The Digital Boom
When Flipkart and Amazon hit the Indian market, brick and mortar companies started to wipe cold sweat. Online shopping was starting out with a mean purpose, and it looked like it wasn’t going to go anywhere. Malls shut down, bookstores suffered, while all online stores winked and said, “Cousin, business is a – boomin”
But fast track a few years into the retail revolution, and it became clear that the repercussions weren’t as apocalyptic as we’d initially assumed them to be. Shopping, after all, is an experience online stores simply cannot offer. There is a convenience in walking down to a nearby supermarket to get groceries for the cake you need to bake in the next hour. There is leisure in strolling around with your cart looking for new products you can try, there is simplicity in reading through the fine print behind a box before buying it all on a lazy Sunday with your family. Online shopping can get you suggestions and reviews, but they can never give out the retail therapy that brick and mortar stores deliver. eCommerce platforms are certainly booming individually, but as retail channels, they don’t hold a candle to the excess of consumers who prefer to just drive to the nearest mall and buy what they see.
As polarized as digital platforms and brick and mortar stores were, retailers soon realized that technology didn’t have to be their enemy. Muttering “Amazon” in a Landmark store while grunting at the inconvenience of searching for books will certainly get you looks from the dark side, but it won’t exactly make you wrong. As brick and mortar retailers, the convenience of digital platforms is not something they should overlook, and the rumbles of customers impatiently searching for products is not an experience they should endorse. Harnessing the power of technology, as clichéd as it sounds, can always make the physical retail experience far more accessible, leading of course to wider possibilities of sales growth, repeat customers and popularity.
Digital Technology in the Real World
For physical retailers, digital data collection and analysis can open entirely new doors and ensure the best results in the form of customer satisfaction, loyalty and relationships. Instead of relying on more traditional methods of marketing, retailers can keep digital signages of their customers, analyze their behavior and feedback to base all their products and marketing pitches on calculated data and actionable insights.
One of the more exciting possibilities today is to accurately analyze foot movement and customer traffic across the store to measure conversion ratio, sales and marketing effectiveness, while strategically creating in-store heat maps, ensuring maximum visibility of the product. Artificial Intelligence makes this possible at a fraction of what it used to cost to gather such data.
Accurate footfall analysis allows offline functions of brands to take a more informed and strategic approach to selling. By correlating the data to optimize their stores, whether it’s in terms of staff or products, allows for smarter marketing, and consequently would lead to better store conversion ratios.
In-store AIs are advantageous, as their proactive actions and didactic learning ensure real-time data collection and analysis, as well as their recommendations and suggestions which are directly accessible to both retailers and customers. Not only do these strategies enable additional sales, but well used and analyzed data can drastically improve the satisfaction of customers, who are getting exactly what they demand in the form of highly personalized experiences.
The Endless AI
AI is particularly useful for curating an experience, the possibilities of which are almost endless: beacon features used by physical retailers such as Amazon Go are incredible examples, and interactive kiosks, virtual and augmented reality, as well as location-based services, are only some of the innovative experiences that a tech-enhanced reality can offer. Technology can creatively wipe off some of the frustrating aspects of brick and mortar retail, such as the unavailability of the exact aspects of the product, the time spent hunting for the right product and the decision-making process that is often limited or impaired by lack of time or resource.
The offline Chinese grocery market, for example, was almost completely devoid of innovative customer service. But Alibaba’s grocery retail venture Hema created a game-changing paradigm shift with its blend of online and offline experiences. Across its 25 supermarkets, each Hema has an online catalog for its in-store meat products for customers to use to check the product’s history, nutritional value, and sourcing. They can use the stamped barcode to check out their items through the store, while online customers can expect a delivery of same to their homes in 30 minutes.
It is becoming increasingly clear that the competing eCommerce and brick and mortar retail work far better when in, they are in sync. Not only can technology profile the average customer requirements for more inclusive store stocks; retailers such as Abercrombie and Fitch actually use it to let customers view and buy online or offline products while at the store. Customers almost always arrive with a notion of having multiple choices and chains to buy from, and ensuring a smooth selection and buying process is vital to the store. Chains like Abercrombie and Fitch have accomplished this by presenting the customer with an ‘endless aisle’ of products, cataloged online and without the restraints of space, but available at the customers notice in an offline channel. For intelligent technology in physical retail, the sky’s the limit.
The fusion of eCommerce and in-store platforms means a heavier load on the brick & mortar system. While the gains from higher sales are certainly tempting, it’s also necessary to remember that it comes at an excessive cost, mostly based on managing the orders coming through various channels. None of the advantages resulting from an online inclusive experience would be possible without high end and advanced methods of order management. Creating such systems are vital to the success of brick & mortar ventures into the digital realm, as they enable easier inventory organization as well. The end results in a smooth, seamless experience that is a blend of digital retail in a very physical experience – limitless in its possibilities and stalled only by the imagination.
