Every business faces a big challenge in gaining and keeping customers. Since attracting a new customer to your online store can already be difficult, you want to do everything you can to convince them to stick around. A loyalty program can be very effective for meeting this goal, because it helps your customers feel rewarded and appreciated.
In fact, loyalty programs are so popular that some customers expect them to be offered, and are likely to turn away from a business that doesn't have one. Fortunately, it's pretty easy to set up a loyalty program using reward points that will encourage your customers to keep coming back for more.
In this article, we discuss reward points in depth and will guide you through setting them up on your own eCommerce website.
What are Reward Points and How Do They Work?
Reward points are points that customers can earn by making purchases. They can later redeem these points for a reward, the nature of which can vary depending on the business offering the points. Reward points are offered by retailers in all types of industries, and credit card providers also usually have reward systems (generally in the form of "cash back," which works similarly).
Most commonly, reward points are given a monetary value that can be applied to the cost of another order. For example, a business could set each reward point to be worth 10 cents, so a customer with 100 reward points could redeem them for a $10 discount on an order. Or, a customer could buy a product outright with their points instead of applying them as a discount.
The purpose of reward points is to provide an incentive for customers to make repeat purchases. This makes reward points a central part of loyalty programs. The idea is that the customer will be interested in the rewards they can earn through accumulating points on their account, and will continue to buy from your business instead of any competitor that might sell the same items.
Businesses' loyalty programs can vary in how they've set up their reward points. They have to decide on the following:
- How many reward points are awarded per dollar spent (e.g. 1 reward point for every $1)
- How much each reward point is worth when applied to a purchase (e.g. 1 reward point is worth $0.10)
- Which products provide reward points when purchased
- Which products can have reward points applied to them when purchased
Retailers often prefer to make reward points cost more to acquire than they're worth to redeem, like the $1/$0.10 example above. This is because they don't want to lose too much actual revenue to reward point redemptions. However, the more reward points are worth, the more excited customers will be to collect them — and the more enthusiastic they'll be about making their next purchases. Businesses with high profit margins can afford to make their reward points worth more, because the lost profits from reward point redemptions won't cut as deeply into their overall profits.
Sometimes, reward points can be redeemed for specific items instead of broadly applied to a purchase. A business using this setup might have a special "reward points only" section of their online store, with products that can only be bought with reward points. This method isn't popular, though, because it runs the risk of customers not being interested in any of the "reward points only" products. It's much more common to allow all products that can be bought with points to also be available for regular purchase.
Businesses can still exclude certain items from their reward points program, disallowing points to be earned or spent on particular items. Ultimately, it comes down to the needs of the business and its strategy for building a successful loyalty program.
Why Should Your Online Store Offer Reward Points?
For a business owner, the main appeal of reward points is customer loyalty, as described above. Since reward points encourage customers to keep coming back, they're a great tool for this goal.
Customer loyalty is crucial for growing your business. Repeat customers are incredibly valuable. The cost of gaining a new customer is much higher than the cost of retaining an existing one, so customer retention should be a high priority. A loyal customer can be expected to make repeat purchases over time, increasing your revenue.
Loyal customers can also become brand advocates, which means they'll spread the word about your business. They'll recommend you to family and friends who are looking for the solutions you offer. If you have a great loyalty program, they may bring it up specifically when discussing your business as being worth a long-term relationship.
Reward points also encourage new customers to sign up for an account on your store instead of simply using guest checkout. While there are many benefits of offering guest checkout, it does run the risk of anonymous customers that are harder to interact with than those with accounts. If you don't offer guest checkout, you'll instead lose customers that don't feel like they should have to sign up. So, you can get the best of both worlds by following this strategy:
- Offer reward points and display the amount the customer will earn on each product page.
- Allow guest checkout, but give the customer the option to sign up for an account after they've already entered their information, so they can get those reward points and save their information for a later purchase.
This way, the customer will see the reward points they could be earning while they shop. If this alone isn't enough to convince them to make an account, they'll be more likely to do so at the end of checkout since they've already had to enter all their information, which is the main deterrent for creating an account in the first place. All they still have to do is choose a password, which is also annoying, but could be considered worth doing if it means they get reward points and don't have to enter their information again next time.
So, overall, reward points help you grow a loyal customer base and earn you more signups on your store, which means increased customer retention and better marketing opportunities. This is why you should seriously consider offering them!
Planning Your Loyalty Program
Deciding to offer reward points on your store is just the first step. You'll get the best results (and the happiest customers) from your loyalty program if you make an effort to plan it out first.
First off, there are some important choices you'll have to make:
- How much does a customer need to spend to earn 1 reward point? ($1 per point is pretty standard.)
- How much is each reward point worth when a customer redeems it?
- Which products will award points to the customer?
- Which products can be redeemed for points?
- Do your reward points expire? (Be aware that some customers hate expiring reward points and can feel cheated if they lose the chance to use them.)
- Will you award points for anything besides purchases, e.g. welcome a new customer with a few points to "get them started?"
