Loyalty, Referral Or Affiliate Program
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Loyalty, Referral Or Affiliate Program – What’s The Difference Between Them And Which One Should You Choose?

Loyalty, referral or affiliate marketing? Which of these marketing strategies should you use? Let’s talk about it. 

You may have set up a well-designed Shopify store. Stocked your inventory to meet customer demands. Optimized your website pages. And got all the basics in place.

But remember – you’re competing with several other brands – new and old, big and small. And a lot of these brands may be making great investments in their marketing strategies. If you don’t take care, they might pull your customers away from you.

So what are you doing to ensure your customers stay with you? Are you working towards building a loyal customer base for your brand? Will your existing customers help you grow your clientele?

Among the many ecommerce strategies, there are three that are increasingly being adopted by brands:

  1. Customer loyalty program
  2. Customer referral program
  3. Affiliate program

In this blog, we’ll discuss these three in detail and help you figure which strategies you should include in your Shopify store.

Loyalty, referral or affiliate: Marketing strategies you should consider for your online store and why

Let’s take an in-depth look into which of the word of mouth marketing strategies are the most effective at customer acquisition, and why they work the best – a comparison between loyalty, referral or affiliate.

What is a customer loyalty program?

A customer loyalty program is a marketing strategy designed to recognize and reward customers. Businesses reward customers who make purchases or engage with the brand on a recurring basis. Rewards such as discounts, store credit points, free shipping, etc. are common loyalty program rewards. These rewards encourage customers to return and engage more with the brand.

Benefits of a Shopify customer loyalty program for your store

Better customer retention: Apart from discounts and loyalty points, Shopify customer loyalty programs help provide a holistic experience to customers with engagement opportunities, different benefits, a feeling of belonging to a community/ group. When your customers have a good experience with your brand, they’d tend to stick with you for longer.

Increased customer referrals: Customers keep returning to brands that they’re loyal to. Moreover, they also recommend those brands to their family and friends. This can help drive referral traffic to your Shopify store.

It’s a cost-effective strategy: Retaining customers is more cost-effective than acquiring new customers (It can cost five times more than retaining customers). Shopify customer loyalty programs can help you retain more customers and hence, save your resources.

Increase revenue: Customers who are loyal to brands tend to spend more time and money on the brands. 70% of emotionally engaged customers spend 2x more on the brand they’re loyal to. This has a direct impact on your revenue.

Challenges of loyalty programs

Difficult to understand loyalty behavior: How do you gauge customer loyalty? Most often, you deem those customers as loyal who make more purchases from you. But that’s not the case. There may be many loyal customers who are emotionally more engaged with your brand than they are transactionally. So, to base your customers’ loyalty merely on the amount of money they spend on your site would be highly misleading.

Difficult to stand out: Most online brands run loyalty programs. And most have similar benefits such as discounts, reward points, free shipping, etc. In such a scenario, it can get challenging to create loyalty programs that are unique and distinguishable, unless you come up with innovative ways to reward customers.

Ecommerce loyalty program example – Sephora

What is a referral program?

Ecommerce referral programs enable customers to promote a brand’s products and services to their friends and family in return for some sort of reward. The reward could be a discount, freebies, free shipping, etc. The purpose of a referral program is to attract new customers to the brand.

Benefits of a referral program

It’s a cost-effective strategy: A referral program is cost-effective as it depends on word of mouth. While you may need to spend some amount of resources on creating marketing campaigns, it is fairly cheaper than other expensive marketing methods such as advertisements, or paid ads, etc.

It attracts high-potential customers: According to a study by Nielsen, 92% of people trust recommendations from people they know. When your loyal customers share your referrals with their friends and family, it instantly improves your chances of getting new customers.

It increases customer lifetime value: A study shows that referred customers have 16% to 25% higher customer lifetime value. This means, ecommerce referral programs not only help you gain new customers, but also customers who would remain loyal to your brand in the long run.

Helps create a new channel for engagement: Referrals programs help create opportunities to engage customers, remind them about their love for your brand. One way to boost engagement is to run campaigns around your referral program on different platforms such as social media, email, SMS, etc.

Challenges of a referral program

Customers may not share referrals: It’s possible that your rewards aren’t enticing enough for customers to share referrals. Or that your customers don’t feel that engaged with your brand. Hence, to make your ecommerce referrals program work, you’ll have to consistently put in effort to optimize, adapt, and change, to keep customers motivated.

You don’t have control over the referred customers: It’s possible that your customers refer new customers only to earn your rewards. In this case, they won’t bother to send the most genuine and interested customers your way. One way to tackle this problem is to reward your existing customers only after the referred customers make purchases from your store.

Ecommerce referral program example – MeUndies

What is an affiliate program?

