Some marketers are buying into a pervasive — and incorrect — belief that loyalty marketing is ineffective.
However, cultivating customer loyalty is actually more important than ever. Now that brands are increasingly price matching to remain competitive, customers will choose where to do business based on the experiences retailers can offer. That is where a quality loyalty program can be your secret weapon to gaining a competitive edge.
Loyalty programs need to provide more than just a discount. The kernel of truth to rumors about program effectiveness may be due to stagnant results from “set it and forget it” programs that haven’t been updated in years. But that doesn’t apply to engaging ones that are actually driving positive results for brands.
We conduct ongoing research among loyalty program members to determine what motivates shoppers most. The research revealed three tenets dominating the loyalty landscape: convenience, savings and status. And while customers have always appreciated these perks in a loyalty program, they expect nuances from their favorite brands’ programs. In the age of the connected consumer, here’s what’s driving loyalty:
Ease and convenience
Customers want instant gratification -- while exuding as little effort as possible. Strong loyalty programs integrate this desire by making convenience a cornerstone of the experience.
For example, Amazon Prime (a paid loyalty program) thrives on its promise to give members free expedited shipping on over a million items. The program has gained so much engagement from customers by addressing the potential pain points in their experience. Any brand can do this by making shopping experiences easier and more convenient.
This means that programs should be easy to engage with. Loyalty programs — especially those that require a downloaded app — will fail if they require more effort than what they’re worth to consumers. The key to driving long-term customer loyalty is making life easier and solving problems for your loyalty members.
A new idea of status
Consumers still crave the feeling of an elite experience — or status —from loyalty programs. But what they define as elite status appears to be changing.
Shoppers consistently say that having a gold card is not what makes them feel valued. And they aren’t necessarily looking to show off their status in traditional ways. Instead, the focus is on “doing” rather than “being.”
But what does that look like? In most cases, it means more personalized experiences: early access to products they’d like, invitations to events where they can bring friends and access to useful information. You can’t just send an email that says “Dear Valued Customer” and expect the customer to feel valued.
Today’s savvy customers, who expect product recommendations based on past behavior, can instantly see through marketing efforts that aren’t tailored to their individual needs and preferences. But when they can tell the experience has been customized for them, that’s what makes them feel they have true status with your brand.
It’s no surprise that saving money consistently emerges as a top-three loyalty benefit. Everyone will tell you they want cash back. While it’s easy to provide loyal shoppers with straight cash back, it’s harder to make it memorable. At the very least, you need to tap into the dynamics of earning and accomplishment. One of the fascinating dynamics to a loyalty program is that companies often find that the same offer — say $5 off — will have higher redemption when it is a $5 off reward the customer earned in the loyalty program than the same $5 off sent as a promotional discount.
There are even more ways to ensure a customer recognizes and remembers that they’re receiving value from your brand. Rather than giving a flat discount, brands (like Sephora) have moved to offering a rotating selection of free products or experiences. The customer then has the memory of interacting with the free reward which can be more meaningful and memorable.
The key? Know your audience
While overarching trends might help brands refocus and refine loyalty efforts, it ultimately comes down to knowing your customer as an individual and acting on what you know in lasting ways. Remember, an effective loyalty program can’t be all things to all people.
These differences illustrate the importance of understanding your customers and tailoring your loyalty program accordingly. That way, your loyalty program will truly differentiate your brand in an increasingly competitive marketplace.