What is a brand loyalty program?
When consumers become committed to a particular brand, a behaviour pattern is observed which makes them make repeat purchases over a period of time. Businesses use creative marketing strategies such as brand loyalty programs or reward programs, brand ambassadors, trials and free samples to build loyalty towards their brands.
Companies use different tactics to create brand loyalty in a highly competitive market, where there are a lot of established and new players. They will study the buying and shopping patterns of their customers, build relationships through a robust and excellent customer service and engage brand spokespersons to attract new customers and retain old ones. Consumers typically purchase from their favourite brands; and price and convenience will definitely not stop them from being loyal.
Brand loyalty addresses the most important requirements and needs of its customers. Loyalty leads to retaining of old customers and an increase in profits. When this happens, it is considered to be a successful program.
Consumer Trends and Brand Loyalty
Studying consumer habits and purchasing behaviour are trends that are studied regularly and over a period of time. Some trends do not change, but there are others that evolve over a period of time. Companies collect and analyze data of their customers, in order to be able to understand how to market their products. Marketers track changes and change their marketing and promotional campaigns accordingly, in order to be able to retain their brand loyal customers. Companies hire brand ambassadors to be spokespersons for their products, promote the brand’s image and stimulate interest in their products. By this, the company hopes to influence purchasing behaviours of customers. Brand ambassadors can prove that word-of-mouth is an effective tool to disseminate information.
Companies need to continuously monitor and research their products and services to find out how effective they are in the long run and make suitable modifications that will add value to their customers, thereby increasing brand loyalty. When a company ignores consumer trends, it usually leads to a decline in market value, profits, market share and most importantly, they start losing loyal loyal customers. A classic example is Blockbuster, which once had a monopoly in the market but failed to capitalize on it simply because their product was not aligned with their customer’s growing needs, behaviours and environment. Responding too late to trends is as detrimental as coming second in the market. To assume that a product will always meet the needs of consumers is a sure recipe for disaster.
Keeping the customer happy and making them advocate for your brand involves more than great service. How will you ensure that this customer keeps coming back to buy your product in the future? One great way to ensure returning customers is to have a robust customer loyalty program. In fact 76% of customers agree that a brand loyalty program is a great way to foster a bond between the customer and the brand. A customer loyalty program is a marketing technique to retain loyal customers and to attract new ones. It is a rewards program that rewards customers that frequently conduct business with a company.
Why a well established brand is worth billions
What does a good brand mean? How can a brand be valued at billions of dollars? After all, aren’t they simply the byproduct of clever marketing strategies and smart product positioning?
Brands bring in a sense of value to their customers, ensuring a promise that they will always deliver on quality and credibility. For example, if you are looking for running shoes, you might not look beyond Nike or Adidas. In case of cars, even if you have absolutely no inkling about them, you somehow have this subconscious realization that Mercedes makes good vehicles.
If you walk through the doors of a McDonalds you know exactly what you will be getting. People associate their positive experiences and memories with a brand and develop loyalty to it – a loyal customer is often undeterred by price fluctuations or momentary lapses in quality or customer service.
Good brands do not try to be all things to all people
It is interesting to note that brands do not have to mean something to all the people, in order to be successful. For example, Apple does not attempt to be appealing to all its customers and they are aware of people out there who hate the very brand and would not buy anything associated with it. Similarly, there are customers who hate the very idea of shopping at WalMart, a value-for-money retailer. On the other side, there are people who live on WalMart purchases throughout the month and stretch their paychecks as much as possible and have absolutely no problem with the no-frills, low-cost approach.
Brands definitely matter and they offer a certain amount of value to their customers, irrespective of how WPP estimates brand value. There is not much difference in taste between Coca-Cola , Pepsi and other cola-flavoured beverages to explain the discrepancy in valuation, but over a period of time, they post significantly higher returns on capital than their industry peers. With each passing year, these differences accumulate and companies with valuable brands generally produce better market returns.
The above thought does not mean that investors should ignore or avoid companies that do not or cannot build a brand around their business. They should not limit their thinking or analysis to trailing sales, book value and other easily quantifiable fundamentals. There might be some doubts about the valuation of companies and sometimes a prestigious brand is often all that stands between two products that cannot be distinguished; all that exists is a thin line between a super product and a run-of-the-mill outcome.
How can brands benefit from loyalty programs?
Businesses that operate in competitive markets constantly need to come up with innovative ideas to differentiate themselves from their competition and to stay close to their customers. The constant pressure of low margins and fixed costs hangs over their head. And the threat of low-price competitors cannot be done away with. When price remains more or less the same, companies have to look for other differentiators.
