Increasing Repeat Purchase Rates: Work Those Loyalty Program Members
Simply put, a great loyalty program works. 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. According to Accenture, 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.
Our guide includes foundational tactics, such as emails and push notifications to drive customers to the next loyalty program tier. Offering VIPs early access to new products and sales is another winning strategy.
We also cover more advanced tactics, such as charging an upfront fee for special benefits and a point system that builds toward special discounts. Beauty marketplace Ulta is one retailer with a strong, sophisticated loyalty program, offering more perks to bigger spenders.