What’s the Difference Between Loyalty and Referral Programs?

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Every ecommerce store owner must remember that you are not finding customers for your products; you are finding products for your customer. Loyalty and Referral programs will help you give your customers the best findings. Happy customers also bring their friends or family to your store, referring to their favorite products they found in your store.

Also, as an ecommerce store owner, you must know that a customer loyalty program is not the same as a referral program, and each is different and has its exciting features.

This blog will further enhance you with the difference between loyalty and referral programs and how both of the programs will benefit your store.

Looking forward to start a loyalty program

What’s a Loyalty Program?

Have you ever wondered why a customer loyalty program started in an ecommerce store? The answer behind it is that a loyalty program can turn your regular customers into loyal customers. Secondly, loyal customers will make their purchases regularly at your store.

These programs will increase your profits and generate more sales, which is a significant advantage to your ecommerce store. You can make this loyalty program work efficiently, and it’s also effortless.

You can track all your customer purchases and give them a customer loyalty program accordingly. You can provide a membership card or rewards to those customers who make many purchases. This way, you could encourage others to even make their purchases in your store.

Customers earn rewards or points in a loyalty program after every purchase. Once enough loyalty points have been gained, customers can redeem the points for free products, coupons, or other benefits. It is how the first loyalty program worked. In the 18th century, American Retailers gave copper coins to every customer after every purchase, and the customers could collect the copper coins and redeem them in their next purchase.

What’s a Referral Program?

Referral Program encourages existing customers to recommend your products to their family or friends. In other words, referral programs are the most trusted form of advertisement. The exciting thing is that you need not do the ad; your customers will do it for you.

All you can do is give them rewards for the referrals they make. This gesture from your side will encourage them to participate in the referral program more often. To make this referral program more interesting, you will also have to provide rewards for new customers.

Also, ensure that you make your customers happy, as this referral program will work much better if your customers are satisfied.

Difference between Loyalty and Referral Programs

Loyalty and Referral programs are marketing strategies that reward your customers and help in customer retention and increase sales. Let’s look into the difference between Loyalty and Referral programs.

Loyalty Programs engage your current customers to continue to shop for more products and use your service often to earn rewards or coupons. Customers will receive a reward only if they purchase or spend a specific amount at your store.

As a result, your customers will purchase more to earn a reward. You will build a strong brand connection by encouraging customers to make repeat purchases.

Also, loyalty and referral programs can convert your ordinary customers into loyal customers and build customer relationships.

Referral Programs encourage your customers to advertise your store/product to their friends or colleagues. In addition, you will earn new customers, and customers will receive a reward only if they bring new customers to your store.

As a result, you will gain new customers, and your new customers will make referrals in the future. The primary purpose of this referral program is to bring in new customers by using word-of-mouth marketing. Also, you can create many loyal brand advocates with a referral program.

Convert visitors into loyal customers.

What are the benefits of a Loyalty Program?

Loyalty programs boost customer retention, as loyal customers are less likely to switch to a new brand. Retaining customers through a customer loyalty program is an essential strategy used by many ecommerce store owners. Show your love to your customer through a loyalty program, and in return, they will stay loyal to your store.

Revenue, an essential aspect of any ecommerce store, is known to boost after loyalty programs are set in place. According to Forbes, 50% of customers say their primary reason for joining a loyalty program is to earn rewards on everyday purchases. So, reward customers for every action they make in your store.

Most ecommerce stores today strive to give their customers a wholesome experience, and one of the easiest ways to do this is by starting a loyalty program.

Receiving the reward will improve customer satisfaction since the expectation of earning a reward fuels excitement and anticipation.

Loyalty programs ensure complete customer engagement and help strengthen the bond between you and your customers.

Different types of Loyalty Programs

Every ecommerce store owner thinks about the types of loyalty programs they could offer their customers. Most of them would be using various loyalty programs in their stores.

Are you confused about choosing a perfect loyalty program? Don’t Worry! Let us have a look at the most popular types of loyalty programs. Also, there are various benefits to offering a loyalty program to your customers.

Points

Show your customers that earning points is way more accessible and fun. Give away points for every interaction they make at your store.

Example: 20 points will be given for every purchase. This way, your customers will get 20 points for every purchase they make. Also, once they earn 100 points, they can redeem them as a discount on their next purchase. This way, it will encourage them to buy more of your product.

There are a lot of ways to offer points, such as

  • Points for Purchase
  • Rewards based on spending
  • Order goals
  • Referral
  • Sign up
  • Write a product review
  • Birthday
  • Social-media share

Providing points will increase brand value and build stronger connections with your customers. Customers tend to purchase more from your store when you keep on engaging them or offering them points.

Rewards

Customers love rewards, and you are there to give them what they love. It’s easy to shower your love upon them; all you have to do is reward and excite them. One of the popular ways to reward your customers is by providing free products.

Let’s take an example of the Chick-Fil-A One App. Customers who use this app to purchase foods receive points, which they can potentially exchange for complimentary menu items, including strips, fries, and salads.

Giving your customers a freebie as a reward on their birthday is a fantastic way to make them feel special. So you can convince them to share their birthday dates, giving your business a vital statistical profile. Sometimes these birthday surprises can be a discount, free product, and free shipping.

Offer Free Shipping as a reward to boost loyalty among your customers. Set a criteria so that customers will receive free shipping on any purchase over a specific amount. You can set the minimum amount depending on your business strategy.

Coupons

Customers can redeem their points through coupons when they reach a specific points limit. This way, customers will make more purchases to earn many points. Also, this helps you sell more products and generate more revenue.

