Commentary

Customer Loyalty Program: One Size Does Not Fit All Retailers

What sways a casual shopper into becoming a loyal buyer who shops with your brand across multiple devices and channels? Does loyalty result from offering everyday convenience and long-term savings? Is it something that is earned over time, or does it require an integrated digital-mobile-social-in store marketing approach? Or is it something as simple as a genuine love for a brand or a product? It may seem like I’m complicating the question with even more questions. But I’m not.

There are two very disparate sides to the equation of customer loyalty. On the one hand, you have customers. As a survey from Colloquy reveals, the average household belongs to 21.9 retail loyalty programs. On the other hand, you have retailers.

Loyalty programs are a major pain point and don’t always have much of a payoff for retailers. According to a recent study by McKinsey, which involved 55 publicly traded North American and European companies, those brands that spend more on loyalty, or have more visible loyalty programs, grow at about the same rate -- or slightly slower -- than those that do not (4.4 % vs. 5.5% per year since 2002).  

To help retailers tackle this challenge, I will outline four ways that retailers can create loyalty programs that deliver long-term value, utility and mobile interactivity to consumers.

Use mobile to untangle the path to brick-and-mortar

Mobile devices have become a natural extension of shoppers’ lives. Savvy shoppers look to these handheld devices to help them research, investigate and comparison-shop both before and during their in-store shopping trips.

Let’s look at one of the biggest innovators and leaders when it comes to mobile loyalty programs – Starbucks. The coffee giant’s mobile payment and loyalty app is used by 10 million customers with an average of 5 million weekly transactions. Most consumers gladly hold it up to the baristas when it’s time to pay for their Iced vanilla latte.

There’s good reason -- it’s more than just a basic loyalty program. The rewards include a point accumulation system, membership level increments, reward redemption in the form of free food, drinks and drink refills, and better yet, random jackpot prizes regardless of membership level. Not only is its loyalty program easy-to-use, fun, wallet-friendly and engaging, but it’s also seamlessly integrated with its mobile payment process.

There’s good news for retailers that want to emulate Starbucks. With beacons, push notification and locally targeted and personalized ads, retailers can seamlessly guide shoppers from the second screen into physical stores.

Court repeat visitors and brand advocates

Many retailers find that customer retention is a major obstacle, according to a recent study by Key Ring. With 55% and 70 % of retail sales being generated by loyal customers, retailers should shift their focus to an audience they’ve already captured.

With so many competitors vying for their customers’ attention, simply offering generic coupons and reward points to program members isn’t the answer. By reanalyzing loyalty programs, retailers and brands are able to improve retention, decrease churn and modernize their companies in the eyes of consumers.

Complement existing shopping habits

Loyalty programs are not necessarily driving the right consumer behaviors and, in many cases, they're only adding another piece of complexity for the consumer to manage. Consumers want to earn rewards for shopping at their favorite businesses without altering their existing behaviors. The fewer steps a brand requires a customer to take to earn and redeem rewards will result in a more successful rewards program.

Utilize scale, scale, scale

While turnkey loyalty start-ups offer brands a low-cost way to launch rewards programs, the problem, especially for national businesses, is that scaling with these programs is typically very difficult, and the cost to drive customer installs is high.

Proprietary programs have higher upfront costs, however, they are flexible and easy to adjust as a company’s program grows. Coalition loyalty apps that support hundreds of merchants can also serve as a supplement to a retailer’s existing mobile app.

Recommend (3) Print RSS
1 comment about "Customer Loyalty Program: One Size Does Not Fit All Retailers".
  1. Steve Gurley from Pyrim Technologies, Inc , June 30, 2014 at 9:18 a.m.
    Your point about complicating the consumer's life is right on target. Simplicity rules! Why is this such a hard concept for so many to grasp?