- Can you set up a system to remind customers if they have reward points they haven't used? Customers who shop from many different stores can accumulate lots of points and forget they even have them. (Shift4Shop has a tool for reminding customers about their points.)
- Are there any types of customers you'd rather exclude from the reward points system (like wholesale buyers who are already getting a big discount)?
- How do you want your customers to be able to redeem their points? (We cover this in more detail later in this article.)
Planning these decisions ahead of time will make it easier to develop a more appealing and consistent loyalty program.
Naturally, you'll also want to ensure your eCommerce software has a loyalty program feature with the capabilities you're looking for.
Why Use Shift4Shop's Reward Points Module for Your Loyalty Program?
Shift4Shop's Reward Points module is a built-in feature in the Shift4Shop software. Not only does this mean you won't need to search for another solution for your loyalty program (which could be expensive), it's also just one part of an all-in-one solution for building an online store.
Other Shift4Shop features work together seamlessly with Reward Points, including guest checkout, so you can use the strategy described above. Customers will see the amount of reward points they can earn for their purchase, which is also important for the above strategy.
Shift4Shop's Reward Points module is flexible enough to open up even more opportunities to enhance your loyalty program. For example, you can create promotional events during which customers can earn bonus reward points, and even add reward points manually to a customer's account (perhaps for their birthday or because they've spent a certain total amount on your store).
On the other hand, you can also prevent certain Customer Groups from earning reward points, which could be useful in some cases. For example, if you have a Customer Group of B2B wholesale buyers who purchase in bulk at a discount, you could exclude them from the reward points system without affecting your normal B2C customers.
We can get a closer look at the flexibility of Shift4Shop's Reward Points module by digging into its setup process and checking out its available options.
How to Set Up the Shift4Shop Reward Points Module
The Shift4Shop Reward Points module is easy to set up, especially if you've already planned out your loyalty program using the list of questions above. Each of those questions relates to options you can choose while setting up the module.
First, you'll need to activate the module and choose its initial settings. Once you've finished this, you'll be able to choose which products are eligible for Reward Points (both earning and redeeming), and make other customizations like excluding one or more Customer Groups.
To activate and set up the module:
- Navigate to Modules in your Shift4Shop Online Store Manager.
- Locate the Reward Points module (entering Reward Points into the Search bar will bring it right up).
- Click the Settings button, review the settings in the module (described below), and adjust them to your preference.
- Check the Enable Rewards box to turn on the module.
- Click Save Changes on the module page to save and activate your settings.
Now let's look at the available settings in the Reward Points module.
- Enable Rewards: This checkbox is for turning on the module.
- Rewards Multiplier: This setting determines how many points are awarded to the customer per dollar they spend. You can enter whole numbers or decimals (in tenths only). The default is 1, meaning the customer would earn 1 point for each dollar.
- Rewards Enabled for Phone Orders: This setting will allow reward points to be automatically awarded for Phone Orders as well as regular online orders.
- Apply rewards only for orders in status: This setting lets you choose the order status the order needs to be in before reward points are awarded for it. You can use this to prevent a customer from earning points on a purchase until the order is actually complete (i.e. they cannot earn points and then cancel the order before shipment).
- Rewards point expiration enabled: This setting allows you to activate an expiration period for reward points. Activating this setting will cause more options to appear:
- Days to expire: This setting allows you to set the number of days until the reward points expire, if you've activated expiration.
- Send email before expiration: This setting activates an automatic email notification to alert customers if their reward points are about to expire.
- Days to Send Email before Expiration: This setting determines the number of days before reward points expire that the notification email will be sent.
Below the main settings, you'll see a section labeled Custom Event Points. This is a separate module that lets you set up additional ways for customers to earn reward points. You can give them points for registering on your store, signing up for your newsletter, and more. These are all good incentives to help your customers get more involved.
Once you've set up the Reward Points module itself, you'll then need to take a few more steps to integrate it with the rest of your store. Remember to save your settings as you go through each process.
- Enable the products that customers can redeem with reward points.
- You can do this individually by navigating to Products and then Product List, opening each product, and entering the required amount of points into the Redeem Points field in its Reward Options (as seen above). When entering this number, keep in mind the dollar value of your reward points and the price of the item.
- If you have a large number of products, or just want a faster way to do this, you can upload your reward point values via CSV file.
- Do you have any products you want to completely exclude from your reward points program? Check the Disable Rewards box in the product's Rewards Options.
- If you want a product to award a custom amount of reward points unrelated to its price and the rewards multiplier you set up earlier, enter the amount in the Custom points field in the product's Rewards Options.
- If you want to exclude a particular Customer Group from getting reward points, navigate to Customers and then Manage Groups. Find the Customer Group in question, and check Disable Reward Points in its options.
Once you've completed all of the above steps, your store's loyalty program is ready to go.
For more thorough information on the Reward Points module and a full explanation of each of its settings, including Custom Event Points, our Knowledgebase has a complete guide to the Reward Points module. It's highly recommended you check it out for more details. The Knowledgebase article also includes information on setting up bonus reward point promotions, adding points directly to a customer's account, and much more.
