These days, it is nearly impossible to shop at a brick-and-mortar store without being asked to collect the loyalty reward points offered by the store. These programs are successful for a number of reasons, but when implemented online, fail. After briefly reviewing current reward programs, I propose a solution that is tailor made for online shopping.
I do a lot of shopping online. I’m not alone. According to a Retail Gazette report published in July, online shopping has increased almost 20% compared to the same period last year. While these are strong numbers, I believe that eCommerce is in it’s infancy. As customers accept online shopping not only as an alternative to traditional shopping but as a replacement, eCommerce will truly become second nature. Driven by increased competition, receding economies and the simple advancement of technology, we have barely started to explore retail environments online.
Avoiding checkout lines, navigating isles and saving time are the reasons I prefer online shopping. Also, smart online stores like Amazon allow me to pre-buy items to have them shipped at a later date. For someone who feels horrible every time a birthday is forgotten, this feature alone is worth breaking the traditional brick-and-mortar mold.
Online stores have tried to emulate the reward programs offered in brick-and-mortar stores, but these programs haven’t been successful. Sure, a number of different credit cards award points for using them online or off, but what about the store itself? Sometimes, I feel penalized shopping online and knowing that if I stop in to a store on the way home, that I’ll be rewarded with any one of a number of reward program points.
The Problem: Why offline loyalty programs don’t work online.
Reward programs are a valuable component of many brick-and-mortar stores. Brand recognition, repeat sale encouragement and increased perceived value are only some of the ways that reward programs such as Shoppers Drug Mart’s “Optimum” reward program add value to the chain.
Online shops have tried to replicate reward programs and generally, have failed. Other then Amazon’s Prime program or an expensive affiliation with Areoplan (as Home Hardware and Costco.ca have done), reward programs have far less value to an eCommerce store then their brick-and-mortar counterparts.
The reward programs that are successful in brick-and-mortar stores fail online as a result of the goals a reward program encourages. In a brick-and-mortar store, customers are positively rewarded when they carry the card in their wallet (brand recognition), shop at the same store regularly (repeat sale encouragement) and perceive the value of the products at the brick-and-mortar store higher because they are receiving valuable “points”. The only element of reward programs that transfers to an online store is the repeat sale. Even that however is only valuable if the customer made a purchase decision based solely on the reward program.
My Solution: Reward value, not purchases online.
What if the eCommerce version of a reward program worked differently? Here is a sample of a points based eCommerce reward program from the perspective of a customer:
- Share a product on a social network: 5 points
- Publish an accepted blog post linking to the store: 20 points
- Answer a product question: 10 points
- Purchase a product: 20 points
- Review a product after purchase: 10 points
- Successfully edit the description of a product: 50 points
- Receive a hit on your affiliate link: 1 point
- Refer a friend who purchases a product: 100 points
- (etc, etc, etc)
Points could then be exchanged for online store credit at a predetermined rate.
Tailoring a program to reward people for the unique elements that add value to an online store can positively increase brand recognition, encourage true repeat sales, and can increase the perceived value of the online store through the reward program itself. These results are identical to the results obtained using a brick-and-mortar reward program, but this system values the unique goals that make online stores successful.
The final element of the reward program would be to share the same, proven system with a network of sites.
How I Would Get This Done
Ideas are worthless without implementation. So, here are the exact steps I would take to bring this idea to light:
First, if this reward program was built by an existing online store, we would be one step ahead. Otherwise, an initial partnership would need to be formed with a busy eCommerce site so that testing could be done and an initial example of success could be illustrated.
I would carefully identify as many valuable user actions as possible. Above, I gave a handful of examples, but these examples should be tailored specifically to the functionality of the store itself.
Next, I would test the program with a limited audience. I would select ~100 customers and give them free points a product incentive or other compensation. In exchange, these users would provide feedback, functionality ideas, and conversation about the new reward program.
After testing, I would immediately implement the reward program and carefully monitor it. I would build an FAQ while providing fast, direct support.
After the API was successfully implemented, I would break this product completely apart from the initial online store in to an independent product. Similar to the business model that Areoplan has created (central reward program accessible by any partner store), I would make this service, functionality and API available to any online store while monitoring redemption statistics and usage.