’t always the answer. If you have repeat customers with a high customer lifetime value, your best bet is to introduce a tiered VIP program. These programs offer incremental value and rewards as customers increase their loyalty.

Since high CLV customers are expected to spend large amounts of money over a long period of time, the best way to keep them coming back is by offering them a sense of exclusivity they can’t find anywhere else.  Programs like Gap’s Gap VISA credit rewards are great examples of this in action, using their exclusive top tier to set challenging but attainable goals that align with brand messaging and bring first-time shoppers back time after time.

Loyalty Programs Convert Customers to Brand Advocates

Brand advocates go beyond simply making repeat purchases — they become an extension of your marketing team!  They aren’t afraid to personally promote your brand on social media, or recommend your products to friends and family. However, encouraging brand advocacy and measuring conversion can be hard without the right tools. Thankfully, referral and VIP programs are more than up to the challenge.

Referral programs are one of the best forms of loyalty programs for brand advocacy because they allow you to both encourage brand advocacy behavior and identify key brand advocates in your network. Just look at UBER’s highly effective referral program! Uber managed to grow exponentially by enabling its users to earn rewards for inviting friends to the platform.

You can build advocacy with other types of programs, too!  Using a VIP loyalty program with deep personalization is a great way to convert more loyal customers. You can incorporate personalization into your loyalty program by determining your most devoted customers through segmentation, and then reach out to them personally. Whether it’s a tailored email or a surprise gift, customers appreciate brands that go the extra mile to make the shopping experience special.

At the end of the day, it’s about creating an experience, unlike any other — an experience that customers can’t help but brag about on social channels and to their friends.

Loyalty: A Perpetual Conversion Machine

Now that you’ve reached the end of this article, I hope you have a better understanding of how powerful loyalty programs are.  Not only do they allow you to personally connect with your audience, but they also give you the chance to surprise and delight your customers every single day. The success of any business begins, grows, and ends with its customers — make sure you show them some loyalty!

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