Loyalty in e-commerce is very different from its retail counterpart. In many respects, e-commerce lags behind retail by around a decade. Merchants used to just build an online store and the orders would come flowing in. However, over time the industry evolved into an advertising arms race as stores tried to match Amazon’s prices.

This is where history repeats itself. Just as competition in traditional commerce led to the adoption of traditional rewards programs, today’s e-commerce landscape has encouraged a new wave of retention marketing: online loyalty programs.

New demands

When e-commerce first came onto the scene in 1991, being able to build an online store was all the advantage a merchant needed. Today, e-commerce solutions like Shopify and Bigcommerce have made it easy to start selling online, effectively leveling the playing field.

With more stores and the same amount of ad space, it’s not hard to guess what is happening. Demand for ad space has skyrocketed the price of advertising tools like Google Adwords and social ads. The cost to get customers to your website is higher than ever and successful stores have shifted from acquisition tactics to retention strategies like loyalty.

“... a loyal customer is up to nine times more likely to convert when visiting a website than a first-time visitor.”

Online rewards

A strong loyalty program allows you to treat rising advertising costs as an investment rather than a sunk cost just cutting into margins. This retention approach pays future dividends because a loyal customer is up to nine times more likely to convert when visiting a website than a first-time visitor.

But what makes a strong e-commerce loyalty program? Online loyalty programs have a few unique benefits over retail ones. First of all, there is no need to input phone numbers or loyalty cards because the program can be tied directly to the customer’s store account. It’s also much easier to encourage other profitable actions online like getting a customer to share things on social media or referring a friend by offering rewards.

Online loyalty programs can be used to both increase customer retention and encourage a variety of profitable actions. E-commerce may be behind retail right now, but it is definitely picking up speed — especially with its loyalty game.