Loyalty points system or not – the potential of rewards programs in e-tail

Most know that there are many differentiators between traditional, physical retail and pure e-tail. Physical commerce values such as location and quality sales personnel do not bring much of the same value to an e-tail business. For example, there is not much of a point in having a nice looking warehouse when no one sees it. In the same way, the choice of payment options does not (yet, IOT is coming) have much of an impact on the physical retail market, as most consumers use credit cards for their physical shopping.

Although there clearly are major differences in value drivers between the two, there has been very little innovation throughout the digital era of commerce in terms of using the new, different possibilities that digital commerce brings to the table.

In this article, I want to discuss some of the effects that e-commerce first, loyalty points systems could have if they were to leverage a broader spectrum of the digital opportunities.

Points on purchases, or not?

Let’s start this part off with questioning this articles header. Points on purchases is a proven concept. Most retailers use them. However, they are an invention of old. With the emergence of a whole new digital marketplace, why, really, should digitally based companies constrain themselves to a function which was put forward as the simplest way of rewarding customers in a whole different type of business?

There are a plethora of other ways to reward customers, and, a plethora of reasons that you should use those other ways. It is proven that very few customers are actually happy with getting the actual points longterm, as it often demands a repeat purchase to activate. That, along with the fact that the “currency” which is created often come with multiple rules for activation and hard-to-read terms & conditions.

What are the alternatives?

So, what are the alternatives to points on purchases? Well, that will be developed further upon in the Gamification part of this article, but, basically, anything that presents a high value to one or more of your target groups and that is not costly to you, is something you should seriously consider offering in return for loyalty.

Here is a simple example of a campaign, where the merchant does not give out any discounts, points, or other EBITDA-killing incentive and still gets that purchase, along with some free PR:

-Let’s say that you are in the business of selling dietary supplements, the kind that bodybuilders, and, wannabe bodybuilders take to “maximize gains”. Ok, then you are most likely working some target groups that really identify with your supplier brands, as well as your own. To propose the transaction; 50 USD spent on site = free complimentary super cool brand t-shirt to show off at the gym, is not that bad of an idea to me.

Understand what in aiming at here? Now, let’s make this campaign something much more interesting.


The example above, in itself, is just a campaign. But what if that free super cool t-shirt was one out of five choosable rewards within the gold-level tier of your rewards program? What if, you run your whole rewards/points program like a game?

Some sites actually do that, and it is pretty effective. Swedish electronics e-tailer Webbhallen.com went ALL the way, creating a specialized MMORPG-game, and their customers (of course primarily gamer-types of people) became obsessed with it.

I’m not saying that a supplement store should adapt their rewards program to be a full weightlifting game, but the basic principles of gamification appeal to every human, as it activates certain areas of the brain, hence its all-encompassing popularity. Therefore, use it!

So, then, who exactly can enable me as a merchant to create a gamification-based rewards program? – Well, me, of course, that’s why I’m writing this article. Message me, or check out more of our website, to check out our social loyalty framework for Magento and other e-com systems 🙂

Shameless plug aside, here are some final thoughts.

Integrate Social and don’t be a third party

Further developing on the “utilize new technology” preface of this article, why not integrate social behavior in your program? There are far more things a customer can do to be loyal to you, apart from buying stuff. If a customer invites his or her friend to register on your site, they are doing the job of your marketing managers whilst cutting customer acquisition costs, seems pretty rewardable to me?

And don’t be a third party, meaning, I don’t think it is wise to spend your customer retention efforts on deals with shopping club applications, customers using that app is being loyal to that app, what you wanna do is to keep your customers on your site. Why not add reviews-onsite as a reward factor, for example?