The best retail loyalty programs turn customer activity data into powerful personalization

Published September 10, 2020

Customer loyalty programs are brands within brands. How they resonate with consumers depends on a sound loyalty strategy and execution. As a retailer, you can evaluate your strategy and execution by gauging customers’ reactions to their loyalty experience. What might your typical customer be thinking about your program as they’re waiting to check out?

  • Something like this? “I know this cashier will ask if I’m in their loyalty club or whatever it’s called. I don’t even remember where my loyalty card is—there’s no room for another barcoded thingy on my keychain. You never actually get anything for the hassle anyway. And I don’t want to say my phone number out loud so they can look it up.”
  • Or this? “Oh, wow, the SMS alert I got when I walked in the door says I’m going to get double reward points for crossing my spend threshold. How do they know? And there’s an offer in my app I can use on something I buy all the time. And I'm about to reach the next tier and get double points regularly. Awesome!”

More and more retailers are catching onto the fact that their loyalty programs have the potential to fit into the second ‘brand feel category.’ That’s because loyalty shouldn’t just be a program—it’s a relationship. To make your loyalty experience into a vehicle for true relationship building (and the positive brand feel that results), it should meet four customer needs:

  • Make them feel valued
  • Enable them to take control
  • Reward them for loyalty
  • Give them rewards to spend

Obviously, the second example above meets all these customer needs. The program in the first category…well, not so much.

So how can retailers keep their customer loyalty program from being less like a commodity and more like a relationship? Data and automation. These make sure the program is capturing as much customer data as possible, and as efficiently as possible, to serve up a personalized loyalty and rewards experience across customer touchpoints and interactions.

 

The global loyalty management market is projected to reach $10.02 billion by 2027, with a compound annual growth rate of 19.9 percent during the forecast period.

Loyalty program types and trends

Types

First, for purposes of evaluating a current program or launching a new one, it’s useful to take inventory of the different types of customer loyalty programs available.

  • Points program. The loyalty program member who spends more, gets more loyalty points and earns rewards. Because this program is the most popular type, it makes sense to weigh point program pros and cons if you’re thinking of implementing one.
  • Spend program. Loyalty members earn loyalty credits for the amount they spend at a business.
  • Tiered loyalty program. These programs reward initial loyalty and encourage more purchases. Customers earn points with each purchase and work toward increasingly rewarding loyalty tiers.
  • Paid program—VIP member club. Customers pay a monthly or annual fee to join and gain access to member-only services, discounts or unique opportunities.
  • Value-based program. If you align your program with your customers’ values, they are more likely to become brand ambassadors. For example, every time a customer makes a purchase of a given value, you donate a certain amount to a cause you both care about.
  • Partnered program. You partner with other organizations that provide the program rewards. This type enables you to build new business relationships and show customers you truly understand and care about their needs.
  • Game program. Gamification of a loyalty program is a great way to generate excitement and attract customers to it.
  • Hybrid loyalty program. The most common combination is a point-based and tiered program.

 

Trend: Personalization driving growth

While there are many different kinds of loyalty programs, there a few trends that impact all of them, starting with what makes them successful. There’s no doubt, loyalty programs that create an ongoing, personalized relationship with the consumer have a bright future:

  • Projected growth data underscore the potential of customer loyalty programs—and the need to differentiate yours. The global loyalty management market stood at $2.47 billion in 2019 and is projected to reach $10.02 billion by 2027, with a compound annual growth rate of 19.9 percent during the forecast period.
  • According to Fortune Business Insights, the pandemic has organizations adopting loyalty program management software to help drive more digital loyalty as more consumers turn to online shopping. Retailers are largely adopting loyalty rewards programs to augment their sales by maintaining a loyal customer base.
  • For their part, customers are starting to show interest in personalized recommendations, coupons and promotions. Personalization can increase sales, customer loyalty and online traffic—and profitability.
  • Technological evolution and digitization have transformed rewards programs by retaining insights from the user experience and engagement cycle. Artificial intelligence (AI) and machine learning offer intelligent insights that could help retailers predict customers’ rewards program behavior.
  • Also, real-time communication facilities and purchasing analytics are transforming loyalty program platforms into effective marketing channels.
  • The evolution of loyalty programs has led to the creation of multi-channel platforms to encourage customers to earn and spend points whether online, on mobile apps or in-store shopping.

 

Trend: Premium programs

Until now, most retail loyalty programs were free. But in an effort to provide even more value while differentiating their loyalty program and enticing shoppers to come back regularly, some retailers are rolling out premium loyalty programs with more regularity. These fee-based, member-only programs have a lot of win-win potential:

  • Charging a fee guarantees that retailers generate revenue up front.
  • Customers who pay for benefits are more likely to shop with a particular retailer to guarantee a return on their investment. Millennials, for example, want simplicity, e.g., if they pay a fee, they can go into the store anytime and get a set discount.
  • Also, retailers gain quality data about their best customers—information and insight that can be leveraged for more personalized interactions.

