Many brands invest heavily in their overall customer experience to help their customers achieve this feeling. Why? Because customer satisfaction is the predecessor to customer engagement...

How to drive customer engagement for eCommerce with a loyalty program

Satisfaction. That feeling of ease, pleasure, and joy that we, as humans, pursue in all of our experiences in life. A desire so well fulfilled, that we want it to last and we want to feel it over and over again. We look to repeat it, to magnify it, and to share it with our entourage. 

Many brands invest heavily in their overall customer experience to help their customers achieve this feeling. Why? Because customer satisfaction is the predecessor to customer engagement. The impact of customer satisfaction and engagement on value creation and customer loyalty is more actively recognized by many experts.

Today, more and more companies strive to foster positive relationships with their customers to unlock their satisfaction and loyalty. But, satisfaction alone isn't enough to secure loyalty. Customer relationship management has shifted its focus on engagement, trust, and dedication. In these new times, the key to effective customer management lies in satisfaction and emotional connections. One study showed that fully engaged customers bring 37 percent more annual revenue to their primary bank than actively disengaged customers.

In the customer-centric and highly-competitive eCommerce space, customer engagement is a critical success factor, and interaction of a brand and a customer is becoming a key element in the process of value creation for both parties. Customers that are actively engaged with the business are more likely to stay longer, spend more, and recommend you to others. Engagement is also one of the most important components that can help eCommerce businesses capitalize on customer loyalty.

Companies of all sizes have been launching several programs to drive better engagement, and one great way to increase customer engagement is through customer loyalty programs. Loyalty programs are all about making your customers feel appreciated by rewarding positive behavior. On the business end of it, loyalty means staying engaged with your brand, building stronger customer relationships, and investing in customer retention to ensure that you're maximizing revenue and Customer Lifetime Value (CLV). 

With that being said, let's explore how a good and well-designed loyalty program can boost customer engagement.

Customer engagement is the psychological process of customer involvement generated through interactions with a brand. It describes how customers are to a particular business and their willingness to spend more money, remain loyal, and promote products or a brand. Customer engagement also includes customer behaviors that go beyond the purchase with non-transactional behaviors such as referrals, WOM, and social media discussions. In other words, marketing campaigns create awareness for a brand and its products/services, which triggers purchases from potential clients. Customers can have either a good or bad experience during the purchase process, resulting in some degree of satisfaction and feelings about the brand. A positive customer experience will more likely make them want to return and purchase again, and if the attitude is positive, they should exhibit non-transactional behaviors.

Customer engagement is the antecedent to customer retention and customer loyalty. The term engagement can be used to define customer behaviors, but also the customer's thoughts and emotions. Engagement implies a more relatable level of connection and, as a result, plays an important part in determining consumer outcomes such as loyalty-related effects. Indeed, customer engagement is a better indicator of loyalty-related effects -beyond purchase-, because it is more adept at capturing the depth of consumer interactions formed with what they consume, rather than just quality or satisfaction alone. 

In an eCommerce business, customer engagement is a combination of multiple elements such as activity on the customer's part, customer attitude towards the brand, and customer experience.

Customer loyalty comes as a result of customer engagement.

Customer engagement is a construct combining cognitive, emotional, and behavioral components. Although, the attitudinal antecedents are better signals to predict engagement and understand the reasons why the behavior occurs. Customers' engagement components are distributed through pre-purchase (branding), purchase (conversion), and post-purchase experiences.  As a result, emotionally engaged customers are more likely to have a more favorable opinion of a product or brand, which boosts the psychological process and raises the likelihood of a positive response. Moreover, engaged customers have a stronger preference for premium goods and a reduced price sensitivity, demonstrating to be more profitable than non-engaged customers.

Engagement rates and levels may indeed differ between industries and even between consumers, such as low switching cost and fast-moving consumer goods businesses that experience more difficulty establishing meaningful interactions with their customers. These interactions could manifest as purchases, referrals, online communities, customers’ feedback on social media, and ideas about how the brand could improve. However, a well-designed customer loyalty program could help you segment and reward different levels of engagement at different stages, depending on your industry. 

How can increased customer engagement impact customer loyalty?

As mentioned before, one consequence of high engagement levels is customer loyalty. There's a direct correlation between higher levels of engagement and attitudinal loyalty. Attitudinal loyalty is a better indicator to predict future behavior, and in return, attitudinal loyalty directly impacts behavioral loyalty (conversion).

Attitudinal loyalty is an indication of a consumer's psychological predisposition towards a brand. As a result, this positive attitude encourages customers to repeat their purchases and influences future behaviors, known as behavioral loyalty. A variety of researchers demonstrated a link between customer satisfaction, engagement, and loyalty intentions. In a nutshell, one must look at engagement to create loyalty. The latter stems from some feeling of satisfaction and positive emotions generated through customer experiences and interactions with the brand. This process produces loyalty-related outcomes such as repeat purchase, WOM, and willingness to participate and co-create. 

Furthermore, some emotional connections (based on the connections created with customers) occur as a result of relevant interactions between the company and customers. As a result, the brand-customer connection will be more sustainable if these interactions are not reduced to a bare minimum and designed with the customer in mind.

Indeed, customer engagement can boost customer loyalty. But, what about eCommerce?

The value of cultivating engagement and loyalty in eCommerce

As a growing eCommerce brand, there's mounting pressure to put more emphasis on acquisition than retention, and you're not alone. Markinblog found that 44% of companies have a greater focus on acquisition vs. only 16% that focus on retention. The acquisition is indeed an important component of short-term growth. But customer loyalty and customer retention are the foundation on which long-term success is built.  