One such advantage that businesses can offer to their customers is through customer loyalty programs. They not only give an additional benefit to their customers during price wars, but they also prevent customers from switching loyalty to other brands. When these programs are run well, they can contribute up to 20% to a company’s profit. It is no wonder then that US companies spend 25 Billion USD every year on loyalty programs.
What is the beginning of Loyalty Programs? Around the 1970s it was found that businesses that had a better relationship with their customers had better customers. This in-turn generated better business. It started off as a marketing strategy for small and medium businesses that used the information collected in their database about their customers, to monitor and manage their behaviour and spending habits.
There are plenty of brand loyalty programs in modern times, but most of these can be slotted into two different categories; Standalone and Partnership.
The most common loyalty membership today is the standalone program where customers get rewarded for shopping with the company that offers the program. Points can be redeemed only within the range of products offered by the program owner. For example, if I buy products from Bath and Body Works, I can redeem my points for products within the brand or store.
Often brands partner with other brands to offer their customers new and unique shopping and experiences. There is more than one company that participates in this program. Customers are rewarded for doing business with all the participating companies. Loyalty points can be redeemed within all the products offered by the participating companies. For example, if I earn points with the Wyndham group of hotels, I can also redeem my points with the Casino group of hotels that is partnered with the Wyndham chain.
How do they compare against each other?
What do customers want? The problem with any good customer strategy is that every company wants to copy a successful loyalty program without giving much thought to whether this program would work for their customers. Sadly, most of these fail miserably; not because of a fault with the concept, but because it isn’t based on careful analysis of customer behaviours. Every brand loyalty program should include :
Rewards that customers can relate to
The reward program should offer instant gratification, rather than saving the best for the last. Customers are attracted to attainable reward programs. But what matters in the long run is the relationship that the business cultivates with its customers.
Never forget the bottom line; that is to sustain brand loyalty
From a brand’s perspective, the ultimate motivate of a loyalty program should not simply rewarding customers; rather the focus should be on cultivating brand loyalty and discourage customers from switching brands or stores.
Program suited for different segments
When it comes to brand loyalty programs, there are no one-size-that-fits-all kind of a customer strategy. The loyalty program should be designed in such a way that it addresses the needs of different segments of customers. It should first identify the needs and requirements of its customers; then analyze the purchasing habits of their customers and so on. If the business can partner with other like-minded companies to offer new and exciting shopping experiences, this would definitely work out to be a very successful marketing strategy.
Best brand loyalty programs
Sephora’s Beauty INSIDER
According to Sephora’s rewards program, customers earn 1 loyalty point for each dollar they spend at Sephora retail stores, on Sephora websites or Sephora stores that are present inside JC Penney Stores.
Sephora’s program has a mobile app, but customers need to use their email address when they check out, to accumulate points.The mobile loyalty program is divided into 3 tiers and features unique rewards like birthday gifts and a private hotline to exclusive events and free beauty classes.
Starbucks issues stars as a loyalty indicator. What differentiates it from many large-scale loyalty programs on the market is that it is simple and easy to use. It has only 2 tiers – Green and Gold. The first tier works very well because it is convenient for both existing and potential customers. Perks include:
- Free refills
- Mobile payments/ordering
- Exclusive member offers
Apart from enjoying personalized rewards, Gold-tier members also get a personalized card which they can use instead of the mobile app, if they want to.
Neiman Marcus’s In-Circle
Neiman Marcus’ loyalty program is a points-based rewards system, where customers earn 2 points for every dollar they spend. This places a lot of emphasis on advancing to the next program tier. The system has 5 regular tiers and 3 luxury-type tiers.
Customers can earn double loyalty points through exclusive private offers, events and perks. Members placed on a higher are offered rewards such as personalized travel services, sartorial consultation and high-end restaurant reservations.
The program’s highlight is its Perk Card which offers numerous privileges. Moreover, when members accumulate 10,000 loyalty points, they also get a $100 Points Card.
Kohl’s Yes2You Rewards Program
Consumers who sign up for Kohl’s program are enrolled on a cash back points-based system, where they earn 1 point for each dollar they spend (no matter how they pay). Once they reach 100 points, they get a $5 reward.
Also, every year, program members receive a birthday present along with 8 extra savings offers. In addition, members can also earn bonus points on various occasions, and other surprises too.
The program is available on both iOS and Android devices on their app.
