Increasing Repeat Purchase Rates: Work Those Loyalty Program MembersMay 15, 2017 - by Kristine Lowery
Simply put, loyalty programs work. Witness Starbucks. Sephora. And Amazon Prime. And some stats from the 2016 Bond Brand Loyalty report: 80% of surveyed consumers say loyalty programs make them more likely to do business with a certain brand, and 70% say they buy stuff to maximize points.
Clearly, there’s a strong link between repeat purchases and loyalty programs, particularly tiered programs that can entice members to higher levels when they buy more. A 2016 study from Accenture puts some data behind this link: Loyalty program members generate 12 to 18% more revenue per year than non-members.
The Psychology of Loyalty: Reward Response Drives Repetition
Consumer behavior regarding loyalty programs has strong roots in behavioral psychology. Specifically, loyalty programs play off B.F. Skinner’s concept that when a behavior is followed by a reward, it is more likely to be repeated. Successful reward redemptions are even more likely to result in repeat behavior, i.e. purchases, according to David Feldman of Catchit Loyalty.
Tiered loyalty programs hook into this basic human response to reward reinforcement. As Chris Luo of loyalty technology company FiveStars explains to Forbes, “Elite levels provide strong incentives for repeat purchases and then drive ongoing engagement.” FiveStars’ data shows that multi-tier reward programs are generally more successful and that members of multi-tier programs’ highest levels often have an outsized impact on revenue.
Getting More From Your Loyalty Program
Online retailers can incent loyalty program members to buy more with targeted communications as described briefly below. Greater detail on this strategy can be found in our best practice guide on how to increase repeat purchase rates.
- Foundational Reward and VIP Program Tactics
- Use emails and push notifications to drive customers to the next loyalty tier.
- Offer VIPs early access to new products and sales.
- Sophisticated Reward and VIP Program Tactics
- Tie purchases to point system that builds toward special discounts.
- Charge an upfront fee for special benefits, such as free shipping.
In addition to reward and VIP program tactics, Increasing Repeat Purchase Rates includes other strategies and tactics for growing sales and revenue.