Loyal & Returning Customers Spend 67% More Than New Customers

The value of customer engagement in eCommerce is undeniable. An engaged customer is much more profitable for a business than other customers. Engagement is what drives customer loyalty and retention. As customer engagement increases, his loyalty also rises. As discussed previously, an engaged customer not only buys from you but will also share, promote and become an active value co-creator for the brand. As such, highly engaged customers should be regarded as "assets" and value co-creators, which is competitive and valuable for eCommerce brands.

As the competition keeps on rising rapidly as more and more businesses and legacy brands embrace the online world, reshaping shopping experiences for millions of consumers around the world, small and growing eCommerce brands find themselves competing with legacy companies that can afford to spend millions in marketing and R&D. Often limited in budget, online stores must continually strive for ways to not only survive, but thrive and fend off competitors. As a result, an eCommerce company that has truly comprehended the quality and value it provides to customers has an enormous advantage at building solid customer engagement.

In truth, The probability of selling something to a prospect is only about 5-20%, while the probability of selling something to an existing customer is 60-70%. In other words, engaging customers consists of robust and long-term psychological connections, allowing them to share experiences and influencing their future purchase behavior and their buying decision process. 

There are a variety of effective strategies for encouraging customer engagement, including investing in good experiences and improved quality of goods or services, (user-friendly website design, shipping/reliability, customer support, security/privacy, etc..). Customers who perceive that they have gained value will develop positive emotions which in return increases their desire to buy additional items.

Thus, it's critical to use memorable, helpful, and engaging experiences to increase the rate of interactions and engagement. For that matter, considering an online loyalty program tailored to your customers' involvement levels is an opportunity to reinforce attitudinal loyalty and reward engagement.

A loyalty program can increase customers' enthusiasm while interacting with your eCommerce, providing an engaging experience that will help you earn a repeat customer.

Maximize customer engagement with a loyalty program

In a quest to engage customers in more long-lasting relationships, brands employ a variety of retention tactics. Given the high cost of acquiring customers and trends toward analytics-driven marketing, approximately 60% of companies rank customer engagement as their top priority. Engagement is also linked to greater marketing performance, a good indicator for customer loyalty, and is almost certainly a plus for profits.  

Customer engagement can be improved with a customer loyalty program. This is done by giving your customers tangible or intangible rewards for certain desirable and profitable behavior such as purchases or referrals, designed to engage customers in long-lasting relationships. Modern loyalty programs incorporate more social aspects such as recognition, special treatment, personalized communications and newsletter and offers, personal invites to special events, personalized price coupons, etc. encouraging customers to adapt their purchase behavior to gain more value by interacting with your brand.

To understand the many aspects of customer engagement realized through loyalty programs, we've got to consider the multi-dimensional nature of customer engagement, which is made up of a variety of activities that range in level depending on the effort they demand from the customer. As a result, not all dimensions are equally likely to occur. In other words, some loyalty programs' engagement behaviors are easier and more likely to happen than others.

Customer engagement in recent loyalty programs is characterized by behaviors that go beyond the purchase. It's the combination of active customer actions toward the brand, such as point collection/redemption, but also other behaviors such as willingness to interact and read emails & notifications, share rate, and NPS. In other words, the engagement level for point redemption is "easier" to obtain compared to recommending and sharing with friends. Consequently, an online loyalty program that could help you achieve this is designed to facilitate and reward these behaviors. 

With that being said, let's dive into how you can maximize engagement with a loyalty program :

Gamified loyalty programs' to boost engagement

As humans, we are driven by an inborn desire to excel at something, and more significantly, to be recognized for our effort and dedication. In a previous article, we discussed some of the behavioral science principles that make rewards and recognition powerful tools, such as the "goal-gradient hypothesis" where when presented with an opportunity to earn a reward, customers frequently modify their purchasing behavior to gain access to these benefits.

To take it to another level, let's look at games. Games are centered around 6 main components: incentive, challenge, achievement/reward, feedback, and mastery. Moreover, games may trigger the release of dopamine, a chemical that reinforces that behavior. Games are an incredibly immersive, compelling experience that enthralls you in a fun way. That's the reason why Gamification strategies have become popular where the use of game mechanisms in marketing is a driver for more engagement and loyalty initiatives.

A gamified loyalty program creates an extra layer to customer engagement, that is driven by the desire to earn and burn rewards and badges that are only available the more you buy, recommend, and interact with a brand. It is a process of taking the "best-off" games and using them in your loyalty program where customers receive rewards for their participation in your game.

Gamification is the process of using game thinking and game mechanics to engage audiences and solve problems. Put another way, it’s about taking the best ideas from games, loyalty programs, and behavioral economics and using them in new, exciting ways

A quick example of how gamification is used to drive customer engagement can be found on Starbucks' loyalty program. The customer earns stars for every purchase, and there are different levels of rewards you can achieve. For example, from April 12th to May 11th, Starbucks will be giving 50% more stars to customers who reach Gold level, and on Mother's Day (May 13), they can earn double stars by purchasing with their registered card.

To take customer engagement to the next level, reward customers for their time and effort by rewarding actions beyond the transaction.

Reward customer engagement beyond the purchase :

Just like people, engagement levels are not created equal. Thus, some actions require more effort from the customer than others, such as sharing your program on his or her social media account, interacting with loyalty programs' news and emails, or even actively looking for information about your loyalty program. Think of these actions as hierarchical, some are more complex than others, but those who are willing to complete the more effort demanding behaviors, are more likely to continue with the less "complex" actions such as point redemption. 

