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Developing an ecommerce business generally speaking and a business of magento stores is hard enough without the chore of wooing a customer to make a repeat purchase. Repeat customers are difficult to win, and the job of convincing has to repeat after every purchase.
Sometimes momentum carries the customer from a second purchase to a third, but you cannot count on it. This is where customer reward programs present themselves as an effective marketing tool. You can offer the customer a bonus in exchange of loyalty, and also build a database of information about your customers.
When you have a reward points program, you have a way of capturing some demographic information about your customers, unlike physical stores that know nothing about the person standing in the checkout line. Using this demographic information, you can target the particular wants and needs of individual customers.
If you deal in merchandise that your customers are likely to purchase repeatedly, then you must consider a rewards program. However, if your service is used only once, or highly infrequently, then you will probably not benefit from a customer rewards program.
Not necessarily. For example, you could offer rewards for referrals instead. This gives benefits to the customer for the purchases made by the person they referred.
Some Magento store take a blanket approach to rewards programs. But there are others who argue that rewards should only be offered to the top 10% of your customers — those who bring you the most profit.
Frankly, both approaches have some merit. On the one hand there is almost no incremental effort required to offer rewards to everyone. On the other, if your rewards are inexpensive, they might fail to excite the customer. If you reserve rewards only for a few, and this is well known, then customers might resent this and leave, or they might spend a little more to get into the program. One solution could be a tiered rewards program. That way the customer can increase their spending a little and get better rewards.
a discount on each purchase
a free item after a certain number of purchases
a reward points program with prizes, where points can be redeemed for purchases
Of course, these are just some of the more common ideas. Your rewards are restricted only by your creativity.
Additionally, the kind of program you institute depends on how much it costs you to run that program. Reward points based programs are most suitable to magento website that have a high number of transactions. A once a month purchase is not enough to warrant such a program.
In fact, of the dozens of ecommerce business plans that I evaluate each month; there are always some that list their rewards program as the key differentiator. While in most cases that is a stretch, I do occasionally come across rewards program designs that are truly outstanding.