The Competitive Heat
The synchronicity between eCommerce platforms and brick and mortar retailers only works when they aren’t disjointed rival stores. Technology belongs to everyone in the new field, and it has leveled out the competition grounds between the polarized channel’s stores. eCommerce stores scramble for exclusive deals to attract more customers, while brick and mortar stores run on loyalty, intelligent market pitches and a personalized customer experience. The entrance of interactive digital technology has given retail stores the stepping ground to come to blows with their online competitors. The game is no longer eCommerce vs. brick and mortar, it is store vs. store and depends completely on which one utilizes its unique force the best.
So cousin, business is a-boomin, and may the best man win.
What is a loyalty program?
Recently, I was at a shopping mall at Winston Salem, North Carolina and to my delight, I found that with every purchase of a Bath and Body Works product, I was able to get another product absolutely free! I came away feeling delighted that I had got a good bargain and the broad smile that I gave to the saleswoman was matched with one of her own, having made a good sale. This was a clever way of getting me, a new customer, back to the store, retaining old ones and an extremely attractive form of a robust loyalty program. Customers are always pleased with toys in Happy Meals, buy- one-get-one-free offers and coupons with a purchase or credit card points.
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 brand in the future? One great way to ensure returning customers is to have a powerful customer loyalty program. Customers like them and 76% of those interviewed think that this is a great way to form a relationship with brands. A customer loyalty program is a marketing technique to retain loyal customers and to attract new ones. It is a reward program that rewards customers who frequently conduct business with a company.
Here are some interesting stats about customer loyalty programs:
- There are over 3.3 billion programs in the US currently
- The cost of acquiring a new customer is 6 to 7 times more expensive than retaining an existing one
- 75% of US companies with a loyalty program generate a Return On Investment (ROI)
- Increased profits show an upward trend of up to 95%
- 83% of customers agree on the fact that loyalty programs are likely to make them continue to do business with certain brands
- Existing customers spend 67% more than new ones
Types of customer loyalty programs
77% of customer loyalty programs fail in the first two years. The primary reason is the lack of sync between customer perception and the company objective. 73% of customers feel that the company should be loyal to them and 66% of marketing executives from the company feel that customers should be loyal to them. Only 25% of loyalty programs reward customers for some form of engagement with them. 85% of companies are always in search of ways to reward customers beyond promotions and discounts. Take the case of Amazon Prime. For a yearly subscription, customers can get access to free shipping, exclusive content and more.
Let us look at loyalty programs that are successful in bringing back customers time after time. Looking beyond complex and bland reward systems, it is time to look at ideas that will build a loyalty program which would actually work for you. Some examples of loyalty programs that have been very successful are :
- Swarm Perks
- American Express Plenti
- REI Co-op
- TOMS One for One
- Amazon Prime
- Virgin Atlantic Flying Club and
- Sephora Beauty Insider and VIB
What makes these brand loyalty programs so successful? Let’s dive in and find out!
- Use of a simple points system
Though this is a simple and commonly used loyalty program, it seems to be very successful. There is no rocket science attached to this system. Customers are rewarded with points for every purchase that they make. It could be in the form of a discount, a free product or a special customer treatment. Companies that build on this model make their processes confusing and complex and this is where they falter and fail. The connection between points and tangible rewards is not easy for the customer to understand. For example, when a company sets out to say “15 points is equal to 1 Dollar and 30 Dollars offers you a 50% discount on your next purchase”, they are setting themselves up for disaster. This is not a reward but a headache for customers.
Make the loyalty program easy to understand, so that customers can make understand the terms of redemption on their own, without any help from the sales and in-house teams. There is a note of caution though. This type of reward does not apply to every form of business. It works best for a business that encourages frequent and short-term purchases like Sephora.
The cosmetics giant is known for a great customer loyalty program. They have a simple point-based system that rewards their customers for every dollar that they spend. Customers swipe their Beauty Insider Card at every purchase and the card keeps a track of every purchase made. Every dollar spent earns customers a point. Shoppers can then redeem their points for products at the store’s check-out counters. The company speaks in the language of its customers with points, dollars and cosmetic items.
A great incentive to continue shopping at Sephora is the scaling up of the rewards, according to how much the customer spends. This helps customers to reach a certain threshold on their spending ways. For example, they offer a free birthday gift through their online shopping or stores and free beauty classes.
There is a thin line between attainable and desirable rewards and this is one of the biggest challenges for businesses, while they design their customer reward programs. Using a tier system that rewards initial loyalty and encourages more purchases is the best way to implement this system.
Offering small rewards is a part of a hook to be a part of the program and then scaling up the rewards or by increasing the value of the rewards, in order to become involved in the loyalty ladder is a good way to implement a tiered system. This helps customers in not forgetting about their points and not redeeming them at all because there is a huge gap between gaining points and finding gratification from them.
A big difference between the points system and the tiered system is that the former is a short-term value and the latter offers long-term value. Tiered programs work well with higher commitment from customers like the airline industry, the hospitality business or insurance companies.
The Virgin Atlantic Flying Club not only offers frequent flying points to its customers, but it also inducts them into the Club Red, the Club Silver and the Club Gold, in order to enable them to earn tier points. Club Red not only helps its members to earn points on miles, but it also offers discounts on airport parking, rental cars, hotels and holiday flights.
