There are a few things to consider when contemplating setting up a rewards point system for your Magento eCommerce store. At a very high level there are a few types of rewards that can be set up to get some good traction on your website.
Below are just a few quick thoughts taken from a recent email I sent to some one to help them get a better understanding of how a rewards point system can be leveraged when starting of. I thought it may be useful so I am quickly sharing this information here also. This is by no means a comprehensive outline of setting up a rewards point system for your Magento store, but rather intended to help you get started and thinking in this direction.
In the future it is my intention to share some more useful information on eCommerce store loyalty programs as I believe it is a very god way to grow your sales, broaden your customer base, retain more customers and increase (what marketers call) share of wallet.
Here are a couple fundamental types of loyalty point structures;
– One type of reward program is rewarding people for their shopping behavior. This involves giving points of direct economic worth for shopping activity undertaken that is directly based on generating economic worth for your website.
– Rewarding people for referring others who in turn go onto undertake shopping behavior – that is rewarding the referrer with direct economic worth when they refer customers that will go onto order (only). This is similar to the above point, the person making the referral is only rewarded when the person(s) referred generate economic activity on the site – make a sale.
Both these activities are rather safe as a starting point because rewards are balanced with economic return, that is, you you are rewarding customers based on a sale being made.
The other type of rewards that can be given on your Magento eCommerce website are for various types of user interactions; such as simple referrals, social interaction, reviews, product reviews, likes, etc.
With this type of loyalty setup, business returns are very indirect. I consider this more of an ‘advertising’ investment on the part of the website owner back into his or her own business as it were, because they are essentially making an expense investment back into their business. Offering monetary value to your customers for non direct economic generating activity towards your business means that you are essentially paying customers or even non customers for helping to promote your website or contributing towards generating content, etc.
I think these activities should be managed and be sporadic subject to your advertising and promotional budget as there is a direct economic impact and expense to the business with no guarantee return. This is not to say that the outcome of such activity may not be economically beneficial or financially rewarding.
The last quick point I would like to mention that hangs over the entire program and strategy is managing risk – liability. This is the redeemable dollar worth value owed to customers. Some ways to reduce this include;
– limit the point expiry period
– reward only for return – as mentioned above
– carefully establish and discriminate the points currency value to ensure that the reward given is balanced with return – easier to do with points 1 and 2 mentioned earlier with regards to the types of rewards as this is easier to monitor. As a rule of thumb I think 2.5-5% discount is ok and safe but this will depend on the situation and nature of your business. Sometimes offering even greater value back to customers maybe appropriate, this will depend on your specific case.
Lastly its important to think about the terms and conditions. It is important to define some terms and conditions around the loyalty program and include this on your website. These need to be flexible and you need to mention to people that you have the liberty to refine and change these at any time.
The is just so much that can be said about this area and I hope to share some more information in the coming months. If you have any questions please feel free to touch base. Thanks 🙂