In reality, by its true definition, there are few loyalty programs that work for the customer. This is the crux and the reason loyalty program failure is common.
But there are loyalty programs that are “winning” (“winning” = both the customer and the retailer benefit). And there is commonality both in specific business activities and “loyalty program characteristics” that work together to create this success.
More than just pricing benefits
Loyalty program success rarely comes from programs solely focussed on price benefits.
According to 2015 research by Capgemini, 77% of loyalty programs based only on “transactional behaviours” (earning points from purchasing) commonly fail within two years of launch.
Another survey, by Bond Brand Loyalty, involving over 28,000 North American consumers, found the following top 10 reasons as to why a loyalty program is “great” from the customer’s perspective as follows:
- Program meets needs
- Customers enjoy participating in program
- Program makes brand experience better
- Ease of redemption
- Program consistent with brand expectations
- Program rewards/benefits appealing
- Level of effort needed to earn redemption
- Time to earn desired rewards/benefits
- Amount accumulated per $1 spent
- Ways rewards/benefits can be earned
This list is a mix of experience and financial rewards, and in fact the top five are experiential in nature.
Many brands are stuck in the old school mindset of creating a points system that forms a representation of “currency” that can be translated to money and/or discounts.
The study found that successful loyalty programs introduce an alternative “experience currency” that 85% consider to be of high value.
As Shep Hyken puts it in an article in Forbes, loyalty programs solely focussing on financial rewards are “marketing programs disguised as loyalty programs”.
So what do consumers classify valuable experience currencies to be? While the specific answer will be unique for each retailer, consumers know the outputs or personal benefits they are seeking when engaging in a loyalty program.
Experience currencies are impactful because the consumer feels like the retailer is listening to his/her needs. It comes down to empathy.
Some specific examples of loyalty experience activities proven to add value are detailed in the aforementioned Bond Brand Loyalty research:
- Making engagement with the retailer easier (“time”, “convenience”)
- Offering a new standard of relevant content that is aligned to the consumer’s interest (“brain space”)
- Improving/enhancing access to retailer services (“convenience”)
- Delivering relevant offers/promotions (“thank yous”)
- Deliver a higher standard of meaningful experiences (“meaning”, “brain space”)
- Simplifying the consumer’s life with unique services (“time”, “convenience”)
- To make the consumer feel appreciated, special and part of an exclusive community (“thank yous”, “discretion”)
Too many promotions?
Merely pushing and offering promotion/discount messages is not a sufficient definition of value.
For example if retailers know a “loyal” customer is not going to purchase from them every week, why are promotion messages to loyalty members at such high frequencies? When customers are told they will receive meaningful information via email and receive a high volume of content that is not to a high standard, the concept of feeling special quickly becomes lost.
Gartner has conducted research showing the impacts of email open rates in the luxury market when comparing two subject title types….discount messages vs experience offers.
The open rates are far greater when email subject titles comprise experience offers.
Case studies of experience-based loyalty
Starbucks loyalty members use an app to place a coffee order, pay for the order, access streamed music (third party) and redeem rewards in real time. All in the effort to embody the brand ethos of “lifestyle enhancement”.
The Walgreens loyalty program enables customers to refill prescriptions, monitor the status of their orders, pay using their phone, and earn/redeem rewards.
Nike intentionally steers away from financial rewards. Members of the Nike loyalty program gain access to meditation services (from a third party app), free access to music on Apple, and are exposed to various athletic content.
Nike is also about to trial a new app concept that recognises customers once they enter a Nike store. This recognition will then allow consumers to scan products for availability and pay without waiting in line. This is being trialed in specific regions.
Uber offers “ride-upgrades” enabling regular passengers the option of a luxury riding experience. While Uber is a disruptor itself, it is cognisant of threats like Lyft, who can take market share if complacency sets in.