Club Silver members earn 50% more points on flights and also enjoy the benefits of expedited check-ins and stand-by seating on priority. Club Gold members get double mile points, access to areas where they can grab a drink or get a free massage before their flight and priority boarding. As the journey of a customer moves from Red to Silver to Gold, they are helped in this process by a benefits table, so that they can understand this journey easily. In the early stages of a customer engagement program, they are offered benefits that are very cool and help them to keep coming back over and over again. They are also made to realize that a gold status is not unattainable and there are some awesome benefits that can be taken advantage of.
- Charging a fee for VIP benefits from the start
Charging customers a one-time fee or an annual fee could work out very beneficial for both the business and its customers. Customers can bypass common purchase barriers and a loyalty program can address specific obstacles.
This kind of a loyalty program is applicable to businesses that are frequent and involve repeat purchases. It was found that a huge number of customers abandon their cart purchases after they find out the cost of their purchases, after taxes and shipping costs have been applied. Amazon found a way to tackle this issue by charging an upfront fee that would be applicable to all future purchases. Prime customers get a two-day free shipping on millions of products, without a minimum purchase, along with other benefits. The company also offered a 2-hour free delivery of grocery to its members in certain areas, along with other discounts.
- Creating a value program around beliefs
Customers are loyal to beliefs and values, rather than to a company. A connection with customers can be created around non-monetary or discounted rewards, much more than dollars and cents. Any business can offer promotional coupons and codes. But the value that they can offer to their customers, other than these can increase loyalty to their brands.
Toms Shoes is dedicated to improving the lives of their customers by promising that for every purchase made; they would help a person in need. This initiative has grown huge and is now helping with clean water access, improving maternal health care and supporting many other organizations.
Coalition programs or partnering with other companies for customer loyalty is extremely effective in retaining customers and growing your business. Understanding customers’ daily needs, lives and their purchase processes would help you to decide which companies to partner with best. For example, if you are a food company for dogs, it might be a good idea to partner with a veterinary clinic or a pet grooming facility to offer co-branded deals that would be beneficial to your customers and create a win-win situation for all.
American Express, in its Plenti program has partnered with companies like Macy’s, AT&T, Rite Aid, Hulu and more and offer their customers points for shopping at any of these stores and linking their existing loyalty card to their Plenti accounts.
Everybody loves playing a good game. Your loyalty program can be converted into a game to help encourage repeat customers and prepare a robust brand image for your business. It is important to make your customers feel valued and that you are not duping them of their rewards. Ensure that the purchase requirements to play this game is attainable and that your legal department is on the same page as you regarding these gaming programs, before it is announced and launched.
Swarm Perks is an incentive that is offered by Swarm, which is a check-in app. It encourages its users to check-in from different locations and share what they are up to with their friends. Discounts are offered at various locations, like a 20% discount at Best Buy. Dream vacations, spa days and shopping trips are also won through draws.
Benefits of a customer loyalty program
- The perks that are offered to customers could be the best way to acquire new customers
- It is a great way to initiate a lifelong brand-consumer relationship
- If customers are given opportunities to maximize their loyalty rewards and receive communication, based on their milestones, needs and preferences, they are likely to support the company not only with their money, but also with referrals, repeat purchases and exposure on the social media, thus bringing in new customers
Latest trends in loyalty programs
Some of the biggest and latest trends in customer loyalty programs are :
- Customers look forward to personalized rewards
- Omnichannel and multichannel programs are replacing traditional ones
- There is an increase in brand partnerships
- A sense of social responsibility is expected from brands
- Premium loyalty programs are an attractive option
- Customers look forward to a sense of emotional loyalty
- AI and chatbots are being used for customer engagement
How to start a customer loyalty program?
Here are some tips to get started on a loyalty program.
- One of the simplest and easiest ways is to have a loyalty punch card
- Begin with an opt-in program
- Put some thought behind a Premium Loyalty Program
- Give your customers a branded loyalty membership card
- Use a digital component in your program
- Invest in incentives that work for you
- Have a regular communication with your members
What is loyalty program management?
What does a business need to do to manage its loyalty program effectively? It does not matter if you are a small company or a large conglomerate, having a strong loyalty program management system in place will help you to leverage your program to maximize customer retention and lifetime value.
So, without further ado, here are the top things you need to take into consideration to effectively manage your loyalty program :
Lead your loyalty program with data
A good loyalty program is measured and driven by numbers. This approach gives you an indication of the direction that you need to go towards. From data modelling before program launch, to extensive LTV or CLV analysis during the program, you should make data a priority as you manage the program. Data should drive your decisions in any marketing conversation, especially around retention or loyalty. A good loyalty program manager can help you track these important metrics.
During the management of the program, make sure you are always “relevant and real” to the customer. By asking questions like “Why is this relevant?” or “Are you pushing or asking?” you will ensure that you are aligned with the needs and expectations of the customer and not taking them for granted. Each message needs to be relatable and customer-centric, and not just as a piece of random communication or a statistic. Human experiences are made up of emotions, feelings and desires. Your loyalty program management should align with these nuances and go beyond being just a discount disbursal system. If you lead your loyalty management from this angle, then your brand can work towards unlimited possibilities.