For example, rewarding first-time visitors for simply sharing your loyalty programs' link on Facebook is probably not the best hierarchical approach to building long-term engagement. In fact, many consumers have found a way around this by deleting and resharing the content to collect points. The chances are, they're going to share it but delete it a few seconds later because they're not doing it for the right reasons. That isn't to say that it's of no use, but allow them a taste of your loyalty program's benefits before asking them to do more.

Rewarding customer behavior beyond purchase can go a long way for your brand. Recognizing your customers by different levels of engagement will make customers feel valued and appreciated for the extra effort. Furthermore, loyalty programs should encourage customers to engage in more demanding actions. For example, by creating incentives and rewards to encourage consumers to adapt their purchasing habits, or by producing relevant content regarding your loyalty program that would entice customers to look for and share it.

It will also give you a definitive customer profile and allow your marketing team to develop customer-specific campaigns that resonate with their needs by viewing engagement with LPs as multi-dimensional.

Customers who demonstrate loyalty to a brand and share their experiences online should be acknowledged. Reward them by incentivizing users and customers based on the value they provide for your eCommerce business such as mentions of your product or service in social media posts, reviews, comments, etc. This will motivate other potential clients to purchase and help your eCommerce business to grow.

Transform cold customer data into warm customer-brand relationship

According to a study by HBR, 41 % of executives say an understanding of customer needs and wants via customer data and feedback has been important to their organization’s customer experience strategy during the pandemic. Customer data is a powerful tool to allow personalization that drives engagement. However, for most, the experience ends as soon as a customer logs out of the website or closes his/her mobile app. Unless you have customer data that allows you to connect with the customer on their preferred channel at the right time, you're not engaging with them. For customer-driven eCommerce brands, customer data should be the foundation for personalization and serve as a valuable asset to turn customer data into customer relationships.

Customer relationship management (CRM), customer loyalty, and email marketing are usually the first tools that come to mind when customer engagement is mentioned. However, customer data can be transformed into valuable customer relationships by using other marketing channels like Social media and online forums.

Customers are willing to provide you with information about themselves when asked to do so in a customer-centric way and when the benefit to them is clear. By rewarding sign-ups for example, you'll have the ability to market to them later in a meaningful way, rather than letting a potential customer go without leaving a trace.

Reach out to your clients and provide them with relevant content 

According to Segment, 49 % of shoppers made impulse buys after receiving a personalized recommendation. Many loyalty programs fail because they adopt a One-size fits all approach or they're not being marketed the right way to the right customers. Connecting with your customers through a well-defined customer profile will allow you to customize your engagement strategy by using the information on customer behavior and preferences.  Loyalty programs should encourage customers to adapt their purchasing habits by providing customer-specific offers or relevant content. Using the power of data, creating audiences, segments and cohorts will also help you identify customer personas and tailor offers to them so that your offerings do not fall on deaf ears.

In addition, using automation based on time or behavior is crucial for scalability. You can automate your engagement strategy by sending relevant messages at the right time to qualified customers and potential buyers that are most likely to be interested in what you have to offer, all while ensuring a quality experience for both parties.

Also, don't forget to promote your loyalty program at every touchpoint. Make sure to educate employees and incorporate the loyalty program into all touch-points from webinars and support chats to payment. Make it clear to customers why they should join your loyalty program and how this will benefit them.

Customers are more likely to sign up if you explain what benefits their membership comes with, whether that's exclusive offers or access to new products first. Make sure you clearly show the value of joining your loyalty program.

Leverage membership tiers in your loyalty program 

Membership tiers are a great way to offer differentiated levels of engagement that provide different benefits and rewards for customers. The more a customer engages with your brand, the greater access they'll have to exclusive offers as well as tailored content. Segmenting your loyalty programs based on membership tiers so each tier has its own dedicated experience and incentives for members can help you increase engagement with your brand.

For example, a customer who is part of the Silver tier may have access to special events and offers on new products while Platinum members will be given more personalized experiences like invitation-only previews or advance notice on sales. Consider creating exclusive groups for customers so they can easily join together if their interests are similar.

If you want to learn more about the benefits of tiered-loyalty programs, check out our previous article here

Give your customers meaningful rewards to entice them to come back.

Percentage off discounts, cashback, exclusive offers, early access to new products, events where they can meet the people behind your brand are all great ways to engage with customers. But don't forget that loyalty programs should be tailored for each customer depending on their buying habits and preferences.

For example, if you know a customer has bought several items from your shop every month, offering them free shipping once they've reached a certain spending threshold makes sense. If this same customer also visits your online store often, offering them first dibs on new arrivals before anyone else, can incentivize their return to the shop and increase engagement with your brand.

Offering meaningful rewards like these will ensure that you're not just rewarding customers for shopping at your store but also for engaging with your brand.

Adding membership tiers and levels to your online loyalty program can be a great opportunity to close the gap between brand loyalty and eCommerce conversion rate. In this article, we will discover how to increase engagement...

Adding membership tiers and levels to your loyalty program can be a great opportunity to close the gap between brand loyalty and eCommerce conversion rate.

How to boost engagement in your loyalty program with membership tiers

Customer loyalty programs have begun to appear in a wide range of sectors in an attempt to develop customer relationships based on rewarding return customers. The advantages for a business to retain consumers are well known, and they include the lower costs of customer acquisition, long-standing customers who are more likely to be less price-sensitive which creates opportunities for receiving higher margins, and customers who buy a lot of products and services are more inclined to respond to marketing messages and other targeted offers.

