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 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.
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?
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.
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 :
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.
Starbucks rewards program
To take customer engagement to the next level, reward customers for their time and effort by rewarding actions beyond the transaction.
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.
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.
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.
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
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.
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Marketing Manager at Loyaly & eCommerce growth specialist. I believe that retention is the new acquisition, and online customer loyalty programs make it possible.
Using advanced segmentation and lifecycle management models, loyalty programs can play a significant part in the entire data value chain by allowing the gathering of member personal data, analyzing the data on loyalty platforms...
By understanding your customers’ needs and wants, you can create loyalty programs that reward repeat business...
An increase in loyalty of only 7% can grow
Customer Lifetime Value (CLV) by over 85%
