Loyalty systems one way to encourage customer retention

Online loyalty rewards programs can improve customer interaction

Customers are often on the lookout for bargains, price breaks or anything that convinces them that they are obtaining a great value for a service or product. That's true whether they are shopping in a brick-and-mortar outlet or at a retail website.

Loyalty systems are a popular way for businesses to offer those advantages to customers, and many find they can provide an increased opportunity for customer retention and involvement. Website visitors might be more inclined to become repeat shoppers at a particular virtual storefront if they feel that they will be rewarded for their loyalty, for instance.

However, there's a risk to this strategy for e-commerce ventures. A 2005 study at the German Institute for Secure Telecooperation noted that consumers sensitive to privacy issues might be reluctant to hand over the personal information merchants require to enroll them in a loyalty system.

In addition, experts note a loyalty program won't reap many benefits if a retailer's customer service experience is poor. Factors such as consumer support and ease of shipping are of particular importance, according to the website Practice eCommerce.

“There is a direct correlation between shipping days to the customer and repeat purchases – the longer it takes for a customer to get the purchase, the less likely they are to make a repeat purchase,” Jim Novo, an author and expert on customer retention, told the website.

As a result, it is important for merchants to ensure the tools they are using on their website are strong enough to support a pleasant customer experience. Their payment processing gateway and merchant account must be able to offer robust security measures, easy interaction and options for loyalty programs. If that's not the case, it may be time for these merchants to consider a new merchant account provider and payment gateway.