The Key to Unlocking Loyalty Program Success is Evolving with Your Customer
By Anne Klein, Client Services
There are 3.3 BILLION loyalty program memberships in the U.S. according to Colloquy. When you ask loyalty program owners to name a company with a model program, Starbucks and Target’s REDcard® are often on the tip of their tongues. And with good reason – Starbucks’ loyalty program now exceeds 10 million members and offers tangible benefits – free food and drink in exchange for such actions as using their mobile app to pay. Target’s REDcard delivers a straightforward way to save 5% on Target spend. The program has an easy to understand structure with ancillary benefits like an extended return policy and free shipping.
So how can retailers capture the hearts, minds and wallets through loyalty programs and digital gift cards in today’s complex retail environment? We sat down with executives representing retailer, loyalty supplier and credit card loyalty program points of view. Here are three things we learned from the engaging discussion:
- Establish Crystal-Clear Objectives
It sounds obvious, but loyalty can mean different things to different companies and stakeholders, so it’s critical to determine from the outset what your brand is trying to accomplish. Do you want to grow basket size? Increase shopping trip frequency? Use the program to acquire new customers? Inspire loyalty members into the ultimate brand mavens? The more specific your goals, the easier it will be to create a program that will bring shoppers in and keep them coming back to your brand.
For example, a pet supply retailer we work with sought a way to be top-of-mind for loyalty members so they shop with the brand more frequently. The brand created a repeat delivery system for pet food as part of its loyalty program. Much like the Amazon Prime model, this makes it easy for its customers to shop with the brand regularly and, if they are buying their pet food on a consistent basis, it becomes more likely that they will buy other products as well.
This retailer also builds goodwill and meets both rational and emotional attributes by adding a “surprise and delight” element to the program with the distribution of unexpected eGift cards. The cards not only reflect positively on the brand’s image, they also help foster loyalty because the shopper now has branded currency to use with the retailer. As the executive on our panel commented, “The [gift card] spend is worth it for sure. It’s another reason to talk to your customer.”
- Understand “Why” & “Who”
Once you know what you are trying to accomplish, it’s time to devise program strategy and tactics that will influence shopper behavior. What are the most effective levers for each program? Will customers buy more when more frequently offered a monetary incentive; will people shop and spend incrementally when given access to something before the general public? Marketers need to understand why customers engage with their loyalty program in the first place and then decide how to keep them engaged. By looking at levers, you can quickly determine what is meaningful for each customer. What resonates best – perks, early access, gift cards, offers, omni-channel entry and engagement access, etc.?
As part of this conversation on understanding your loyalty members, panelists discussed the generational gaps within their customer base and how best to approach different segments. What matters to a baby boomer might be very different from something that motivates millennials, for instance.
One of our loyalty partners studied each generation’s habits and learned that companies need to look more at lifestyle than generation. For example, “Generation Connected” doesn’t necessarily equate to “millennials.” An example of Generation Connected is a 65-year old male who is digitally connected, checks Facebook multiple times a day and considers himself an early technology adopter.
Hospitality loyalty, for instance, attracts a big Baby Boomer/Gen X segment for work-related travel. And they have very different needs and motivations outside of the generation. Our partner advised that marketers “need to understand their audience instead of segmenting based on age.”
- Be Relevant!
After understanding your objectives and your customers’ motivations, it’s important to communicate effectively and that all comes down to relevancy. For years, marketers have been calling this “personalization” or “CRM.” When you boil it down, it’s about being relevant to each shopper – understanding shopper preferences, behavior, how and when they shop, and presenting the right communications at the right time.
As part of the value exchange in joining a program, loyalty program members know the retailer is tracking their behavior and expect that to result in some kind of benefit. Retailers need to, in turn, make good use of the data they are collecting. If they send something that’s not relevant, it’s a huge turnoff to the customer. The panel agreed that while this can be challenging and complex to tackle, successful execution contributes to a positive customer lifetime value.
Another partner on the panel is leveraging technology to tackle the omni-channel communication challenge. Customers are now shopping on so many different points across a retailer’s network, so the challenge becomes understanding the customer across all touchpoints and presenting very tailored offers. He advised the audience to “use tech not just to build a program with compelling features, but do it in a personalized way. Be relevant.”
Panelists agreed that acquisition is only half the battle and early engagement is a top priority for a successful loyalty strategy. Marketers need to spend the first 45 days keeping members engaged with the program. Establish a game plan to test, measure and refine the behaviors you’re trying to elicit in order to secure optimal engagement. Ask yourself: Does the program have a strong value prop? Is there choice? Is it mobile-enabled? Does it include social elements? Does the program offer rational and emotional value? And, does it surprise and delight enough to make it a unique and engaging experience?
The future of loyalty holds a lot more complexity, making it imperative for retailers and brands to continue to evolve their program with shifting consumer behaviors, wants and desires. Keep in mind that what’s come to be “expected” in loyalty programs is now pure table stakes. The surprise and delight, the uniqueness, the relevancy – these are how you’ll really connect with shoppers and turn them into brand loyalists.