It does not matter if your loyalty program is digital or an old-school punch card, it should be a go-to strategy or the foundation that your business is based on. Implementing a loyalty program needn’t be a cumbersome task. In fact, even if you are a small business owner with limited resources, we would still recommend that you take the time out to conceptualize a brand loyalty program. It only takes a few extra minutes to implement one and the benefits are many: retain and reward existing customers, increase sales and gain new followers.
Here is a handy list to get you started with designing your own customer loyalty program.
Start with the end in mind
From the onset, you need to be very clear about the goals of your customer loyalty program; in short, what do you want to achieve with it? Improve customer acquisition? Decrease customer churn? Increase order size? Make these goals very specific and as measurable as possible. Attach a timeframe to each goal. For example, “I want to decrease customer churn by 25 percent in the next two years.” Working with a timeline for each goal will help you stay focused and on track.
Invest in an automated loyalty program
There are many ways by which you can automate customer loyalty programs. The more automated your program is, the easier it is to manage and maintain it. This does not mean that you will be doing away with personalization. These days, you can choose from several personalized loyalty program software to help you automate campaigns while still maintaining a personal touch.
Leverage the power of email
One of the easiest and most effective ways of staying in touch with your customers is to send them an email. This is a great way to kick off your digital loyalty campaign. You could start by sending a steady stream of communication around your loyalty program. There are several free or low-cost email-marketing solutions that are all easy to use and can be tweaked or tailored to suit your business needs.
Social media is a powerful and effective way to engage with your existing customers on a regular basis. Take the time to understand and find out which social media channels — Facebook, Pinterest, Foursquare and Instagram to name a few — your customers are seen on the most. Once you have decided on the right network(s), build your social community around them, following through varied and engaging content and posts – giving many options to your followers for sharing and referring.
What is the bottom line? What can be inferred from the above? For most businesses, it can cost up to five times more to acquire a new customer than to retain an existing one – all the more reason for customer loyalty.
How to measure the success of loyalty programs?
Loyalty programs are nothing new, but this does not mean that they are going out of fashion anytime soon. Based on the research conducted by the group Colloquy, there are 2.65 billion loyalty program memberships in the U.S. alone. On an average, US households are involved in 21.9 loyalty programs, yet only actively participate in 9.5 of them. There are about $48 billion allocated towards loyalty programs each year, in the form of discounts, free rewards or special promotions. Out of these, only two-thirds of the amount is ever redeemed by customers. That might sound great from a company perspective, but it is indicative of poor loyalty program management and worse, bad customer engagement.
A loyalty program that is well designed can boost customer satisfaction and repeat business. Given below are different loyalty programs. Find out what works best for you and how to assess their effectiveness.
One of the easiest and simple loyalty programs is the points system. Frequent customers earn points with every purchase they make, usually with a loyalty card. These points accumulate into some sort of discount or other customer experiences.
A points system is a great loyalty program for businesses where customers make frequent purchases that are small in value. For example, Starbucks’ “My Starbucks Rewards” is a point-based program. It has over 10 million active users and it seems to be quite popular. However, at its core, it’s a simple points system. However, Starbucks cleverly throws in limited-period discounts and special birthday rewards to keep their customers from becoming used to this system.
If your business chooses to implement a point-based rewards program, remember to keep it easy for customers to sign-up and vary your reward offerings to keep customers interested.
The difference between a tiered program and a points program is that a tiered program is in for the long-haul. It can offer greater rewards in the long term. The tiered system is like a step-ladder. Firstly, it offers small rewards for joining the program and getting the interest of the customer. Then the value of the rewards increases as customers become more loyal on the program.
Southwest Airlines’ successful Rapid Rewards program is a points system that has three different tiers of rewards: A-list, A-list preferred, and Companion Pass. Moving up the points ladder unlocks privileges such as priority boarding, free in-flight Wi-Fi, a 100% points earning bonus and eventually a companion pass that allows one friend to ride one free round-trip flight.
Tiered loyalty programs work best for businesses that require a higher commitment such as insurance, hospitality or travel. If your customer-base primarily purchases small items, then a tiered system might not work for them, as the effort required to move up the next level usually doesn’t justify the end reward.
Although getting customers to pay upfront for privileges in the future can be a difficult sell, e-commerce giant Amazon.com has shown that it can certainly be done. For seventy-nine dollars per year, Amazon Prime members receive free two-day shipping on all items sold by Amazon or select partners. Members also have access to Amazon’s streaming video service and the privilege to borrow one free Kindle book per month.
While a VIP rewards program is tempting from a business perspective, you will definitely want to make sure that the perk you are offering to customers is worth the money that they will be paying. If you’re not offering a substantial service, you’ll risk being seen as trying to fool your customers or being out-of-touch.
Assessing the Effectiveness of your Rewards Program
A vital aspect of loyalty program management is measuring its effectiveness – in terms of increased customer retention or satisfaction. There are many different ways to analyze this, thanks to the availability of user-friendly loyalty program software. Here are a few metrics you should be measuring to understand the success of a reward program.