 

Data analytics underpin personalization

The growing popularity of premium programs is a strong indication that consumers are more than open to enrolling if they see value in them. Data, personalization, machine learning and artificial intelligence—and a POS platform that can easily integrate it all—can elevate your customer loyalty program into a personalized relationship that increases customer lifetime value.

To achieve loyalty program personalization, you’ll need to commit to learning as much about customers as you can. As mentioned above, the critical factor here is data. Tools such as customer loyalty software are available to enable you to build a data-driven loyalty program, but what matters is how you use the data:

  • Many marketers have data warehouses, or data lakes, that enable their enterprise systems to access customer data in real time. These data lakes enable marketers to create well-rounded identities for each customer that include their activities in multiple channels.
  • Whether they’re browsing your website, interacting with your social channels, checking out as a guest online or purchasing an item in a store, the shopper should be identified as the same person across every channel.
  • It’s true that in-store tracking technology has lagged e-commerce tracking technology, which generally captures much richer data such as brand preferences. The goal should be capturing e-commerce-level data from all different mechanisms—social media, web search and chat, not just purchases—to reveal the complete customer experience with your brand.
  • Based on their multi-channel interactions with your brand, you can use AI and machine learning to determine what that person might want to purchase next. And you can use data from similar customers to predict what another particular customer will do.
  • The most advanced, ideal scenario is using all of these data to make in-the-moment loyalty suggestions. For example, a just-completed purchase might trigger a product recommendation, a best customer status recognition or a reward update on the customer’s mobile device.
  • Even better, a program that uses geo-fencing beacons can use the customer’s location at any given moment—e.g., pulling into the parking lot or walking through the front door—to trigger geo-targeted suggestions via SMS, mobile app or digital wallets.

 

How to promote the program

It doesn’t matter how great your loyalty program is if no one knows it’s available. To get the adoption and engagement you need to create the best return on investment, try varying your promotion methods.

 

Digital marketing tools

One program includes five ways to recruit new members:

  • Create a big introductory splash to maximize enrollment by auto-enrolling every recent purchaser of your products or services into the program with an option for an opt-out. Send a program introduction email as part of a loyalty campaign. Give bonus awards for purchases within the previous six months.
  • Build a catchy loyalty program explainer page that shows visitors the various ways they can earn points, how they can redeem points and what reaching the different tiers will offer them.
  • Feature the loyalty program prominently on your website.
  • Embed callouts to earn points at different places on your website.
  • Use gamification through ongoing marketing promotions such as double-points weekend and contests with special rewards for members who earn a set number of points in a given month.

 

Trend: Ambassador programs

For even more reach and engagement, brand ambassadors are your force multipliers. They form the backbone of your loyalty referral program. As independent third parties, they lend credibility to your program promotions and can provide a boost to enrollment.

Here are some ideas for operationalizing an ambassador program:

  • Assuming you’ve already got a loyalty platform in place, consider tracking your ambassadors with assigned gift cards, trackable coupons, landing pages and the like. As an example: for every assigned “$5 Off Card” a customer redeems at your business, the ambassador gets $1 for any item of their choice.
  • Another idea is using point multipliers. Try awarding successively larger amounts of value to an ambassador’s account for the more people they refer. This can be particularly effective during high-traffic periods, like holidays.
  • Set goals tied to a referred value threshold that you can measure by revenue, customers or number of items purchased. Goals are the basis of gamification.
  • Make sure your ambassadors have a resource center to go to for questions and feedback.
  • Build the relationship. Genuinely thanking ambassadors when they send a new customer your way is vital to building referral relationships. Instant rewards are a great way to let your ambassadors know when their referrals are working.
  • Measure program effectiveness by segmenting all of the tickets where an ambassador program discount has been applied. Remove the value of the discount you applied to your end user—e.g., that $5 off coupon—and then subtract the value of the reward you applied to your ambassador’s account on the same ticket. Divide the dollar value of the discounts you gave by the total revenue earned from referral-based revenues for the program’s percentage cost.

To recap: Keep your focus on using your loyalty program as a means to build stronger relationships with your customers. Analyze the available data on any interactions they have with your brand. Learn their preferences. Personalize your program to the preferences.

You’ll know it’s working when they tell you they feel valued, they’re in control, they’re being rewarded for their loyalty and they’re getting rewards to spend.

Don’t forget to keep the conversation going with loyal shoppers over time. Try conducting  surveys or focus groups to confirm you’re on the right track. And if you have the right loyalty platform that integrates directly into your POS, ecommerce and analytics, you can track their loyalty program activity levels, spending and purchase habits to give you all the evidence you need.

Need more information?