How to Award Custom Reward Points Based on Product Options
Product options or variants are the different variations of a certain product, like size or color. Some product variants are a bit more distinct, though, and may require different handling or pricing. For example, a product might have a variant that weighs more than the others or has significantly larger dimensions, and therefore costs more to ship. Or a certain product option might cost more for the business to purchase from its supplier, and therefore need to be sold at a higher price — XXL apparel is often like this, due to requiring larger amounts of fabric for manufacture.
Shift4Shop makes it easy to handle the differences in product variants through its Advanced Options system. With Advanced Options, you can designate a different product variant as having its own price, cost, inventory tracking, and more, as if it were a separate product — without actually having to make it a separate product listing. You can read all about product options in our article How to Set Up Product Options - The Complete Guide to Product Variations.
But how does this relate to reward points? With Advanced Options, you can assign custom reward point amounts to specific product options. This can come in handy in many different circumstances.
For example, you may want to give your customers extra reward points for choosing a specific product option beyond its actual dollar amount. This can steer customers toward picking the option that offers the biggest rewards. You can use this strategy to encourage customers to pick a specific product option, whether as part of a promotion, to sell slow-moving inventory, or for any other reason. The most important thing is that this capability is there if you need it!
How Customers Can View and Redeem Reward Points
When customers make a purchase that earns reward points, the amount is shown on their order email and invoice. They can also check their account on your store to see how many reward points they've accrued. You can also use a newsletter SmartList to inform customers who have reached an amount of points you designate as being worth a reminder.
And of course, when a customer has built up enough reward points, they're going to want to spend them!
There are two recommended methods for allowing customers to redeem their reward points, and this is another choice you'll need to make when setting up your loyalty program. Both of these methods are recommended for the amount of control they allow you over how your customers can spend their reward points, and on what products.
Redeem Points with Gift Certificates
The most straightforward way to allow customers to redeem their reward points is to create gift certificates and set them as the only products that can be purchased with reward points. This is very easy to manage, as you can decide the exact dollar amount these gift certificates are worth, and match it up to the amount of points they cost to redeem.
For example, let's say each dollar spent on your store earns the customer 1 reward point, and you want them to earn $10 worth of rewards every time they reach 100 points (i.e. spend $100). You could simply create a $10 gift certificate product and make it redeemable for 100 points. You can do this with any amount, so a customer could save points for longer and redeem a larger gift certificate. You could also make larger gift certificates offer a bit more of a bonus than they'd normally be worth, to encourage shoppers to make even more purchases — for example, making a 1,000-point gift certificate worth $110 instead of $100.
Customers can then apply the gift certificates to future orders by entering a code. Any leftover funds on the gift certificate will still be available to use later. On the opposite side, if a gift certificate only covers a partial order total, a customer can apply it and make up the rest with a regular payment method.
The gift certificate method takes some stress off the customer who might otherwise not be sure where to spend their points — they can just buy the gift certificate and use it at their leisure. This also makes it an especially good method if you've set your reward points to expire, as customers can redeem their points without having to first decide what they want to buy with them. Some customers might also give their gift certificates to friends or family, which can further spread the word about your store.
To make it easy for customers to see the gift certificates they can redeem with their reward points, you can display them within their account page on your store.
Buy with Points
The second method is to allow customers to directly redeem any product with points by adding it to their cart. In this case, you need to designate an exact points cost for each product. When the customer reaches checkout, any items they added to their cart with points will be free.
Needing to set a specific amount of points as a redemption price for each product can be seen as a downside. But many merchants find it works quite well with their vision for how they want to run their store. For example, a product that normally costs $10.99 might only cost $10 worth of reward points, so a customer could save a dollar by using points — which encourages them to earn more by shopping more. Remember that you have control over how many points customers can earn per dollar spent and how much each point is worth, so $10 worth of reward points could equal 100 points, which the customer had to spend $100 to accrue. This has the effect of automatically giving a small discount to customers who have spent more (even if in this example, it's only about a dollar cheaper). Customers who perceive this difference will be more eager to earn reward points to get these small discounts.
The Buy with Points method works best on products that don't need to use different pricing for their product options, because the cost in points cannot be different for variants of the same product. If you have any doubts, use the gift certificate method, or a combination of both — make some products redeemable with points, and provide gift certificates that can be bought with them as well.
Ready to Reward Your Customers?
Let's do a quick overview of what we've covered:
- With customer loyalty being a high-priority goal for every business, reward points serve a valuable purpose in building these long-term relationships.
- Reward points are a powerful incentive for customers to make more purchases, and keep coming back to your store.
- There are several ways you can choose to set up your own loyalty program, and many choices for you to make.
- Shift4Shop's Reward Points module is a versatile solution for setting up a loyalty program of your own, with many options to set it up as you envision.
As an eCommerce business owner, you're constantly on a mission to improve your offering and expand your reach to a larger audience. At Shift4Shop, we're proud to provide the tools to help you make that happen.