Customer Retention Rate
The customer retention rate is a measurement of how long customers stay with your brand. The bottom line of a loyalty program is to increase the number of customers who stay with your business for a long period of time. Finding out the difference in customer retention between program members and non-program members is one of the best ways to find out if your loyalty program is effective.
Customer Effort Score
The Customer Effort Score (CES) measures your business’ customer service based on actual experiences of customers; especially after-sales customer service that they have had with your company. CES asks customers how much effort they had to put forth to pursue the executives of your company to solve a problem. Loyalty programs that address expedited requests, such as Amazon Prime’s free shipping, will likely improve your business’ CES and general perception.
Churn is the measure of how many customers leave your business overnight. The measurement of customers who instead of leaving, upgrade their membership and purchase added services is called negative churn. In order to properly measure this, you’ll need to be able to attribute purchases to individual users or customers and track the purchases of customers over a period of time. Most loyalty program management software will help you calculate Negative Churn with ease.
Net Promoter Score
Net Promoter Score (NPS) is a metric that is received from customer feedback. NPS measures the recommendation of your business by customers to friends, relatives etc., based on a scale from one to ten. Subtracting the percentage of detractors from the percentage of promoters is how the NPS score is arrived at. Scores can range from -100 to +100 and any positive score is considered good. While investing in a loyalty program software, make sure that it has the provision to calculate the NPS Score.
Digital technologies has led to an increase in customer expectations, especially around faster service and support. Companies need to invest in digital solutions to stay consumer ready. Loyalty programs are a great step in this direction, especially when implemented with a long-term strategy and using tools for analyzing customer data.
How to restructure an existing loyalty program, to improve its effectiveness?
The primary focus should be the alignment between your customer and the loyalty program. For example, the program should support customer experiences and not vice-versa.
Keep your customers engaged
Target communication in such a way that it piques your customers’ interests and preferences. For example, if you have 15 customers who want to buy yellow rain boots, you can engage with these customers by sending each an email with information about a complementary yellow umbrella. Invest in a great customer relationship management software and email automation solution to create personalized customer communication.
Given below is a comprehensive loyalty checklist developed by a top Ogilvy & Mather strategist, Michael Szego. Do note that there is nothing called a perfect loyalty program, even if you follow the below list, to the T. You need to keep evolving and changing with the market and your customer. In fact, you need to be a few steps ahead of them, in order to make your loyalty program management a success.
Simplicity = Make my life simple, don’t confuse me with too much information
Benevolence = Understand my issue and take my side in finding a resolution
Trust = Doing what’s right, honouring promises and protecting customer’s privacy
Transparency = Rates and fees are crystal clear and comparisons are available
So there you go, these are some of the elements that you should keep track of, to ensure that your loyalty program is effective and engaging for your customers.
Why brands need to adopt a mobile loyalty program
Nowadays, brand loyalty amongst customers is on the decline due to intense competition and a plethora of choices. While loyalty programs are a great way to increase brand loyalty, most brands still treat their rewards program as an excuse to get an email address instead of adding value to the customer. But when a business gets their mobile loyalty program right, they get a 13.3 million-user-strong success story like Starbucks.
I am sure you would have heard the old adage – ‘It’s is easier to get an old customer to come back than to ask a new customer to transact with you’. This is a retention strategy that every marketer worth his salt knows. This high acquisition cost is the primary factor why brands need to build relationships with existing customers and reward them. As for reason for adopting a mobile loyalty program, here are they :
Benefits of a mobile loyalty program
Loyalty programs encourage customers to align themselves with the values of your company and this could be a wonderful opportunity for you to build a long-term relationship with your customers and nurture them.
Howard Schultz, Starbucks’ CEO, once said, “If people believe they share values with a company, they will stay loyal to the brand.” Given below are a list of benefits that a mobile loyalty program offers.
Understanding customers’ behaviour and buying habits will lead to an understanding of customers’ needs, which will help you to be at the right place at the right time; that is to say, you can offer them the right offers at the right time. You can keep your customers engaged by sending them messages at just the right time along with other communication such as push notifications and newsletters that will keep them informed about special promotions and discounts. This will also benefit the business through higher sales and conversion. A mobile app-based loyalty program also fosters a larger number of brand advocates who bring in a higher percentage of profitability and revenue compared to an average customer
It is predicted that mobile payments will reach $503 billion by the year 2020 and this is partly due to mobile loyalty programs. Loyalty programs encourage customers to make purchases through mobile-based apps, even if they are reluctant to do so, in the beginning. Sweetgreen offers a free salad to its customers, but to earn this reward they first need to pay through Sweetgreen’s mobile wallet.
Staying ahead of the competition
Irrespective of how good or superior your products and services are, there will always be competitors lurking all around to pry your customers away. A good way to stay ahead of the competition is to create a differentiating niche for the brand. Ultimately, even when your competitors copy your product, your differentiators, like an effective mobile rewards program and an impeccable customer service is what will help you stand out and keep you beyond your competitors’ reach.Think smart, identify your advantages and leverage innovations to provide customers with an irresistible loyalty program.