One of the most common types of marketing strategies for online brands is ecommerce affiliate programs. It is where an online brand makes an arrangement with an external website to bring traffic to their (the brand’s) website. In return, pay them a commission for the traffic or sales generated through that traffic. Affiliate marketing is responsible for 16% of global ecommerce sales.

Benefits of an affiliate program

It helps boost customer acquisition: Ecommerce affiliate programs can help you reach new and a large audience of other sites. This can help you acquire new customers, which you wouldn’t have had access to otherwise.

You can find genuine and good leads: By having a control over which external brand/ website you affiliate with, you can ensure genuine and highly targeted customers.

It helps grow your brand awareness: Affiliate programs help businesses, especially small and medium sized businesses grow their brand awareness. Consumers like to make purchases from brands they’re familiar with. Once they get familiar with your products/ brand through an affiliate, they’re more likely to move beyond a single purchase.

Challenges of an affiliate program

Affiliate programs are transactional: Ecommerce affiliate programs are financially motivated and hence lack a personal touch. If, as a brand, you do not put in efforts to engage customers when they land on your site, you might not be able to build long-term relationships with them.

Low return on investment: Even though affiliate programs help you reach large audiences, you can never be sure about the kind of audience you’re targeting. This can be expensive as your marketing spends might not generate matching returns.

An ecommerce affiliate program example – Wirecutter

Loyalty, referral or affiliate program at a glance

Now that we’ve learnt the basics of these three types of marketing strategies, we can move a bit deeper to understand the nuances. Here’s a simple table that will make it easy for you to understand the different aspects of the three types of strategies.

Particulars Loyalty Program Referral Program Affiliate Program
Rewards Loyalty points, discounts, exclusive events Discounts, store credits, points, gifts, coupons Cash (percentage of sales)
Reward recurrence Multiple, often with every sale, during special campaigns Mostly one-off With every click or every sale, mostly monthly payout
Channels Most loyal customers Customers’ friends, family, close circle Affiliate networks
Partner type First-party, your own customers Third-party, close contacts of your customers Third-party, could be completely new and unknown
Gains and ROI Long-term if customers are engaged consistently Mostly short-term, long-term is referred customers are engaged Short-term, one-time

Loyalty, referral or affiliate: Which program should you choose and how?

Before embarking on any of the three types of programs, it’s essential that you consider a few factors. It’s important that you have clarity about your objectives, a sense of your budget, and know what your customers want/ expect from you. Let’s understand these factors in detail.

Business goals

The first thing you should have clarity about is your business objectives. What is the end result that you want from your program? Of course, most businesses would want sales and revenue, but for that, you’d first have to acquire customers.

Is your goal short-term customer acquisition or long-term customer retention? Affiliate programs and referral programs work well for short-term customer acquisition. Both these types of programs help spread awareness about your brand and bring traffic of new shoppers to your website.

Referral programs may help you gain long-term goals to some extent. Since people trust recommendations from people they know, they tend to remember your brand for a long time.

Loyalty programs are more long-term in nature. Here, your existing customers who already like your products and brands might join your loyalty program and enjoy the benefits for a long-term.

Marketing budget

Loyalty, referral and affiliate programs – all three would require a different kind of investment from your marketing budget. Affiliate programs are more like traditional advertising that maximize the number of clicks your link generates. However, this also means you might end up with wrong shoppers and thus, each click could be a huge cost to you. Hence, affiliate partners should be selected with care.

Ecommerce referral programs do not require too much of an upfront investment apart from marketing campaigns. However, you should be careful how you reward customers. If the referred customers do not end up making any purchase and you still have to reward your customer, it’s going to be a costly affair for you.

Ecommerce loyalty programs are one of the most lucrative strategies. Your existing customers who already like your brand and products would be keen to sign up for your loyalty program. Offering loyalty points or store credits is a great way to make your loyal customers stick to you. That way, they’ll keep purchasing more to use the rewards or points. It can help you increase the customer lifetime value like no other type of program.

Your customers’ preference

When you choose the type of program you should have, one of the first things to consider should be your customers and your target audience. One of the best ways to find out what your customers want is by asking for their feedback and conducting surveys before you launch a program.

What type of program are you setting up for your Shopify store?

The ecommerce space is chock full of brands, websites, and shopping platforms. To stay ahead of your competition, you’d have to put in place, not just one, but many marketing strategies. You could have all three types of programs running on your Shopify store.

But, you should choose the strategies that are relevant to your business. You could have either just one, or combine two of them or have all three.

Done smartly, you can ease the entire process of combining these strategies. The customer account app, Flits, can help you do so.

You can combine a referral program and a loyalty program within your Shopify customer account. What is more, you could even interlink the two programs for better engagement.

To explore how Flits app can help you make the most of your loyalty program and referral program, install Flits customer account app.

Install Flits Customer Account App On Your Shopify Store Today!

Install Flits To Set-Up Your Customer Account page Right-away

Vanhishikha Bhargava
Vanhishikha Bhargava
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