It is no secret that a well-executed loyalty program has the ability to transform a business and fast-track growth. After all, 40% of revenue today for US e-commerce retailers comes from returning customers who represent only 8% of all visitors.  As the tides of technology change, so must loyalty programs merely to stay afloat. With mobile commerce accounting for over 30% of e-commerce sales in 2017 (a number predicted to increase to over 50% by 2022), brands and their loyalty programs must incorporate deep retail analytics and the omnichannel experience to remain in the top tier.

Consumer preferences vary across countries and cultures, from the technology they utilize to what they seek from a loyalty program. Instead of casting a vague wide net to rake in sales, retailers must identify their ideal customer group and strategize accordingly.

Far from just incorporating discounts and satisfactory customer service, companies must strive to resonate with the emotions of their ideal customers.

The ability to bank on an impersonal, one-size-fits-all approach to loyalty rewards is quickly fading, and customers are looking for rewards that are relevant to their specific tastes and purchasing behaviors. Of course, this implies that a loyalty program platform today must be intelligent, and dynamically predict a customers’ changing preferences.

So how do successful loyalty programs create customers that are eager to return? Below, we peek into the inner workings of best loyalty programs in 2019 and what makes them tick.

REI Co-op

REI Co-op offers a lifetime membership at just 20$, and members frequently rave about how swiftly they see returns for the money spent. With an incredible selection of outdoor and wilderness gear and a unique loyalty program, REI has quietly earned its place as one of the best recreation services corporations. Their message is clear from the very first visit—choose nature and get outside more.

Members get special prices on adventure trips curated by REI, and heavy discounts (think 50% and more) on gently used gear being sold online. If you opt for REI’s Co-op World Mastercard, you receive a $100 REI gift card upon joining, and REI makes a donation to the National Forest Foundation every time you use your card. The most unique aspect of this program is that members can influence the direction of the company by voting for the company’s board of directors, based on their profiles and values. Members also receive an annual dividend that they can cash in, use in-store or donate towards causes for nature and the environment.

And apart from all this, they still offer excellent customer service with free shipping over purchases of 50$, and replacements and refunds within one year (!) of purchasing.

Key Takeaways :

  • REI focuses on loyalty from an emotional perspective. The brand resonates as an organization that truly cares about their cause.
  • They give back nearly 70% of their profits to outdoor stewardship projects, and offer events of stewardship where members can volunteer to protect and expand trails.
  • More than just highlighting the financial gains of being a member, they give their customers certain values to be invested in.

 

Nike +

In just over a decade, Nike’s loyalty program—Nike+—has grown to over 100 million members. The brilliance of Nike’s marketing is that they don’t focus on selling the apparel itself— rather they create an emotive story around the sweat, determination and absolute high that an athlete experiences.  

Using the concept of gamification, Nike tracks the workout routines of members and rewards them for it. Nike+ also offers its members a community where they can meet and train with other members, and it doesn’t do this alone.

The brand has partnered with others giants for their rewards program, including Apple Music (giving members access to curated workout playlists), the mindfulness service Headspace (where members can access guided meditations), and the education service ClassPass. Besides that, members get sweet perks like free shipping on all orders, early access to top-of-the-line gear, a month of birthday discounts and gifts,  and a 30-day “no questions asked” return policy.

Key Takeaways:

  • Nike does a great job of  getting into the mind of their customers to understand what makes them tick and incorporates that into their loyalty offering
  • Create a reward and experience ecosystem by partnering with synergetic brands
  • A great mobile experience: the loyalty program incentivizes app usage to access special perks, discounts, guided runs, and exclusive experiences.

 

Sleep Number

Sleep Number, the mattress company, has been driving customer engagement and increasing revenue through its loyalty program, the Inner Circle.

The loyalty program encourages members to participate in surveys and polls in exchange for points. Sleep Number uses the information gleaned to advice insiders on improving the quality of their sleep, and for creating educational blog posts.

Members enjoy discounts and are the first to know about new products, but the true differentiator of their loyalty program has been the incentives they offer for referring friends and family. They are credited with points for sharing referral links, and for every successful referral, they earn a 100$. After the 10th successful referral, they receive an additional $799.

Lisa Erickson, Director of Customer Relationship Management & Loyalty, says “you’d be amazed how many referrals we get. Our customers are engaged in the program and we get more than 1,000 digital referrals a month, that’s really important to our business because your best customers bring more best customers. Testimonials are our most powerful form of marketing.

Key Takeaway:

  • Incentivizing your customers to refer their friends is a cost-effective way to drive more engagement and grow your following.

 

Lululemon

Athleisure brand Lululemon’s loyalty program may be young, but it has already attracted some positive attention. As far as loyalty programs go, the annual membership is rather steep at $128, but active members will quickly see the value—Lululemon members receive an exclusive pair or pants or shorts on joining, which already make the membership a good deal (considering that most pants are priced around the 100$ mark).

The real value of the program lies in the community they create for you through yoga sessions, run clubs, and other classes and events. Striving to inspire viewers, Lululemon collects the stories of driven athletes working on bettering their communities as part of their “ambassador” program.

