Flipkart-owned online fashion retailer Myntra, whose sales grew 56% from a year earlier during its season-end sale, will soon launch a new loyalty program as part of a broader strategy to get existing customers to shop more and also to acquire new shoppers, a top company executive said.

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In an interview to Livemint, Myntra chief executive Ananth Narayanan said the new loyalty program will be different from Amazon’s Prime service and would be “fashion-specific”.

“We are actually thinking of innovating around a loyalty program, which you should see come out in a month and a half,” said Narayanan. “It won’t be like Prime, but it makes sense to have a loyalty program. We’ve been working on it for two-three months.”

Myntra’s plan comes at a time when Amazon’s Prime program is proving to be a crucial differentiator for the US-based e-commerce giant in its fight against local rival Flipkart, with over 30% of Amazon India’s overall orders coming from Prime users.

Myntra Shopping Groups

During the End of Reason Sale sale, Myntra introduced a new feature called Myntra Shopping Groups, which allows buyers to shop in so-called online groups, as part of a move to drive higher traffic and retain more customers. Myntra said nearly 100,000 shopping groups were formed during the sale and contributed about 18% of sales.

Narayanan said, “The biggest thing for us this time was that the consumer experience was fabulous. Almost 2 lakh deliveries are already done.”

Separately, Amazon India said sales of its top fashion brands grew five times compared to normal-day sales during its recently-concluded end-of-season fashion sale. Amazon India’s fashion head Arun Sirdeshmukh said sales of top brands including Marks and Spencer, Pepe Jeans and private-label brand Symbol grew 10-20 times, compared to average-day sales.

 Ecommerce Loyalty Program

The idea behind a customer loyalty program is that when repeat customers are rewarded, the business’s sale increases. This is basic yet a powerful strategy. As business management started to become more scientific and data driven, marketers began to understand the true cost/benefit of loyal customers. Today, we know that it costs 5% to 10% more to acquire a new customer than it does to sell to an existing one. Furthermore, current customers spend 67% more than new customers.

As e-commerce becomes more popular in the retail industry, it is important to balance the marketing toward both customer groups.

Customer engagement is important and signing up for loyalty programs increases the chance of engagement. By providing a deal, such as a certain % off your first purchase when you sign up, it will incentivize people to purchase a product.

Here are some key advantages of Loyalty Programmes.

  • Win greater share of wallet: Loyalty programs encourages the consumers to purchases more toward a business and less from competitors.
  • Encourages additional purchases: Consumers can be enticed to buy more with the loyalty programmes.
  • Reflects customer behavior and preferences: The loyalty program tools collect customer data and tracking behavior. It allows the organizations know what a consumer buys, how much, and how often.
  • Contributes to differentiated service: A loyalty program provides a means to reward customers according to their value to the business.
  • Nourishes the product: Loyalty programs are worthwhile when they enhance the value of the product brand and increase product availability.
  • Attract new customers: For many consumers, the reward program may lead to mouth publicity further engaging with new customers.

In case of Amazon Prime, there is a very clear value proposition and indeed a value exchange between the customer and Amazon. This value exchange is key to Prime’s effectiveness. Myntra will have to do the simple things better and add utility and entertainment to its loyalty plan.