Bulletproof’s Bulletproof Rewards
Bulletproof is known both for its coffee shops and also for its online store where people can buy products that are coffee-related, as well as plenty of food items and drinks. Their loyalty program is mostly built around online purchases, which is a strategy that one does not see enough of, nowadays.
The program itself is a points-based system, and customers can earn points by:
- Making purchases
- Sending out invitations
- Subscribing to a newsletter
- Submitting product reviews
- Adding product tags
- Registering on Bulletproof’s website
It is the small things that really matter in any relationship; including the brand-customer relationship. As eCommerce websites, it is our job to assure our customer experience even after the shipping lands in the hands of the customer. A little effort on your part before shipping can turn first-time customers into your brand ambassadors. As Maya Angelou said, “people will forget what you said, people will forget what you did, but people will never forget how you made them feel”. Make your experience such that they don’t forget – here are five examples of ways you can woo your customers with order fulfillment.:-
This is one of the easiest ways to personalize your sale. Write a small handwritten “thank you” note for the sale to your customer. Address them by their name, thank them for their purchase and say that you hope they will enjoy their purchase. Is the customer a returning customer? Add that you value them being loyal customers. Did you help them with their purchase? Refer to that in your letter. End the letter by informing them that you are there to answer their queries at any point of time. This feel-good letter will encourage them to leave a review on your website / social media. Let them know that you genuinely care about them and want to open room for dialogue between the two of you.
Thank you letter from a store
Want your customers coming back to you? Occasionally offer them a special discount coupon or gift vouchers to keep them happy and returning.
If there are any customers who have had a bad experience with your brand, you can turn it around by including something extra with their order. Make amends by including a free gift, sample or vouchers or coupons along with an apology letter in the shipment. This would make the experience positive rather than negative.
Include your product brochure and flyers along with the shipment. After all, they bought a product from your store and are likely to buy another if reminded about them. Upcoming sale and collection updates should also be included in the shipment to build up anticipation for your promotions.
Promotional Information – Product Catalogue
Create unique packaging material for your brand. This will make your brand easily identifiable and definitely impress your customers. To look at the numbers, it was found in a study that 52% of customers are likely to repeat purchase from online merchants with exclusive packing and moreover, 1 in 2 customers expect their shipment packing to be branded if the retailers provide branded packing in-store. Here is an online brand which is doing it right.- Bonobos, a popular men’s apparel retailer from New York City has distinct packaging that makes it instantly recognizable. The added handle to make the box look like a briefcase is a great creative way of creating a buzz.
Segmentation for Personalization
Personalization takes time and money. Hence, spending time personalizing all shipping your company makes is taxing. The smart way to go around personalization is through segmentation. Personalize where it is more likely to give you a better return on your effort. Segment customers on criteria such as how much they spend, when their last purchase was, their purchase history and when they were last active. Then choose and invest in building relations with your best customers.
We’ve entered the age of the consumer, where the customer is at the center of the retail universe, and data has made this possible. Customers are empowered with more information than ever before; with online stores, social media, and smart phones. Their expectations from in-store shopping experiences have changed, and so should the role of the sales associate. Clienteling is a customer centric CRM retail system, which empowers the sales associate with customer data in the palm of their hands to facilitate a highly personalized and delightful shopping experience that drives repeat visits.
Clienteling solutions help associates in various stages of assisting the customer:
- Getting Customers To Visit The Store – Engage with existing customers by sending personalized communication to various channels, based on the context and past shopping behavior.
- In-store – Recognize the customer in-store and personalize the interaction to better assist the customer. Effectively use customer preferences, notes from previous interactions and recommendations based on the customer’s past shopping behavior to increase your customer engagement.
- Transform Customer Service to Customer Delight– Clienteling, when done effectively, also means handling customer returns and customer feedback effectively with the goal of achieving customer delight.
While clienteling systems have seen an impressive growth in adoption over recent years, this space has been rapidly evolving with the recent technology trends. Mobile devices and interactive displays are redefining the in-store experience for both sales associates and customers. Tablets have dramatically impacted how sales associates can participate in the customer shopping process. Tablets allow store associates to have a 360-degree view of every customer; information on the move as they engage in assisted selling and double as a product expert with relevant information at their fingertips. Experiences such as this, can bridge the gap between online and offline retailing and bring personalization in-store with all other advantages of in-store shopping.
Tablets also make it easier to enrich customer data by capturing customer preferences and interests based on one-to-one interactions. As this data becomes more accurate, retailers are able to serve customers better in the forthcoming shopping experiences, as well as use it for targeted communication to announce new arrivals, sales and other events the consumer may show interest in.