At its most basic form, loyalty programs reward customers for each dollar spent and/or frequency of purchase. Until recently, most frequent flyer programs rewarded customers based on the distance traveled and not on the revenue generated by the customer. As a result, a customer x could get a cheap ticket at a fraction of the price from an affiliated website, at the same value as a customer y who would have paid the full ticket price. This inconsistency had a significant influence on the financial performances of airlines like Delta and American Airlines that almost turned their loyalty program into a failure. But to design, build & sustain profitable customer loyalty, airlines were pushed to revisit their frequent flyer programs' structure to align their loyalty programs based on profitability rather than distance. This trend was also seen in other industries where marketers are focusing their loyalty programs on customer spending (e.g. credit card companies, grocery stores, and departmental stores, etc).

How Consumers View Loyalty Program Tiers (Graphic: Business Wire)

To take it to another level, a tiered loyalty program can be used to reward customers based on membership level or spending threshold and give more to customers who go the extra mile for your brand, AKA your high-value customers.

Membership tiers could also provide you with an opportunity for a gamification approach for your loyalty program. You could offer membership tiers to your customers, and provide them with a status that is rewarding in itself. It gives the customer great value as membership can provide them with access to exclusive offers, events, and membership benefits. Not only that but it boosts customer loyalty by rewarding customers for staying loyal over time, while also increasing customer lifetime value.

In this article, we will explore the benefits of membership tiers and what they could mean for you as an eCommerce store. We'll also talk about how they influence consumer behavior and how that affects customer engagement and revenue based on some behavioral science findings. 

What is a multi-tiered loyalty program? 

In a world where brands' focus shifted from simple transactions to building long-term relationships with their customers, loyalty programs came to play an important role to reward and reinforce longer-lasting customer engagement. Tiered membership loyalty programs for eCommerce stores are no different from the loyalty program membership models of offline businesses.

A membership tier is a hierarchy of customers with different membership privileges. It can also be defined as membership levels or membership ranks. Tiered loyalty programs offer the opportunity to reward key customers while providing a streamlined user experience for more casual customers. It is a membership program where members gain access to exclusive loyalty rewards and items if they reach a higher membership level.

In addition, a multi-tiered loyalty program recognizes that customers have different needs, purchase behaviors and provides different levels of engagement with the brand.

In a multi-tiered loyalty program, customers at higher levels get more benefits and rewards. For example, an airline may offer the basic membership tier of "Silver", which would include all the benefits of membership including discounts on flights. The "Gold" membership tier would include these benefits plus more perks like priority boarding and free checked baggage. On the other hand, a "Platinum" membership tier may include all benefits, with complementary upgrades to first-class on select international flights.

Truly loyal customers are customers who feel so strongly that you can best meet his or her relevant needs, that your brands' competition is virtually excluded from the consideration set; these customers buy almost exclusively from you 

StoweShoemaker & Robert C Lewis — Science Direct

Why do membership tiers boost customer engagement?

As mentioned before, many brands adopt membership tiers for loyalty programs to enhance customer engagement and increase revenue from top buyers. We could see membership tiered loyalty program in the airlines' industry, where frequent flyers are offered different membership privileges, but also in B2B brands such as Bayers, who introduced membership tiers from which customers in different levels receive bonus points ranging from 10 to 50% at the end of the year, with Gold and Platinum access to VIP areas at events and agricultural trade fairs. 

Tiered loyalty programs create a sense of fairness and equality, since membership levels are usually achievable through the purchase of certain items or completion of specific actions.

Multi-tier loyalty programs are designed to offer rewards that are worth more in higher tiers. The "goal-gradient hypothesis" -originally proposed by the behaviorist Clark Hull in 1932- states that when presented with an opportunity to earn a reward, customers frequently modify their purchasing behavior to gain access to these benefits, and the closer they are to receiving that prize, the stronger motivational urge becomes. For example, one research found that customers of a café (e.g., "buy ten coffees and get one free") purchase coffee more frequently the closer they get to the reward. Loyalty programs naturally follow the "operant conditioning" proposed by B.F. Skinner, or reinforcement theory, in which he states that the rewarded behavior is more likely to be repeated in the future with positive reinforcements.

Rewards are intended to elicit feelings of joy, enthusiasm, and thankfulness. Multi-tiered membership loyalty programs offer a feeling of accomplishment to customers, where top-tiered customers perceive the rewards they receive as more "valuable" and "fair" than those received by lower membership tiers since they "worked harder" to attain them. On the other hand, those in second or first level membership tiers do not view negatively the benefits received by top membership tiers, even when made aware of the benefits. Customers in lower tiers will feel more prompted to attain membership levels or ranks that they find more appealing and valuable, such as premium tiers. 

Multi-tier Loyalty Programs to Stimulate Customer Engagement — Springer Link

Tiered loyalty programs create a sense of fairness and equality since membership levels are usually achievable through the purchase of certain items or the completion of specific actions. It can even create a sense of exclusivity in membership, where members feel privileged to have access to certain membership benefits. Additionally -based on the reciprocity principle- When a brand shows positive customer treatment, especially towards high earners, it elicits an ethical debt that may lead to future positive actions on the part of customers, and return it through gratitude-driven changes in purchase behavior. We see this often, where customers are more likely to reward good service with referrals, loyalty, and repeat profitable business.

Behavioral loyalty (e.g., purchasing behavior) is crucial to businesses to create profit, while attitudinal loyalty (e.g., your customers' attitude towards your brand) helps to build an invisible exit barrier for their customers, especially with businesses where switching costs are low, such as Food and Beverage stores and retailers. 