Nowadays, ecommerce store owners use coupons as a kind of strategy. For instance, each shopper could be asked to submit their email address before obtaining a coupon, so that you could send them welcoming or thank you emails.

Customers prefer stores that provide them coupons or discounts rather than those that do not offer such amenities.

What are the benefits of a Referral Program?

Implementing a referral program to your ecommerce store is more efficient and straightforward. Customers trust good suggestions and review more than an advertisement on television, making this the most apparent advantage of the referral program. Also, existing customers will likely stick with your business if you give them a referral program.

You can use your existing customer as a brand ambassador for your business, enabling you to expand your reach. As people tend to have a lot of friends, referral programs will work and grow your business to the next level.

A customized experience is incredibly popular with your current consumers, and you may give your customers the benefit of personalization for every referral they make. Also, this might help your brand satisfy a customer’s needs.

Rewards like discounts and gifts may cost your store, but loyalty and referral programs are a cost-effective way to advertise compared to other advertisements. Also, you can gain a new customer and a loyal customer. A customer who refers a friend is more likely to return to your store regularly, either to claim rewards or to talk about your products with other people. The more products customers buy, the more frequently they visit your website.

Different types of Referral Programs

Have you ever purchased things online after hearing from a friend that they loved the product? If that’s the case, this is a significant reason why ecommerce referral programs are so effective.

Word-of-mouth is one of the simplest ways to promote your product. Most people are likely to follow their friends’ advice before purchasing a product.

Here are a few types of Referral programs that you could use in your store to gain new customers and retain old ones.

Points

Give away points for every referral your customers make. Similarly, this will encourage them to bring in their friends to earn many points. Also, excite them by showing all those points earned can be redeemed as a discount on their next purchase.

Example: Earn 20 Points for each referral. Customers can redeem these points as a reward/coupon on the next purchase.

Rewards

Reward your customers for referring their friends or family. Similarly, reward the new customers who came into your store with a referral. This way, you could encourage both the customers to make more purchases.

Social-media referrals are more common nowadays, as they have evolved, and many people currently use them. By sharing your product on social media,

  • Expand your brand-awareness
  • Grow the loyalty of your brand
  • Gain new customers
  • Increase inbound traffic
  • Deepen your relationships with your customers

Give a reward to your customers for every referral they make on social media. For example, Share your referral link, and once friend shops with us, you both get $15 off.

Coupons

Send coupons instantly and gain the trust of your customers. Make them believe that your referral program is the best and most effective to depend on it. Whenever your customer refers to a friend, send them an instant coupon to their email and make them refer more.

For example: Refer a friend and earn an instant coupon!

On the other hand, send coupons for their referrals as well. This activity will encourage your new customers to make referrals in the future. Example: Give your friends a 30% off and a chance to win free products. Also, we will give you gift cards to win exciting prizes.

Sending these kinds of messages works charm and brings in new customers to your store. Also, it increases sales and generates more revenue for your store.

What makes a functional Loyalty Program?

The answer is simple. Any guesses? Yes! Great Rewards make a functional and practical loyalty program. Whether a free product or exclusive perks, the reward must be valuable.

Customers love new products, and products are a great place to start when considering a loyalty program. A functional loyalty program will drive repeat purchases, providing customers with discounts, rewards, unique offers, VIP events, and so on.

What makes a successful Referral Program?

To make your referral program an immense success:

  1. Be precise, accurate, and straightforward.
  2. Don’t exaggerate while requesting referrals to your customers.
  3. Make it simple!

Each time someone has a conversation about your products or store, you have a big chance to introduce your offerings to a new pair of ears.

Launching a referral program is not tricky because your most loyal, trustworthy customers are the ones who are most likely to refer to your store. If a referral succeeds, it raises awareness of your business’s brand. Anyways, it’s a win-win.

How to choose between Loyalty and Referral Programs?

Before choosing between the Loyalty and Referral programs, let’s look into some standard features. Both programs offer benefits to customers and are an affordable strategy to attract and retain customers. Also, they

  • Create a better value for your customer
  • Generate Revenue and High-Profits
  • Active participation
  • Build relationships with your customer
  • Build trust and loyalty

So, don’t be confused about choosing between loyalty and referral programs. Choose both and enjoy the double benefits!

Drive repeat purchases with a Loyalty and Referral program.

End-line

Whether you run loyalty programs, referral programs, or both loyalty and referral programs, you open up the possibility of developing enduring customer relationships that expand your store.

The loyalty and Referral Programs create tremendous value for your ecommerce store and your products. Implementing loyalty and Referral Programs together will strengthen relationships with your customers, and you can enjoy the long-term benefits.

Is a referral program the same as a loyalty program?

No, both are different and have their unique values. Reward Customers who refer your store or product to their friends through referral programs. In loyalty programs, customers receive a reward for expressing their trust and loyalty by staying with your store longer.

Who started the Loyalty Program?

Betty Crocker introduced box tops as loyalty program cards or tokens in 1929. The coupons were cutouts printed on the product boxes or packaging, and these coupons would be printed out, collected, and eventually redeemed by the customer for rewards.

Why are Loyalty Programs created?

Retaining customers is the ultimate goal of a loyalty program. This program will let you know how likely they are to return and how much money they intend to spend on your store.

What is the purpose of the Referral Program?

A referral program is a word-of-mouth marketing strategy that motivates customers to promote your store. Through referral programs, customers can share their brand experiences with friends, colleagues, and relatives and help you gain new customers.

Haridha P

Haridha P

Haridha is a content writer and a blogger. She has experience in B2B writing, SEO, and ecommerce plugins. Her interest also lies in reading novels, and she is always passionate about learning and exploring new things.

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