Beacons, among the other recent technological innovations have made intelligent customer identification in-store possible. This technology will also open doors to mobile phones becoming a customer’s trusted digital assistant to enhance their shopping experience inside the store.
Regardless of the promise many of the new technologies show, the final touch point inside the store will always be the sales associate and hence a critical link in building and maintaining the relationship between the brand and the customer.
“Information will be the basis of competitive advantage so make it everything you do.” Blogger Elizabeth Dias summed up what we believe perfectly, but the question is, what is the best way to harness this information? For that, we need to look at the buzzwords and exciting innovations displayed this year at the NRF, Retail’s Big Show. As a product manager I was excited by the new product technologies unveiled at the NRF across more than 550 booths.
One question I asked myself was, what direction is the industry headed over the course of 2014? After one lap around the booths it was clear to me that the direction, or directions were cloud, mobile, social, analytics and omnichannel. These were the buzzwords floating to and from every booth. The funny thing about buzzwords though, is the majority of people use them without really knowing what they stand for. And when it comes to omnichannel and analytics, people tend to use them with even broader strokes. To me, omnichannel is where we get the data; customer likes, dislikes, location, and history while analytics is how we analyze it and put the data to use.
The ubiquity of integrating analytics strategies into mainstream retail might seem obvious now, but it took years to go from it being spoken about in a small section of the Big Show to a large presence woven into the fabric of every exhibitor’s messaging. Similarly, advanced technologies such as “people counting”, “beacon”, “localization” and the biggest buzzword of all “omni-channel” have gone from something experimental to slowly finding a place in mainstream retail. What was not clear however, was a single storyline emerging out of this omni-channel retailing boom. I found that outside of a few large players operating in this segment, namely the likes of Salesforce or Oracle (thanks to their slew of acquisitions of smaller niche players in this segment) most retailers used the buzzwords with no clear storyline.
Common themes: What emerged as a common theme was that Point Of Sale vendors have decided to dive deep and figure out how they can go up the value chain by expanding into higher end analytics/Business Intelligence software to create a differentiation. Lightspeed Retail, Celerant, and Epicor all looked really good with their solution offerings, but many large solution providers are offering analytics solutions. While the smaller players were trying to look at entering specific products and diving deep into them. For example, Irisys was deep into people counting and trying to do a good job at focusing on one thing, Experian was also the same as were a few others.
Uncommon technologies: What was not too common was mobile apps, localization technologies, and beacon adoption. This being said, it became increasingly clear to me: Solution providers and retailers have yet to figure out the possibilities with the emergence of the new disruptive technologies. I could not find a single company at the show (and I looked at pretty much all the major ones out there) that had a clear mobile app strategy that worked and really did all three things well. If you look at it, Apple’s Passbook has not exactly taken the retail world by storm, despite starting with a bang and beacon technology has yet to achieve widespread adoption. Apple has released 200+ million iBeacon devices out there in the wild since they already have been shipping this technology with BLE i.e. Bluetooth Low energy since the iPhone 4 devices from 2010. I did stop by Qualcomm’s booth and they have a technology called “Gimbal” which is a context awareness SDK designed to deliver timely, personalized content to mobile audiences which seemed interesting.
27,000 delegates from across the world gathered in New York this January at NRF 2013, making it the largest platform for discussing the future of global retail industry. Team Capillary brings to you the three most talked about customer engagement trends at the show.
1. “The Great Convergence” : Deloitte
In a keynote addressed delivered at NRF’s BIG Show 2013, Alison Paul, compared the impact of the digital revolution to the Industrial Revolution and how it caused a massive reconstruction of the industry. Rather than change in retail technology, he said it is consumer technology that is changing and retailers need to take notice.
2. Mobile continues to dominate customer engagement!
For a second year running, after 2012, NRF 2013 was dominated by mobile. While leading retailers such as Macy’s and Sephora are testing a range of mobile technologies, mid-segment retailers were also curious to know how to ‘Go Mobile!’
3. Smarter Analytics for Personalization
In one of the key NRF Educational Sessions, leading specialty children’s apparel retailer, The Children’s Place discussed how analytics is helping them improve business strategy. They are building brand loyalty through personalized and targeted communication.
Also at NRF’s BIG Show ‘13 Jeff Bezos was awarded the Gold Medal Award for the company’s excellence in retail and his inspiring leadership. Crocs, Inc., President and CEO, John McCarvel was named Retail Innovator of the Year while Lululemon Athletica CEO, Christine Day was awarded International Retailer of the Year at NRF’13.