Multi-tiered loyalty programs are an effective strategy for increasing customer engagement over time, as it offers a clear value proposition to customers in terms of the benefits they receive. It also offers brands the opportunity to segment their target audience and focus on specific membership tiers that offer a better fit with their customers' shopping habits and spending threshold.

Brands should carefully balance between the benefits obtained from membership tiers and their costs when setting a membership fee.

Membership tiers and levels for growing eCommerce brands

As stated above, one of the benefits membership tiers can offer is increased customer engagement. For eCommerce stores, It provides rewards that are more appropriate for their customers, so they can better target them with membership options. For example, membership programs like "Hassle-free returns" or free shipping for VIP members only (i.e., top membership tiers) can be a great way to incentivize customers who are more likely to return purchase items. You can also create membership levels that are more suited for specific customer segments (e.g., students, senior citizens, or pregnant women).

In addition, your membership tiers should offer the perfect balance between value proposition and price. As such, membership fees or high-value rewards should be set following the value received by customers, and membership benefits should be accessible and appealing enough not to discourage customers from joining.

When setting membership tiers for your loyalty program, you need to carefully balance membership benefits with membership fees. To do that, you can carefully study your customer's shopping habits and purchase behavior in conjunction with the value they place on membership benefits.

You should also consider your eCommerce store size when designing membership tiers, as the cost of setting up a membership program may not be worth it for smaller stores. Membership tiers should also take into account the lifetime value of your customers and your programs' cost. The membership tiers you choose should be highly appealing to your target audience, but not prohibitively expensive. This will help ensure customer retention and membership growth over time.

Keep in mind that to encourage customers to join your program and climb up the ladder, you need to set small and achievable targets for your loyal customers, without altering or complicating the program.

Key benefits of multi-tiered loyalty programs for eCommerce stores :

Allows you to identify your best clients through segmentation 

Provides a unique experience to your top tiers

Provides more incentives to customers to buy.

Cater to your customer's unique needs and wants

Build a stronger connection with their clients 

Allow members to have a sense of accomplishment as they progress through membership levels.

In addition, membership tiers can also provide your eCommerce store with increased visibility and brand awareness, since it allows you to reach a wider audience.

For eCommerce stores, membership tiers are an effective way of increasing customer engagement and loyalty while providing customers with membership benefits that are more appropriate for their shopping habits.

As membership tiers offer a clear value proposition to customers, an eCommerce store can better target them

This increased visibility and advertising of your store can help you grow your membership base, and increase the value of your loyalty program exponentially.

How to design outstanding membership tiers and levels? 

Membership tiers and levels are not just about having something to offer your customers; it's also about providing the right customer experience to the right segment. Exclusive membership privileges show that you care about the customer: membership is a way of saying "you matter", which will make customers want to come back again and again and drive more revenue. If done right, membership can help you gain new customers by building trust with potential clients who might otherwise have been too nervous to buy from you in the past.

Here are some key recommendations to  keep in mind for membership tiers and levels design :

An overused statement in marketing is that a retained customer costs less than acquiring a new customer, which stems from the principle that through repeated interactions, brands get to know their customers better. As a result,  membership tiers and membership levels can be specifically designed to match the needs of your most loyal customers. This benefits both business sides by increasing revenues, but also customers as they will receive better treatment.

So before you start designing membership tiers, it is most important to understand your customer base. This is the foundation of membership tiers and levels design because it will allow you to choose membership levels that are right for your customers.

You can use user analytics (e.g. tracking customer data such as lifetime value, retention rate, and revenue generated, etc) to see which membership tier might work best with certain types of customers. Another way is through feedback and customer surveys. This is a great way to get in touch with your customer base and see what they think about membership levels, whether or not the membership levels you currently have -if any- meet their expectations, and what membership levels they would like to see. With the help of your Database and transaction data, these types of surveys allow you to capture your customer’s attitude and purchase behavior towards your brand so that it could help you determine your rewards' objectives.

Furthermore, to be successful and selective in developing attitudinal loyalty -which impacts purchase behavior- businesses must have a thorough understanding of their customers. Customer profile information, which includes psychographic and demographic data, is essential in predicting future customer profitability. Another approach is to figure out the future customer profitability is by applying the metric of customer lifetime value (CLV). For example, If a loyal client has a CLV of $ 100 and is at risk to churn, you may consider giving him a maximum incentive of $ 100 worth to retain him.

Clearly define your tier structure objectives 

The membership tiers and levels you choose should help you achieve your business goals. They need to be linked to specific marketing and business objectives, so they need to be measurable. The membership tiers should be clearly defined to match the objectives of your loyalty program and business type and goals as well as your customers' spending behaviors so that you know which membership tier will work best.

The membership tiers should also be designed to bring in more revenue, while at the same time not causing any harm or reducing revenues for lower membership tiers. When membership levels are not designed to be profitable for businesses, it is easy to become confused about the number of membership levels that should have, which membership level should come first, and what membership levels should be created.

For example, in a structure where you could choose to have 2 membership tiers reward strategy :

1 — The first tier, which we'll call silver, would be designed for the objective of offering a standard and explicit baseline to reward customers for their past and current purchase, regardless of their shopping patterns (e.g., high-margin, low margin products, etc..). This ensures accessibility to a wide range of customers, as well as new ones, serving as a way for instant gratification, and scaling your loyalty program by rewarding spending. Another objective is to capture customer data and purchase behavior in your store so that you can move to your second tier. For example, in an eCommerce store where most customers are first-time purchasers, a membership level that is designed to be rewarding on the first purchase might exist as the first tier.

