Loyalty programs can be an effective way to reward regular customers, drive repeat business and deliver great customer service. It’s important for retailers to ensure they are getting the most out of loyalty programs All programs are not created equally, however, which is why it’s important for retailers to ensure they are getting the most out of the investments they sink into creating and maintaining loyalty programs.
1. Ability to influence and track positive behaviour change
The ability to influence and track positive behaviour change has expanded vastly with the proliferation of available customer data. It delivers a fair exchange of value for customer loyalty and provides a foundation for building relationships beyond the transaction and customer loyalty. Another risk factor is internal silos. All business stakeholders need to be aligned around the customer needs and be willing to reevaluate internal business processes to ensure accurate tracking and reporting.
2. Ability to differentiate and target members on a segmented basis.
The ability to consolidate consumer data, identify meaningful insights that address not just demographic differences but different motivations of your consumers is fundamental to loyalty program success. The level of customer profile enables retailers to understand how customer needs may change from by channel or by day.
The time-starved office worker mid-week is the same shopper who enjoys leisurely in-store browsing with the family on weekends.”
The benefit of this approach to the retail consumer: It feels more relevant and personalized. The customer feels like he matters to that retailer, and that is the beginning of building an emotional connection with your customers. The best examples of segmentation/ personalization enable the customer to manage their own personalization settings for the relationship, Yeow said.
The pitfall: Collecting profile data and not using it to personalize communications and experiences is a missed opportunity. Consumers provide you with their personal information and expect something of value in exchange. If data is collected and perceived to not be used, it erodes consumer trust. That is the opposite of customer loyalty and advocacy.
3. Ability to recognize and reward transactional and non-transactional behaviors.
Rewarding customers for non-transactional behavior has become a minimum expectation. Programs that only recognize transactions feel very one-sided as if customers are valued for profit only, Yeow said. This approach limits the opportunity to build an emotional connection to the brand; limiting the potential. That emotional connection is required to build customer devotion. A customer who feels devotion adds another level of value.
“They are more likely to recommend the product to others, engage with social media efforts and engage with offers,” Yeow said. “Social media has provided loyalty marketers with quick, easy and repetitive ways to provide rewards for engagement behavior. Many beauty brands are successfully offering prizes and rewards for engaging with them via Instagram. This is one way to reward non-transactional behavior, increase share of voice and it helps to promote advocacy via one of the largest social platforms.”
The benefit of this approach to the retail consumer: Consumers who are rewarded for all types of interactions feel more like they are participating in a two-way relationship with the retailer and are being recognized for all of their efforts in the relationship.
The pitfall: The risk is becoming uncompetitive and losing relevance.
4. Offering relevant rewards
The most successful loyalty efforts start by understanding the customer base beyond transactions to motivations, lifestyle and ultimately persona. Starting from customer insight enables programs to offer rewards that are relevant and have the ability to inspire that customer. Practical rewards like free shipping are also immediate and tangible. Another practical reward example is Nordstrom offering free alterations. Those examples are relevant, practical and immediate, Yeow said. Millennials and younger are driven by immediacy and instant gratification. Integrating loyalty into point-of-sale provides the ability to reward the customer’s current spend and with real-time connectivity, returning a benefit straight to the customer via their mobile device or even on the POS / receipt itself. This means a retailer can automatically update point balance to deliver the instant gratification and recognition consumers crave for being a member and using the program.
Yeow said successful programs balance practical rewards with aspirational rewards and frequently communicate progress. Offering both practical and aspirational rewards enable retailers to make customers feel like rewards are easily reached and can also be a tool to encourage additional spending. “Spend and get” rewards are typical retail aspirational benefits. Members know when they spend a certain amount, they will receive a discount or cash back coupon. Achievement of a membership tier level can also be the aspiration, providing additional ongoing benefits. Aspirational rewards lead to what we call the “golden moment” when a member claims their reward. Members who’ve claimed that reward, the aspirational one they’ve been working toward, are more likely to become devoted. More likely to tell others. More likely to become a long-term customer.
The benefit of this approach to the retail consumer:The consumer receives rewards that are tailored to their needs, feel within their reach and are received at the right time.
The pitfall: If a consumer is rewarded in a way that is not relevant or poorly timed it is a wasted effort. That consumer will feel like all of the business and personal information they have given has been wasted investment on their part.
5. Capitalizing on unique benefits of each consumer touchpoint.
There have been many recent examples of bringing technology into the store to improve customer experience, Yeow said.
“We now see digital influencing the physical store in many positive ways from interactive mirrors to picking up online purchases in store,” he said. “The customer journey is not a straight line. Depending on the product it can take many months and incorporate many channels. The best loyalty offerings provide continuity, are convenient and seamless to the consumer. Apps have emerged as a very strong tool in this area. The Starbucks app is a great example of to use mobile and in-store to create a seamless experience and drive sales.”