Learn how to calculate the value of store credits you offer on your Shopify store.
Store credits – ecommerce brands offer them at various times – when customers return an item, they convert the amount to store credits.
Store credits are used as incentives to encourage customers to make purchases. Apart from that, store credits are used to boost engagement – given on customers’ birthdays, as surprise gifts, and many more such reasons.
That’s because store credits are a key element of customer loyalty programs – not only does it increase engagement, but it impacts the business’s revenue and profits as well.
And that is why store credits should be strategically thought through. How many and when you give them are critical factors.
So let’s look into the details – how to figure how many store credits you should give and how to determine its value.
Calculating the cost and profit from your Shopify store credits program can be tricky. It depends on how you design your program, how many store credits you offer to customers, for what actions, and which customers. Apart from that you have to also consider the revenue generated via store credits and the costs incurred.
One of the ways to calculate the cost or performance of store credits is to measure how many store credits are used to make purchases. You can calculate this from the Shopify customer account, which is where most store credit programs are found. Or, you could calculate how many store credits were given vs. how many got used.
However, there are many factors that have to be considered in order to assess the cost of store credits. Again a one-size-fits-all approach does not work for all kinds of businesses.
In short, determining the value of your store credits isn’t an easy feat. Now let’s look at how to go about it.
Now the value of store credits may vary based on what your business sells, the selling price of your products, and who your consumers are. But here are some tips that always work:
All your customers are different. And so, if you give them just a few ways of earning store credits, it may not work.
It’s important to provide options and choices for customers to earn points. This way, you can engage more customers.
Also, having more ways to earn store credits makes your program exciting for customers. Different customers would prefer to earn points for actions that are relevant to them.
For example, offering store credits for following your brand on social media to customers who don’t use social media is pointless. But maybe they’d like to sign up for your customer account and earn store credits. Right?
Store credits can be given towards many different actions such as the ones mentioned below:
- When customers return items, instead of refunding the money, brands give them store credits
- When customers sign up for a customer account
- Upon customers’ first purchase from the store
- On customers’ birthday
- In return for writing a product review
- For sharing feedback
- For referring friends
- As incentives to make purchases. For example, buy from the new collection and receive extra store credits
- For every purchase
The above are the most common ways to give store credits. But you do not have to give credits for everything.
You should give store credits in a way that it adds value to your business. Make store credits relevant to your Shopify store.
More than 80% of customers believe receiving store credits is the most valuable feature of an ecommerce store.
Set up a comprehensive customer account page and store credits with Flits app.
Offering store credits for different actions also helps grow your customer base. And when it comes to how many store credits you should offer towards different actions, you should take a look at your customer base.
Use data to understand how many store credits you should offer for what actions. If some actions are more common than others, can you afford to give away so many store credits?
Conversely, if some actions are rarely taken by customers, would it make more sense to offer more store credits on those actions? So that there’s more engagement.
Let’s understand the ‘value of different actions’ aspect with a few examples.
Take for instance you have a referral program and you offer store credits to customers who refer their friends. You give store credits to your customers, but, in the end, the referred friend doesn’t lead to a sign-up or a purchase.
What just happened? The store credits you gave to your existing customers are a cost for you that won’t generate any returns. Now add up hundreds or thousands of such scenarios. It’s a huge cost to you, isn’t it?
Instead, what if you offered store credits to customers only after the referred friend took an action desired by you? That way, your store credits won’t go to waste. It will bring in revenue.
Similarly, you can apply this thinking to other actions on your Shopify store for which you offer store credits and the real value of those actions.
Another example of identifying the value of an action is that of The Man Company. The Shopify brand receives thousands of orders and gives store credits. But at one point they realized that all the canceled orders were costing them store credits, as there was no way to take the credits back.
So what did they do? With the help of Flits store credits app, the brand created a tiered stored credits program – customers would receive store credits only after their order was successfully fulfilled.
Store credits benefit ecommerce stores in many ways. When you decide on your store credits, you should consider the kind of value it brings to your business. Here are some things you can consider:
Store credits on every purchase can help boost loyalty and customer retention
Store credits are one way to bring customers back to your store. Say for example, you give store credits on every purchase. Customers would come back to use those store credits to buy more products.
This cycle can help you boost customer retention and keep customers loyal to your store for a long time.
Store credits for product reviews can help boost conversions through social proof
When you request customers to write product reviews, you can offer them store credits in return. Reviews are the best type of social proof for your store.
95% of customers read reviews before they make purchases. And if you’re not collecting reviews on your Shopify store, you should start right away! Because most probably, those reviews would bring more revenue to your business than the store credits you’re offering.
Make store credits proportionate to the value of different activities
Activities such as product reviews, referrals, or sign up to Shopify customer account page add more value to your business and brand – they drive sales, enhance engagement and loyalty. Hence, you should offer more store credits for them.
Other activities such as social media follows, sign up for newsletter, etc. don’t drive direct sales. And so, for these smaller activities, you could give less store credits.
This is one way of ensuring you don’t spend/ invest more on store credits than the returns it gets for your business.
Another way to make store credits proportionate is to offer more to your existing customers compared to what you give to your new customers.
Your existing customers who’ve been buying from you for a while are more likely to spend more on your site as they trust your brand. Studies show they tend to spend 67% more than new customers.
Whereas your new customers might take a while to make their first purchase on your site or come back for more.
Another way to decide how many stores credits you should give is to correspond them to the price of products, or the total bill amount.
For example, a bill amount above $1000 would get one credit point for every dollar. Whereas a bill amount of $500 to $999 would get one credit point for every $5.
This way, you’d be giving more store credits to customers who spend a lot on your site. In turn, assuring more future sales as they’d be spending the store credits they earned.
In the same manner, you’d be giving lesser store credits to customers who’ve spent less.
Imagine if you’d be giving one store credit for every dollar spent, no matter the amount customers spend. You’d end up running into losses if you do that.
This would also help you increase the customer’s lifetime value. Since customers who receive more credits will buy more frequently from your site, the lifetime customer value will increase.
However, this can be tricky if you have more customers who spend less and just a few customers who are more likely to spend $1000 or more.
This could demotivate the larger segment of your customers. And so, you could make your store credits program desirable for low-spending customers, too.
How? You can come up with creative ways to do so. Always strike a balance between what the store credits cost you and what value the points bring for customers.
For Shopify stores, the most ideal scenario would be to offer store credits of a high value that make points feel beneficial to customers but actually cost less to you.
Your customers would be making purchases in two ways. They’d either pay by cash or they’d make use of the store credits.
To determine how valuable your store credits are, you can calculate and compare both these amounts – revenue generated via cash and sales made via store credits.
Now compare the two. If the cash revenue amount is higher, it’s a good sign for you. But if the store credits amount is anywhere close or equal to the cash revenue, it’s time to relook at your store credits program.
Your loyal customers are most probably a part of your store credits program. Loyal customers bring more revenue for your business. Research shows that 80% of your business is generated by 20% of your customers.
This means that your loyal customers should also be using the store credits they earn. You should do this: compare the revenue generated from your loyal customers with the store credits given.
Once you compare the two, you’ll get a fair amount of idea of the value of the store credits you give to your most loyal customer segment.
This data can help you make changes such as increasing the number of store credits you give, running special promotional campaigns for your loyal customers, etc. This way, you can enhance the value of your store credits better.
Yes, looking at the benefits it has for Shopify sites, store credits are an essential feature if you want to grow your business.
And if you’re not sure where to begin your store credits program, explore Flits customer account page and store credits add-on.
Reach out to Flits Shopify customer account page app to set up your store credits program and get an accurate measure of the value of store credits.