2 — The second, which we'll call bronze, would have an objective of influencing current and future purchase behavior, given the past data of the customer. As such, this tier will reward fewer selected customers than tier 1. Here, you can have more control over who gets and what types of rewards and incentives are given to your customers (Medium CLV). Moreover, you'll have more control over how much these rewards should be worth.

3 — The third we'll call gold, would take the Bronze tier to another level, with a higher degree of control -centered around profitability- and higher-value and differentiated rewards, to cultivate a positive attitudinal loyalty and offer rewards that feel "fair" to your most profitable and loyal customers (High CLV). Armed with customer knowledge, the rewards would be tailored to these customers' needs, and provide exceptional value. This tier could help customers feel special and cared for, and reinforce the reciprocity norm mentioned earlier.

Membership tiers and levels must be designed with a clear objective in mind, both for the short term and long-term. To do so, you must first be able to define membership tier goals in line with your company's profitability.

Another approach is to figure out the future customer profitability is by applying the metric of customer lifetime value (CLV).

How many membership tiers should you have?

It depends on the type of membership program you are trying to design. For example, if your goal is to increase loyalty and retention rates among new customers, you might want to create an entry-level membership tier that encourages customers to make their first purchase as soon as possible. In this case, you may consider giving them instant gratification (Free sample with their first buy, a small complimentary product, xx amount of additional points in happy hour sales, etc..) to encourage future purchases, thus developing customer retention & loyalty.

On the other hand, when your membership program is defined by its ability to increase CLV through tiered membership levels, you may consider having three or more membership tiers -for example- by creating membership levels that are differentiated in terms of the value they offer to your customers (e.g., membership tier for repeat and high-margin purchasers, a membership tier for occasional purchasers and so on.)

Keep it simple (to create a clear value proposition)

Aiming to motivate customer behavior and increase their membership levels is a good idea if you want to make your loyalty program more engaging. However, it can be overwhelming for customers if they are receiving too many memberships offers at once. Your membership program must be simple, easy to understand, transparent -and at the same time- meet both short and long-term membership program objectives. Otherwise, you might end up with a tiered loyalty program that does not work for your eCommerce store or brand.

Be generous with your membership tiers and levels design

It might seem counterintuitive to offer membership levels with plenty of privileges and benefits, but if your goal is to build loyalty among customers who will spend money with you again and again, then membership levels are an opportunity to give them something in return.

Be fairly generous when designing membership tiers because it is a way to communicate that you are willing to give your best customers more in return for their loyalty through value rewards that make sense to them. Whether it's a free product, early access to sales, or discounts on future purchases; the goal is to give customers an incentive to keep coming back

To make membership levels truly enticing, they should set you apart from your competitors. So it's important to do your research on membership levels offered by competing brands. How are they different? What membership benefits are unique to them that you can offer as well? Customers want membership tiers that make them feel unique with benefits that aren't overlooked, and membership levels should be created with this in mind.

With that being said, the costs of running your loyalty program should not outweigh the program's benefits. If you don't connect your loyalty program to customer profitability, you'll lose money over time (e.g., CLV, Attitudinal and behavioral loyalty & profitability).

Customers are different, membership tiers should be too

This is the most common mistake that eCommerce stores make when designing membership tiers and levels. They aim to establish a standard membership level that can be utilized by all client types, but this is counterproductive to the notion of tiered loyalty.

The membership tiers should be designed in a way that matches the level of brand engagement between your customers and your business, which means you should look at loyalty programs as a tool to identify your most loyal & profitable customers (low, medium, and high CLV). For example, if you sell premium goods online, it might not make sense to send simple discounts to your customers who are already buying premium products and are not price sensitive. Instead, these customers might want to be a part of a quarterly private VIP sale with limited edition items or be the first ones to know about new products or brand launches.

Using membership tiers to identify your customers is the best way to ensure that loyalty programs are working for you, and membership levels are designed in a way that benefits your customers the most.  For example, customers shopping from an online grocery store may receive basic incentives in the form of discounts on particular goods and cashback for their everyday purchases. However, if the brand characterizes the client as a very loyal consumer with a high customer lifetime value, it may give out a premium reward such as early access to holiday sales, and exclusive membership rewards such as free express shipping or early access to limited items. 

Be creative, membership tiers can help differentiate your store from competitors

As membership levels are meant to reward your most loyal customers, they can be designed to include membership benefits that eCommerce stores find fun and interesting. If you are a brand that likes to engage with your customers and share the spirit of creativity, membership tiers could be a good way to show off this nature. For example, if you own an online store that sells art supplies, membership levels could be designed around famous artists and their work.

At the same time, membership tiers can help you go above and beyond what your competitors are offering. If you have membership tiers, they might be one of the most enticing loyalty programs in the industry. Your membership levels should be unique and tailored for your business

What membership benefits are available to the most loyal customers in your industry? How are membership levels different from your competitors? Do you have membership benefits that other brands don't offer? These are all questions eCommerce stores should ask when designing membership tiers and levels.

A membership program should be designed with the customers in mind, so it's important to understand what your customers want from membership benefits. This way, you'll ensure that your loyalty program will help drive more revenue for your business and improve customer satisfaction by rewarding them for their loyalty.

Ideally, you should aim for differentiated membership tiers from your competitors, offering benefits that customers find delightful and interesting.