Becoming the market leader
The best way to stay ahead of the competition is to become a market leader or a thought leader and by setting trends. If you raise the bar for the quality of your products and services and set standards for others to follow, you will not only survive in today’s customer-centric environment but also remain on the top.
“We shape our technologies and thereafter our tools shape us,” observation made by Marshal McLuhan, one of the most recognized experts in the field of communication studies, is accurate now more than ever, with 93% of business leaders worldwide saying technology has changed customer expectations in the past five to ten years.
A great customer loyalty program helps you create a moat around your brand and prevent your existing customers from jumping ship.
Customers love loyalty programs and their benefits but gone are the days of carrying around plastic loyalty cards. Cards are lost easily, they aren’t practical for carrying around in a wallet and tracking redemptions can be difficult for business owners.
86% of marketers ranked mobile loyalty campaigns as very effective or effective, even if there are many who doubt them. In addition, 72% of consumers like better access to rewards and the ability to redeem their rewards more easily on a mobile loyalty platform(78%).
A loyalty program can affect current and future customers. Sending the right offer to a current customer can generate recurring purchases (as in the Kohl’s example, where customers who are members of the loyalty program spend $80 more than those who are not) or it can attract potential customers and convert them into regular customers.
Reduced operational costs
Mobile loyalty programs are easier to maintain as compared to traditional loyalty programs. Offers can be changed instantaneously and sent to all users within seconds. The time spent is less and it works out to be economical than paper-based loyalty programs.
Analyzing, tracking and interpreting customer data is very important if you want to communicate the right messages and offers to your customers. Customers are more likely to use loyalty programs if the program is simple, easy to understand, and if the offers are exciting and relevant to them. Furthermore, brands that allocate 20% or more of their budgets to customer loyalty get a better understanding of their customers.
In order to find out what customers want, you need to decide which metrics to use and track the goals that you want to achieve. Every business has different methodologies and strategies to reach their targets and how to achieve them.
If you want to leave a strong initial impact on your customers, the number of app downloads is the best way to measure your success. If your goal is to get users to keep using the app, the percentage of active or returning users will give you an insight into your strategy’s success. In order to attract user attention, keep promoting specific feeds in the app and by keeping track of the most popular pages in your app, you can decide whether to change the contents of the app or to continue with the same content. It is also crucial to understand which pages are the most attractive to customers.
You might want to track the purchasing habits of your customers, the amount that they spend and how they deal with redemption. Based on the information collected, you can redesign your current campaign or create a new one for the future. You might also want your business to be a huge success on social media and go viral; in that case, analyzing and tracking the engagement metric for social media might be a good idea.
How to implement a mobile loyalty program?
The use of mobiles has changed the name of the game for loyalty programs; especially when it comes to creating more ROI.
Research shows “that customers who actively engage with brands and their loyalty programs make 90 per cent more frequent purchases, spend 60 per cent more in each transaction and are five times more likely to choose the brand in the future.”
A good example of this is Kohl’s. Members of the company’s mobile loyalty program are spending $80 more per transaction than those who are not. Mobile reward programs are also known to engage the younger generation a lot better compared to traditional card-based loyalty programs. Mobiles drive loyalty more than any other platform because they meet the needs of its members in the most convenient way.
Mobiles capture information such as location data, consumer preferences, app usage, attributes, purchase history like frequency, spend and more. Marketers drive customers back to the brand backed up by such rich and user-specific data, thereby ensuring an engaging and personalized customer experience.
The first step towards designing an effective mobile loyalty program is to understand what your customers want. Loyalty marketing expert Howard Schneider says, “Savvy and strategic companies are now looking beyond these reward programs to delight, create and retain loyal customers. They are looking to solve customers’ problems and soothe pain points.”
You can get to understand customer behaviour through conducting user interviews, focus groups, competitive research and third-party integration research. Your web analytics and sales metrics will give you more information on conversions. Look at past data to find out what worked and what did not. You want to make sure the program is a win-win situation for both your customers and your business.
If you build a mobile app on top of existing systems, you can manage sales entirely on the app (For example, purchasing food on the app, scheduling service appointments etc.), while using your existing back-end systems (For example, printing a ticket in the kitchen to managing operations).“Mobile will ultimately be the way you provision most of your services. The way I like to put it is, the answer should always be mobile first. You should always put your best team on your mobile app,” says Eric Schmidt, Executive Chairman for Alphabet, Inc.
Best mobile loyalty programs
Best Buy, Walgreens and Sephora are examples of brands that use mobile loyalty programs as the centrepiece of their mobile strategies. Marketers from every sector have worked hard in building loyalty, from using social media to educate consumers about mobile payments. They are using mobile apps not only during the holiday season but also in building long-term relationships with old and new consumers.Here are examples of well-executed mobile loyalty campaigns:
Best Buy’s omnichannel approach to mobile loyalty programs
Best Buy redesigned its reward program with a more comprehensive omnichannel mobile loyalty offering, as a way to increase footfalls to their showrooms. The big box retailer’s My Best Buy loyalty program replaces the previous Reward Zone and works well with the company’s iPhone and Android applications. Consumers that use the app within a certain area around a store receive points that are credited to their member accounts. In exchange for downloading and using the app, members are offered exclusive deals. Best Buy’s customers are increasingly turning to mobiles to differentiate loyalty programs with an in-store incentive.