Their membership also includes free expedited shipping for online orders and no-questions-asked return policy.

Key Takeaways:

  • In today’s highly individualized climate, people are finding it increasingly difficult to form social connections. If it suits your brand, move away from run-of-the-mill rewards and foster a sense of community using your loyalty program
  • This community-driven customer loyalty program will inculcate an emotional connection to your brand.

 

Swarm Perks

Swarm is a social networking mobile app where users can share their lifestyle with friends by checking into the locations they’ve visited.

After Facebook created a similar check-in feature, Swarm saw a daunting drop in popularity. But in recent years, it has reinvented itself with Swarm Perks. As the name suggests, users can earn perks (significant discounts, points, and real-world freebies) for checking in at participating locations. They can earn extra bonuses for checking in with friends, and are awarded ‘mayorship’ when they visit a venue the most number of times. Swarm Perks offers these discounts by partnering with existing discount networks.

Swarm Perks users highly anticipate the weekly sweepstakes challenges, where participants get the chance to win grand prizes (for example, $10,000 towards a dream vacation) by checking in at specific locations. According to Jonathan Crowley, vice president of product, the introduction of such features in the beginning of 2015 has seen the number of check-ins per user triple in the US.

Key Takeaways:

  • Gamification is a tried and tested concept in the loyalty space and it still works  
  • The human psyche is driven by competition and the glory of winning. Gamifying user engagement can lead to soaring popularity for your brand and, in turn, revenue.

 

CVS

Although CVS Health has been around for decades (since 1963, to be precise), it’s market share has been threatened in recent years. After Amazon acquired online pharmacy PillPack, CVS launched its loyalty program CarePass to secure its customer base. The membership costs $5 a month, or a discounted rate of $48 a year. Members receive free 1-2 day delivery on most prescriptions and purchases, 20% discounts on certain CVS Health-branded products, and $10 in monthly promotional rewards.  They also have a 24×7 dedicated phone line to a pharmacist so that customers can consult a professional who has access to their prescription history with CVS Pharmacy.

Key Takeaway:

  • Choose experiential rewards that your customers will value and that your competitors are unlikely to offer, such as CVS’s pharmacist helpline.

 

Sephora

Sephora’s Beauty Insider is arguably one of the best loyalty programs ever implemented. To stay in line with their image as a luxury brand, they rarely offer discounts and price slashes. Instead, they run on a point based system that segments customers into tiers depending on their annual spending. Higher tiers offer greater rewards and more point accrual for every dollar spent.  

Based on the customer’s preferences and shopping history, every member receives personalized rewards and customized promotions. The brand stays relevant by offering beauty enthusiasts what no one else is doing, such as the augmented reality feature that allows users to virtually try on various products. It has created an air of excitement by knowing what drives top customers in their industry—exclusivity. Sephora teams up with brands to offer products first before they are even released through the brand’s own channel. Depending on the tier that a customer falls into, Beauty Insiders get access to a wider range of gifts and early access to new products, exclusive events, and one-of-a-kind experiences. A glance at their twitter mentions makes it obvious how excited customers will go above and beyond to secure bragging rights.

Key Takeaways:

  • Sephora delivers a great omnichannel loyalty experience. The program does this seamlessly and extends the loyalty program across all platforms (be it mobile app, website, in-store or even in-partner-store JC Penny).
  • Tiered loyalty programs are one of the most effective ways to motivate desired behaviors from customers, especially when the upper tiers convey a sense of exclusivity.
  • The level of personalization makes every customer’s reward relevant to them, which is highly important for any loyalty program. You want your most loyal customer to feel like they have achieved something that others could not, and inspire your other customers to strive to get there.
  • Offer a strong online community where users can have discussions, get advice and shop makeup looks.

 

Costco

Jim Sinegal, Costco’s Co-Founder and Former CEO, explains how the wholesale giant consistently offers lower prices and better values: “by eliminating virtually all the frills and costs historically associated with conventional wholesalers and retailers, including salespeople, fancy buildings, delivery, billing and accounts receivable.”

The Costco shopping experience is only open to members, who swear by their savings and frequently return for all their household needs. Costco banks on their annual membership fees to maintain profitability. Costco’s entry-level “Gold Star” membership costs $55 per year with additional cards for anyone living at the same address. At $110 every year, the executive membership costs double the gold star membership but provide additional benefits and discounts and 2% cash back on qualified Costco purchases. Members are also eligible to shop at Costco gas stations, Costco Optical, Costco Pharmacy, and Costco Travel.

Key Takeaway:

  • Costco’s success stems from the fact that they thoroughly know who their customer base is. Their members usually belong to large households or are those that benefit from buying in bulk.
  • The company crafted a successful loyalty program by giving customers just the bare essentials of what they need by knowing their purchasing behaviors—and by cutting out the fluff that doesn’t really excite them.

 

With the plethora of loyalty program options only increasing, it can be tempting to emulate successful programs that already exists. But you’re more likely to attract a loyal customer base through experiential rewards that only you can offer, rather than just discounts and monetary rewards which can frequently be undercut or copied by competitors.

Aishwarya Raman
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