Be flexible, membership tiers are an evolving process 

By principle, membership tiers offer a great deal of flexibility to any loyalty program. They can help brands achieve and influence customer purchase behavior and attitude towards a business, and give your online store the ability to proactively respond and invest in your best customers based on their "future" potential -as opposed to just past transactions-. 

As a result, membership levels or tiers need to be flexible if brands want membership tiers to grow with their eCommerce store. So, whenever you introduce a new loyalty program membership tier, membership level, or program -or increase membership benefits for existing tiers-, you have to carefully monitor how membership levels affect your eCommerce store revenue and membership conversion.

You can't be afraid to review and change membership tiers as you continue to grow and evolve your membership program. However, don't make changes too often as it can be confusing and frustrating for your membership base.

— Membership levels should be reviewed regularly to ensure they are beneficial for both eCommerce stores and customers

— Membership benefits have to be relevant to your eCommerce store and customer needs

— Membership tiers should be designed in a way that matches the level of brand engagement between you & customers.

Your research & data will determine the rewards you can offer in membership tiers

To design membership benefits that add value for eCommerce stores and customers, it's important to do some research and data analysis. If your membership tiers and levels are not optimized, this could affect the growth of your loyalty program and revenue from your customer profitability -as membership levels should be reviewed regularly to ensure they are beneficial for both eCommerce stores and customers- Any loyalty program that focuses mainly on consumer goals’ would have scalability issues due to serious erosion of the bottom-line over time due to the increased reward redemption, and vice-versa.

As mentioned before, your collected customer data and KPI analysis enable you to have a deeper understanding of your customers and will help you determine these rewards based on balanced customer/brands' goals. As a result, you may be able to meet your clients' latent aspirational desires that would otherwise go unfulfilled through standard cash-back or price discounts. As a result, your brand's attitudinal loyalty may be amplified to new levels. The customer will see shopping in your store as a way to fulfill needs that would otherwise go unexplored.

As such, membership benefits that you offer in membership levels/tiers for eCommerce stores should strive to influence the behavioral and attitudinal loyalty of your customers, such as :

Rewards can that impact behavioral loyalty : 

Rewards that impact behavioral loyalty can be as simple as membership gifts with purchase, discounts or free delivery/shipping, etc. Rewards should be relevant to your eCommerce store and customer needs. For example, if you know a segment of your customers like getting discounts on everything they buy, then a baseline membership tier that offers discounts will work best for these customers.

Rewards that can impact attitudinal loyalty :

Rewards that impact attitudinal loyalty can be membership-based exclusivity; travel deals, exclusive brand dinners & experiences, VIP-only sale days, VIP customer service, etc. These membership levels/tiers create a magnetic pull for customers to want to stay loyal to your eCommerce store. This creates a strong bond between you and your customer, which will ultimately lead your brand to create its tribe of highly engaged consumers who identify with the membership level/tier that they have been placed in.

Customer loyalty is a vital construct to build and nurture customer relationships with a brand and thus increase business and customer retention. The rewards associated with your loyalty program should evoke positive emotions of joy and excitement from your customers as a way to say "hey, we see you! thank you for doing business with us, and come back again!".

However, many brands are still thinking about loyalty programs as a one-off campaign or just another promotion to increase sales and engagement. The challenge is to create profitability and sustain customer loyalty over time.  To do this, membership tiers/levels could be designed in a way that matches the level of brand engagement between you and customers, and differentiate your store from competitors. Experiential and intangible rewards are becoming more popular, linked to special treatment or special experience as opposed to just simple discounts for everyone, regardless of purchase patterns and CLV. These rewards influence the higher-level goals and attitudes of the consumers. This is the reason why, when customers receive a surprise gift from you, they are more inclined to remain loyal. But, these rewards don't come cheap, as they should be weighed against customer profitability (with higher CLV). This ensures that the value created does not exceed the cost of what is offered.

Can non-tiered loyalty programs be profitable? — OlinBusinessSchool

Can non-tiered loyalty programs be profitable? | Business Research Series

Membership tiers could be a great opportunity to close the gap between brand loyalty and eCommerce conversion rate. In other words, maintain a balance between customer goals and your stores' goals. You can create membership tiers based on your data/KPI analysis to give a clear picture of the type of rewards to include as well as the objective of each tier to your business.  

Customer retention analytics is one of the most important ways businesses can measure and achieve sustainability. The key to optimizing your customer experience from start to finish begins with understanding how customers think and what drives them away.

Customer retention analytics is one of the most important ways businesses can measure and achieve sustainability. The key to optimizing your customer experience from start-to-finish begins with understanding how customers think and what drives them away.

What is customer retention analytics and how to measure it?

Relationship marketing becomes an essential strategic tool in an environment where customers' needs and preferences are changing rapidly. Since customers have considerably gotten more power in the digital era, it has disrupted and redefined customer experiences and brand management --- 86% of consumers will pay up to 25% more for a better customer experience. Now, organizations can anticipate these changes by managing their relationships more effectively through customer analytics. The fundamental purpose of customer retention efforts is to ensure maintaining relationships with value-adding customers by reducing churn rate.

Furthermore, a recent study by Ketchum analytics showed that 45% believe COVID-19 has already changed their brand preferences while 62% expect permanent shifts. Another study by McKinsey & Company puts this number at 75%. As covid-19 is and will continue to shift consumers' shopping habits and behaviors, brands need to focus on developing long-term profitable relationships to enhance the value that they deliver to their customers. Thus, understanding your customer retention analytics & metrics within the scope of your retention marketing strategy could help you identify opportunities to get your customers to come back, and find new ways to retain them.