Cosi’s social-focused mobile loyalty program
In order to increase loyalty and drive foot traffic, the fast-casual chain Cosi ran a campaign that emphasized the use of mobiles and social media, as a part of a huge multichannel program. As a part of this program, Cosi ran social and mobile display ads to attract consumers and offer them the chance to win prizes and unlock offers. The chain created a desktop as well as a mobile web experience for the campaign with the latter being geared towards social-focused such as posting pictures on Instagram. It is quite common these days to offer rewards for purchases on mobiles, but what is unique about Cosi’s program is that the brand is encouraging social actions, which is predominately taking place via mobile devices.
Cumberland Farms’ payment integrated mobile loyalty program
In the last couple of years, convenience store chain Cumberland Farms has moved into mobile territory in a big way to smoothen out its payment process. The brand expanded its program with an app that opens up a checking account, in order to trigger payments. In addition to cutting down on the amount of time that consumers spend on getting gas, the mobile program also saves consumers 10 cents for each gallon bought, thereby encouraging repeat refuelling and driving the adoption of mobile payments. Cumberland Farms has also added mobile coupons to its mobile app as a way to integrate rewards into its mobile payment offering, thus encouraging their customers to go the digital way.
What is a consumer loyalty program?
Keeping your customers happy and transforming them into brand advocates involves more than great service. How will you ensure that your customer keeps coming back to buy your product in the future? One great way to ensure returning customers is to have a powerful customer loyalty program. In fact, 76% of customers in the US agreed that a great loyalty program is a major factor in determining their shopping preferences.
Here are some more statistics around customer loyalty programs :
- There are over 3.3 billion programs in the US currently
- The cost of acquiring a new customer is 5 times higher than retaining an existing one
- 75% of US companies with a loyalty program generate a Return On Investment (ROI)
- Profits from loyalty programs show an upward trend of up to 95%
- 83% of customers agree on the fact that loyalty programs are likely to make them continue to do business with certain brands
- Existing customers spend approximately 67% more than new ones
What are the latest trends in customer loyalty programs?
The 3Cinteractive study says that 64% of brands reported an increase in customer loyalty programs in recent times. Loyalty programs are moving away from the traditional spend-and-get models to more sophisticated channels like omnichannel and multichannel programs, which recognize every interaction that the customer makes with the brand.
Here are some of the biggest and latest trends in customer loyalty programs
- Omnichannel and Multichannel programs
The use of omnichannel and multichannel loyalty programs are proving to be very effective. Omnichannel loyalty programs help customers connect with the brand easily and seamlessly across different touch points. Consumers are given the opportunity to be rewarded for spends and brand engagement across all channels like app, website and social. The data that is captured through omnichannel loyalty programs help brands to offer personalized communication and experiences to their customers.
Beauty giant Tarte’s launched their “tarte <3 rewards” loyalty program, where they reward their customers for not only spending their money on their brand, but for sharing content and their experiences on social media, referring their friends and reading the emails sent by the company. These kinds of activities turn members into brand advocates, keeping them informed and engaged about the brand and helping to spread the good word around to a larger audience. The data that is captured about the members; how they spend their money and their engagement activities helps the brand to further amplify its marketing efforts.
- Consumers expect brands to become more personalized
There is a connection between personalization and customer satisfaction. 67% of customers said that they are very happy when they are made to feel special and recognized through personalization. The satisfactory meter for customers who received personalized communication and offers is 2.7 times more than normal customers.
It was found that customers were willing to share their personalized data with brands in return for personalized experienced. This data can be leveraged to offer relevant promotions, upsell and cross-sell relevant products and services and make personalized recommendations.
Many resellers are using personalization in their marketing and customer strategies. Members of the DSW Rewards Program were sent an email to let them know how many points were required by them to receive a $10 certificate, were informed of other deals that they were eligible for and were given a detailed snapshot of the interactions that they have had with the brand over the last two years. This data included how many points they have earned, how much they have saved and since how long they have been loyalty members. This program was a huge success and saw a 64% increase in the openings of emails, a 13% increase in click-through rates and a 58.82% rise in customers who opened their emails and read them for about 15 seconds. This kind of a program not only keeps customers informed about their engagement, but it also encourages sales.
- A sense of social responsibility is expected from brands
Customers expect brands to be socially responsible; to go beyond making profits, become drivers of change and become active in their respective communities. This has a major impact on customer loyalty, as customers are more likely to support businesses that have a purpose beyond profits and are ready to make a difference to their communities and the environment at large. A staggering 66% of customers were willing to pay more for products and services that come from companies that are committed to social and environmental causes and those that work towards bringing about a positive impact on society. Customer expectations and loyalty are better met when corporate social responsibility is incorporated into a loyalty program.
