Building Customer Loyalty In An Online World

As CTO of Engage People Inc. Len Covello helps companies differentiate loyalty programs to deliver a better experience for their customers.

Published July 5, 2022, 8:30 a.m. EST

Henry Ford understood 100 years ago that a brand’s success is contingent on customer loyalty. In his 1922 autobiography My Life and Work, he wrote, “A manufacturer is not through with his customer when a sale is completed. He has then only started with his customer.” Today, the same ideology rings true—but in the world of online shopping, the brand-customer relationship must begin well before the point of sale.

There are more than 2 billion online shoppers worldwide, but despite the heavy traffic, U.S. digital retailers see less than 3% of all website visits convert into sales. That is a big discrepancy from brick-and-mortar retailers, which see conversion rates of 20% to 40% depending on the type of store. Customer retention is among the biggest challenges for online retailers, with an estimated seven of 10 shoppers abandoning a potential sale at checkout.

The missing links are customer loyalty and ongoing efforts to build positive, personalized experiences. The concept of loyalty is both valid and valuable in an online environment, but digital shops are facing different challenges than their brick-and-mortar counterparts. Successful loyalty program sponsors recognize that each touchpoint is an opportunity to engage with the consumer and curate a better experience, and it can be done with a few simple steps.

Here are the top five ways that digital retailers can enhance the customer experience throughout the shopping journey to build loyalty and drive conversion.

1. Early access. Early access is the most highly desired loyalty perk after discounts. Exclusivity is the primary benefit, and it is one that wins customer loyalty. In a recent Shopify survey, 60% of respondents said they would join a loyalty program for early access to sales, and 29% of customers say early access is a must in a loyalty program. Members get exclusive or limited-edition products, front-of-the-line treatment for new launches and sales, and even reserved inventory—a major benefit considering inventory shortages and ongoing supply chain disruptions. These perks can also come in the form of exclusive promotions or discounts tailored to a select group of customers.
2. Alternative payment options. More than half of online shoppers have abandoned a purchase at checkout because their preferred payment method wasn’t available. Customers are demanding more payment options, with methods like “buy now, pay later,” virtual wallets and pay with points (PwP) becoming the preferred choices for online shoppers. For example, we’ve found that around two-thirds of rewards card members prefer to redeem points directly at checkout. These alternative methods also have a big payoff for merchants. They increase conversion rates and customer purchasing power and result in an overall faster and easier checkout. Access to “buy now, pay later” can increase conversion rates by 44%, and research from Mastercard shows that customers using PwP spend three times as much. These alternative methods can create a more engaging and personalized shopping experience.
3. Shipping perks. Amazon Prime has set the tone for the industry—online shoppers expect fast and free delivery. Data from a McKinsey survey found that a staggering 90% of U.S. customers expect two- to three-day shipping as the baseline, while a Jungle Scout survey found that 80% expect free shipping once they meet a minimum purchase amount, and 66% expect free shipping on all orders. Failing to meet shipping expectations is one of the top reasons for shopping cart abandonment. A strong shipping program also includes delivery tracking and regular communication with the customer throughout the shipping process, like personalized alerts letting customers know when items have shipped, estimated delivery times and when packages have arrived at their doorstep. The backend communication makes for a seamless experience getting products to the customer—which is critical for an online storefront.
4. Personalization. There is no one-size-fits-all approach to customer loyalty. Personalization is the foundation of the most successful loyalty programs, which integrate bespoke emails and brand communication as well as customized rewards and perks, which is all accomplished with data. Collecting customer data starts with basic information like a customer’s email address and phone number and evolves into a comprehensive profile that includes behaviors and shopping preferences—although it is important to note that customer data should only be collected with user permission and handled transparently and securely. Still, data molds and tailors a program to meet your customers’ shopping expectations; it’s how you decide the right alternative payment methods, tailor early-access benefits and communicate shipping information. Personalization creates an engaging customer experience in an otherwise flat and detached digital shopping world.
5. Easy returns. We get it. Navigating the reverse logistics for returns is a headache for online merchants, but in an environment where customers shop without seeing or feeling the products, easy and free returns offer peace of mind (most customers want to read a store’s return policy before even making a purchase) and increase customer conversion. Offering free returns can increase online purchases by 357% and increase repeat business. According to a survey from ShopRunner, 81% of customers will not return to a store that has a fee for return shipping. To ease the pain of paid returns, many digital retailers are using return bars—physical locations that partner with online merchants to accept returns—and retailers with a brick-and-mortar storefront can offer free in-store returns as an alternative.

The Result

Although retailers have always understood the importance of building healthy relationships with customers, online merchants have to work harder to foster a personalized shopping experience. As the e-commerce market expands, investing in and getting customer loyalty right is the only path forward. This year, online retail sales are expected to top $1 trillion for the first time. Digital retailers that can effectively engage with a customer throughout the shopping journey should strengthen loyalty and drive better conversion rates today, and they should be better positioned to capture demand tomorrow.