Retention marketing tactics have several advantages for a business because engaged and recurring customers increase their spending at a faster rate, buy at a full margin rather than at discount prices, and create operational efficiencies. Moreover, acquiring new customers is more expensive than retaining existing customers, and customer retention efforts can reduce marketing expenses --- A 2% increase in customer retention has the same effect as decreasing costs by 10%. Besides, customers who are satisfied with your products or services are more likely to recommend your business to others and are less responsive to competitive offers and price appeals.

Customer retention analytics can be used for understanding - How loyal your customers are to the brand, which customers you should focus on to retain them, and what customer retention strategies should be implemented.

E-commerce KPIs (add-to-cart rate, conversion rate, revenue per session), by shopper loyalty segment. - Source

Customer retention is the process of keeping existing customers by ensuring that they remain satisfied with your products and services. 

Customer retention works by identifying the factors that drive satisfaction, engagement, or dissatisfaction among current consumers to maintain a strong relationship with them via tailored offers and efforts from marketing campaigns. The aim should be to prevent customers from switching to a competitor's product or service. 

To calculate your customer retention rate, you can use this simple equation : 

The number of customers who have been with you for a specific interval or period (e.g.,3 months, 6 months, 1 year). 

The number of customers at the end of that period

The number of new customers acquired during that interval. 

For each type of customer, compute the retention rate by dividing by the total number of customers at the beginning of that period. 

By adding up the retention rates of all customer types, you can calculate your overall customer retention rate.   

Customer Retention Rate = ((number of customers at the end of the period - number of customers acquired during the period) / number of customers at the beginning of the period) X 100 

The probability of selling to an existing customer is 60–70%; while the probability of selling to a new prospect is 5–20%

Customer retention analytics is the measurement of customer loyalty and activity to identify areas for improvement. It provides details on how customers behave, what they want, what is important to them, and how they make decisions. It also helps in understanding customer actions (or inaction) associated with the purchase of goods and services. Customer retention analytics focuses on the value of customer relationships over time, and how to identify which customers are at risk for leaving so that brands can develop strategies to retain them.

For example, when analyzing customer retention analytics data, an organization may find that only 20% of their customers regularly use loyalty programs, but this set tends to spend 30% percent more than other segments. Brands can develop strategies to increase usage across all customer segments. Another example is a customer who has an account on the website, purchased in the past but hasn't purchased in six months. These customers are at risk for leaving and can be targeted with marketing campaigns to bring them back into the sales funnel.

The analysis of key retention metrics gives brands the tools to better understand the changes in customer behavior and their buying patterns over time so that they can develop acquisition, retention, and cross-selling strategies. Customer retention analysis is not just about measuring customer loyalty or determining the quality of a relationship between an organization and its customers, but also about understanding why customers behave in certain ways. It helps businesses to identify trends that can help them predict future behavior from existing clients as well as new prospects --- what makes your brand stand out from competitors, and what unique value you can offer customers.

How often should you conduct a customer retention analysis?

It depends on what kind of business you're in. For example, a food and beverage brand might want to conduct customer retention analysis daily or weekly, while a financial services company might only need it once or twice per year. 

The analysis of key retention metrics gives brands the tools to better understand the changes in customer behavior and their buying patterns over time so that they can develop acquisition, retention, and cross-selling strategies.

How does customer retention analysis work?

To conduct this analysis, you'll first need to map out what you want to measure, track customer purchases, implement a metrics system and set up key performance indicators. The aim is to help you recognize what you've done wrong as well as what you're doing well. Knowing where and why consumers churn can assist you in determining where and why your marketing and retention plans are ineffective. 

The first step for any organization is figuring out what they want to measure. The goal of this exercise is to identify your key retention metrics. You can use ad-hoc analytics to see which ads are performing the best, where customers have a poor experience and what kind of customer interactions are causing the most repeat purchases.

Here are some questions that could help you map out what to measure :

- What percentage of new visitors turn into paying customers?

- After a certain period, how many customers buy again?

- What percentage of purchases are recurring purchases?

- What percentage of revenue is recurring purchases?

For example, if the goal of your analysis is to figure out your repeat customer rate, you need to know how many unique customers buy something the first time they come to your store. You also need to know how many unique customers buy something when they come back again within a certain time frame, which could range from a season, a month to a year depending on your business type.

Knowing how many customers come to your store is important, but it's not enough. You need to know what they buy and do in your store as well. The next step is to track your customers' shopping behaviors. You can do this using Google Analytics or another analytics tool that tracks customer actions such as add-to-carts, transactions, and registrations. You can also track this information using your CRM or customer relationship management system to get a better idea of customer behavior.

Referrals among repeat customers are 107% greater than non-customers

Implement a customer retention analytics report

After you have figured out what to measure and how to track customer purchases, you'll need to be able to extract, aggregate, and visualize your data. This is where you'll track customer behavior, define your key criteria and set up KPIs.

As part of your metrics system, you'll need to set up key performance indicators. KPIs are a way for you to track the progress of your business. The KPIs you choose should be relevant to what you're trying to achieve and help track how well or badly the situation is going. For example, if you want to increase customer retention by 20%, you should be able to track this change so that you know when you've reached your goal.

How to drive customer engagement for eCommerce with a loyalty program

How to boost engagement in your loyalty program with membership tiers

What is customer retention analytics and how to measure it?

12 tips to design a loyalty program for eCommerce that your customers will love

50 statistics about customer loyalty programs for eCommerce in 2022

Why your Loyalty Program is failing and how to fix it?