TOMS Shoes has a Passport Reward Program whereby their members have an option to redeem points towards a donation, a charitable cause or an initiative. For example, members can make a $25 donation to support the company’s after-school groups or community development programs. This option creates a goodwill amongst the members and helps them to emotionally connect with the brand.
- Increase in brand partnerships
Partnerships amongst brands have taken center stage and are seen as a strategy for growth. This is also a great strategy to stay ahead of the competition as it allows brands add value to customers, beyond what they themselves can provide. The right kind of partnerships amongst brands provides new and exciting ways to reward customers. This, in turn, increases sales and loyalty.
For example, Wyndham Rewards, that is a loyalty program offered by the Wyndham group of hotels has partnered with Caesars Entertainment’s award-winning casino-based “Total Rewards” program. This allows members access to leading industry travel experiences, perks and benefits such as complimentary status match, one-of-a-kind hotels, restaurants and entertainment. This kind of partnership and branding also allows the hotel group to access potential new customers.
- Premium loyalty programs are getting popular
Premium loyalty programs are getting very popular because members want to enjoy benefits and they do not mind paying extra for them. For example, Amazon Prime offers many benefits to its members, in the course of their loyalty programs. In a study conducted on consumers, 62% of respondents said that they were willing to consider joining a loyalty program, if their favourite retailer was offering them one. This percentage increased with the millennials. 75% of customers in the 18-24 age group and 77% between the ages of 25 and 34 years said that they would be willing to join a fee-based reward program. 47% of the audience that was studied said that rewards in a fee-based program were much better than rewards in a free program.
The PowerUp Rewards premium loyalty program by Gamestop takes pride in having more than 50 million members. Members of the program contributed three times the revenues of non-members. Recently, the brand introduced a new program, that is an upgrade from the current level (Pro). The new PowerUp Rewards Elite Pro membership costs $29.99 USD per year, which is double of what people pay for Pro. But members do not mind paying this amount because it provides them with additional perks, including free two-day shipping, $50 in exclusive monthly offers and discounts on pre-owned games and software. The brand received feedback from reward members who wanted to earn more points and subsequently enjoy more rewards and hence this program was introduced. The success of this program demonstrates that PowerUp Reward members see the value that they get in paying an additional fee. For gaming enthusiasts willing to go the extra mile, the brand encourages spend and loyalty.
- Emotional loyalty is a huge factor in influencing purchases
A research that was recently conducted by Forrester found out that emotions are a very strong factor in loyalty programs and they in fact, drive them. This means that companies should invest in frameworks that help them understand emotions of their customers at various interaction points. Finding out what kind of behaviour elicits their consumers’ actions and emotions is a step in the right direction towards true loyalty.
The survey of marketers found out that most brands are trying to build an emotional connection with their most frequent shoppers.
Gallup conducted research where it was discovered that emotionally loyal customers were willing to be loyal to a brand, even if less-expensive alternatives were offered. During this research, they also found out that consumers with strong emotional connections to retailers were willing to visit their stores 32% more often and spend 46% more on the average bill value.
For example, to reward customers who showed an interest and demonstrated deeper emotional connections and a dedication to the show, “The Walking Dead”, the studio offered “money-can’t-buy” experiences and rewards. Leveraging a loyalty program, the brand encouraged fans to attain these unique rewards through further engagement. Members who accumulated the highest level of points as part of the program, enjoyed one-of-a-kind experiences, including VIP tickets to the “Talking Dead” show, a set tour and meet-and-greet with the cast.
How does Artificial Intelligence (AI) and Blockchain impact consumer loyalty programs?
Customer loyalty is changing constantly. Customers are increasingly demanding to be seen and heard as individuals, with specific needs and requirements. Using AI in loyalty programs can solve a whole lot of issues and concerns that plague the existing system.
How is AI used in these programs? It is the only way to reach out to huge numbers of customers that run into thousands and millions. It is the best way to capture an individual’s need, intentions or preferences, in real-time. Each individual’s data is captured, thereby putting together a collective database that delivers information which goes far beyond numbers. Technology like speech recognition, dialogue management, natural language processing etc. are used to create intelligent assistants. These intelligent assistants can interact easily and naturally with human beings and can help them with accessing information and completing tasks.
For example, AI can help power Virtual Assistants who can monitor specific customer behavior and reward them for it. This in-turn inspires loyalty in customers and all this can be done without the intervention of human beings.
Another good feature of the integration of AI is that it offers security against cybercrimes, fraud and theft. AI systems can also augment employee performances, which frees them from mundane tasks, so that they can focus on important areas that maximizes customer experience.
The benefits of using Blockchain in customer loyalty programs are cost-efficiency, speed and real-time response capabilities, both for participants and stakeholders. An efficient way to reduce management costs and to bring about transparency in transactions are some of the other benefits that are offered through this technology. Cryptography that is available in Blockchain Technology exposes fraudulent transactions and flags off mistakes. They also offer customers the ability to create, redeem and exchange reward points across partners and different vendors.
To stay relevant, loyalty programs should leverage the latest technology and always keep customers at the center of their focus.