While discounts have been a marketing tactic to attract and engage customers, there’s another feature that’s silently gaining more popularity – reward credits.
Think about it, reward credits vs discounts, what helps bring customers back to your eCommerce store?
Definitely, store credits. Studies show that more than 80% of consumers are more likely to purchase from brands that offer some sort of credit or reward points.
In this blog, we take an in-depth look at store credits vs discounts, what is better, how to use reward credits, and much more!
What is store credit?
Store credits are a form of reward or loyalty points. Brands offer store credits to customers for various reasons. For instance, when a customer returns a product, brands deposit store credit into their customer account, instead of returning the actual amount.
Considering the eCommerce return rate at 18.1% is higher than the return rate of physical stores, having store credits is quite beneficial for brands.
Other instances of brands giving Shopify store credits to customers are:
- When customers make purchases
- Customers signing up for a customer account
- As a gift on customers’ birthdays and anniversaries
- When customers sign up for newsletters
- In exchange for referrals
- When customers cross a milestone
If you’re wondering how to use store credits, the above are some ways.
Also, to understand whether you must have Shopify store credits strategy or not, let’s look at its pros and cons.
Pros
- You can create many opportunities for customers to earn store credits
- Improve customer engagement by creating a vibrant store credit strategy
- Combine store credits with other marketing campaigns
- Increase customer loyalty
- Increase the average order value (AOV)
- Make your returns policy customer-friendly, hence more customer satisfaction
Cons
- Store credits function as points, not as cash so customers may not be convinced
- Store credits cannot be redeemed as cash
- At times, customers have to reach a threshold before they can use their credits
Store credits examples
Call it store credits, loyalty program, or rewards program, when planned well, it can help you build a solid community of loyal customers. Here’s an example of Debenhams cosmetics credits program.
Key takeaways and why we think it works:
- The brand has a dedicated page for their store credits/loyalty program on the website
- It is a tier-based gamified store credits program
- The FAQs section explains every basic questions that customers may have
- The brand enables customers to earn points on multiple occasions
Key takeaways and why we think it works:
- The brand offers multiple ways to earn points such as by downloading their app, for subscribing to an email list, for opting for push notifications, for writing reviews, making purchases, etc.
- The brand has a dedicated page for the points program that explains how to use reward credits, how to earn more points, etc.
What is a discount?
A discount is a deduction from the price of a product or service. When something is available on discount, customers pay less than its original price. For instance, brands offer discounts during peak shopping seasons such as festive sales, BFCM, Black Friday, etc.
Discounts is one of the oldest and most used marketing strategies adopted by eCommerce stores. However, these days, reward credits vs. discounts is a hot topic of discussion amongst eCommerce marketers.
To get a better understanding of discounts, here are the pros and cons of discounts:
Pros
- Attracts customers
- Increases sales
- Adds a competitive edge to your brand
- Helps with seasonal promotions
- Offering discount in exchange of contact details helps grow your contact list
- Improves repeat purchases and boosts customer loyalty
- Discounts can help clear out inventory
- Increases the speed of sales
Cons
- Discounts can eat into your profit margin
- Overusing discounts can build a wrong impression of your brand
- Frequently offering discounts can lead customers to always expect discounts
- Discounts can lead decreased sales during non-sale periods
Now you know the difference between online reward credits and discounts. Next, let’s take a comparative look at both to determine which one is better for your Shopify store.
Reward credits vs Discounts: A comparison table
Here’s a table that compares different factors of online reward credits and discounts—an easy reference to help you decide what is better, reward credits or discounts.
| Factor | Reward credits | Discounts |
| Profit margin | Profit margins can be maintained because the value of reward credits is fixed | Profit margins can decrease if discount strategy is not well calculated |
| Customer loyalty | Shopify reward credits can improve customer loyalty as customers return to use store credits | There’s no guarantee customers will come back to make more purchases |
| Brand perception | Creates a good brand perception because customers know they won’t lose their money if they return a product | Overuse of discounts could lead to customers not valuing your products and services |
| Customer acquisition | New customers would feel safer as they would not lose money in case of returns. Besides, when returns are easy, customers feel more safe | Discounts help bring new customers to your store. However, there’s no guarantee they would sign up so customer retention rate could be low |
| Cash flow | Shopify reward credits ensure cash once received does not decrease from your account | Discounts could eat into your revenue and profits if the calculations aren’t well thought and planned |
| Control over pricing | Reward credits provide a better control over your pricing strategy | Your pricing strategy could be difficult to maintain if you start offering discounts frequently |
| Long term impact | Helps boost customer loyalty, increase in sales and customer retention | If you fail to collect customers’ contact details, your discounts strategy may not help in long term customer retention |
| Flexibility | Shopify reward credits offer flexibility to customers in terms of using credits in multiple ways and at any time in future | Discounts have limited time use and customers cannot do much with discount codes |
Store credits vs Discounts: Which one is better?
Practically speaking, anything that helps bring your customers back to your Shopify store is a good strategy. As we explored both reward credits and discounts, between the two, reward credits seem to have more positives compared to discounts.
Not convinced?
Let’s take the case study of one of the biggest online marketplace – Amazon. On Amazon Prime Day 2019, the website had wrongly mentioned low discounted prices of many products. However, when customers tried to buy the products at the discounted rates, they weren’t able to. This left many customers unhappy and frustrated.
A classic example of how frequent and high discounts can lead to customers setting high expectations from your brand. When unfulfilled, you might end up losing more customers than gaining from your discount strategy.
When compared—reward credits vs discounts—most factors point to positives of setting up online store credits.
Tips to use reward credits
- Initiate reward credits when customers return a product. Instead of refunding the amount, offer store credits in their Shopify customer account
- Allow customers who buy in physical stores to use reward credits on your Shopify online store
- Allow flexibility to customers. For instance, allow them to transfer reward credits to family or friends
- Do not put a last date to use reward credit. Give customers the freedom to use store credits when they are ready
- Use a robust Shopify reward credits app to make the process automated and hasslefree for customers
Wrapping up: what to choose — reward credits vs discounts
Setting up Shopfy reward credits has more benefits than offering discounts.
However, it’s critical to ensure you first set up a robust Shopify customer account page for customers to sign up.
Automated processes and integrating reward credits with your customer account can ensure a seamless and smooth returns process for customers. Additionally, their shopping experience will become better.
Explore Flits Customer Account Page App with Reward Credits add-on.