Although loyalty programs are primarily associated with the hospitality industry and brick-and-mortar stores, Forbes reports that there has been a sudden uptick of these programs in the online retail space in the past year. Merchants now invest millions to increase online shopper frequency and boost revenue.

What works? What doesn’t?

• Copy-cat commodity-based initiatives rarely leave a lasting impression. Create incentives that are as unique as your brand, to make customers feel special and engaged. Send your top customers on a weekend getaway at a resort, or offer them tickets to a sporting event. Rewards in the form of experiences are personalized, and not easily duplicated by competitors.
• Loyalty membership tiers serve as a consumer psychology tactic that will motivate shoppers to spend their way up to the next tier.
• Convenience services are a customer magnet, particularly when packaged as a VIP offering. If peer businesses offer free ground shipping, offer discount or free expedited shipping to set yourself apart.
• Buy-one-get-one type rewards may sometimes be perceived as cheap production, inferior quality, or excess out-of-season inventory, to the detriment of your brand image. If you choose to offer a free item, make it a customized or exclusive product that your valuable customers will not interpret as dispensable to your business.
• Reward non-purchase interactions that occur on mobile apps, social networks and review sites. When your customers create a buzz around your products, they serve as brand advocates, and most importantly, give you free advertising.
• Points should expire after a period of inactivity to encourage continuity.

A successful implementation ultimately depends on budget, manpower, growth forecast, and customer demographic, and what works for one business may not necessarily translate well for another. Nonetheless, effective programs share one thing in common: loyal customers are rewarded with royal treatment.

Source:  The 10% Strategy: Growing Your Business by Making Small Incremental Changes