I recently wrote about how a successful loyalty scheme must offer more than just pricing discounts.

But what else defines a successful loyalty scheme?

1.  “KISS” – keep it super simple:

The ease in which customers can interact and engage with loyalty programs has heavy influence on its success/failure.

For example, Walgreens’ multifunctional app sounds great, however, if it was confusing to use, and refilling prescriptions was a clunky experience, very little uptake would result.

For simple and successful loyalty programs:

  1. Simplify the structure of the program, you don’t need to be a mathematician to calculate rewards (points) and benefits.
  2. The activities the customer must undertake to gain points are easy to understand.
  3. The ability for consumers to redeem rewards is easy to understand and apply.
  4. Program status updates are clear and simple.
  5. The app or “My Account” area elegantly presents all status updates and potential benefits so the customer can check whenever he/she wishes.
  6. Retailers can easily explain the full “loyalty program” value proposition to new and existing members.  If the program itself is easy, the ability to communicate it and prompt more members to sign up also becomes easy.

Customer experience design specialists are required to ensure all aspects of digital loyalty engagement are intuitive and easy, specifically for smartphone screens where most loyalty programs drive engagement.

Successful loyalty programs are driven digitally. Both Starbucks and Walgreens enable their loyalty programs through apps to enhance physical experiences. Loyalty for bricks and mortar, as a business function, can and does become competitive advantage against online-only threats.

Research from Bond Brand Loyalty shows 57% of US consumers want to engage in loyalty programs on their mobile devices.

Though I have used apps as examples, the point to make here is to digitally enable loyalty. App development is expensive and high risk. The ideal place to start is to leverage your existing site and do more with it along with other digital tools such as email.

One example of this in action is Air New Zealand, which communicates member status via email.  While their points system is not always clear due to so many ways to gather points, regular emails update customers on their status and what they need to do to either gain a higher level or attain an existing level.

2. Ask customers what they want

Retailers who are winning are those who simply ask their customers what they want in a loyalty program.

These organisations conduct a process mixing quantitative and qualitative data, and from this, comes a series of assumptions of what “value” looks like from the customer perspective.  These assumptions are then tested by surveying segments of their database.

One example of this in action, as detailed by GartnerL2, is DSW (Design Shoe Warehouse) in the US, who surveyed thousands in their database to see what they wanted in a loyalty program.

In the process they found an unexpected customer characteristic… many of their female customers have shoes more than 12 years old.

This outcome was turned into a member benefit.  Members could bring their old shoes into a DSW store, donate them, and receive points that can go towards the purchase of a new pair.

While this does not appear to be a direct tactic to drive sales, this membership perk…

  1. Frees up room in the shoe closet
  2. Creates goodwill
  3. Brings customers back in to stores
  4. And shows members the retailer is listening

3. Don’t pressure customers for volumes of personal information on initial sign up

While consumers are open to sharing their information, this happens only once trust is built.

So when loyalty programs require too much information in the beginning, it puts consumers off.

Successful retailers structure the loyalty program in a way where consumers can easily join and immediately benefit with little information input.

However, once they join, the retailers gather more personal information over time.

Lululemon is a good example of this in action. The customer provides a very limited set of information to become a member. This retailer then “gamifies” the process of profile completion, and creates a customer “status” to encourage the behaviour of providing more personal information.

Lululemon uses friendly terminology (“Let’s be friends with benefits”) to not appear to be pushy and they present what the benefits look like if more information is submitted to the retailer (“70% complete – save a credit card for speedy checkout”).

4. Don’t (initially) create a loyalty program for everyone

Successful loyalty programs embrace the notion: there is no singular loyalty scheme for every customer.

Don’t think for a moment, a loyalty program is the next “Amazon Prime”!

Those retailers who are successful now, did not try to initially satisfy everyone. These retailers identified their loyal customers and worked hard to please them first.

They undertook a process of identifying a core segment of the database who would see value in various “currency” types:  time, convenience etc…

Once the loyalty program proved to add customer value and business benefit, it is then incrementally released to a wider targeted audience.

5. Data gathering

The successful retailers recognise the value gained from the data coming from loyalty programs, specifically the behaviours of existing returning customers.

So much so, even though the numbers may not stack up and the loyalty program is not highly profitable, these retailers harness the data they are gathering and apply it throughout the business.

According to the aforementioned Bond Brand Loyalty study, 87% of consumers embrace the notion of being watched on the caveat this monitoring results in improved experiences in the future.

While 87% may appear to be high, this percentage rises to 88% among households with children, 91% among the under 30 cohort, and 94% among the affluent.

While this data gathering can help improve existing loyalty programs, the real value comes by it delivering insights organisations can use to identify and acquire new customers who fit specific profiles.

The customer profiling that occurs within loyalty program development are hypotheses that can be verified with data which can then be used to create content and experiences to acquire more of the same.

This activity supports the wider business customer acquisition strategy and can thus reduce the cost of acquiring.

Lancome example:

Lancome has a robust loyalty measurement system in place (as detailed in this Emarsys article). At one point, the data was used to identify a segment of the loyalty database where purchasing in store had not occurred for a set period of time, which was considered to be out of “character”.

Lancome created a campaign offering reward incentives to prompt these members to explain why they have not purchased in store. This (of course) is all constructed in the hopes it will reignite the relationship and since the questions are relevant to a customer behaviour, it feels personal and sets the tone that Lancome wants to listen.

lancome email

via Emarsys

6.  “Pretotyping” – testing new loyalty experiences

Successful retailers conduct “test pilots” when introducing a new loyalty program or variations of an existing program.  These pilots are made available to a small segment of the targeted database to test impacts.

Retailers don’t necessarily need to build a program to test its viability and popularity. The successful loyalty programs first create the concept of a program and then test the concept.

This is “pretotyping”.

Where prototyping is the initial creation of something for actual behavioural testing, “pretotyping” is the step before.

This concept trialing allows retailers to come up with a variation of ideas and not be forced down a certain path due to committed investment.

Walmart is a good example of where “pretotyping” would have been a valuable cost and time saving step.

In early 2018 Walmart introduced a “Amazon Prime” equivalent known as “Shipping Pass”, offering customers free two-day shipping services at a cost for members. Walmart created the infrastructure and offered it to a segment of their database. The response to this loyalty offer was not favourable.

Walmart found the benefits they offered within the “Shipping Pass” program was nothing exceptionally special (faster shipping), there was no perceived value.  Customers perceived these “benefits” to be a “standard service” that should always be available.

This same conclusion could have been uncovered in a “pretotyping” process.

Conclusion

To understand the benefits of loyalty is easy, to get loyalty right is hard. Retailers need to listen and develop a higher degree of empathy in order for loyalty programs to add value.

While the cost of creating and perfecting a loyalty program may appear to be prohibitive, think about a business model where the reliance on business growth is always on new customer acquisition.

Today’s consumer has more loyalty to his/her own need and demands to be in complete control of his/her information gathering and buying destiny.

Forbes says the “empowered consumer” is no longer easily influenced by brand equity and traditional advertising tactics. Consumers engage with brands because they want to.

Now think about your competitors? How well do they conduct loyalty initiatives?  Is this an opportunity to develop competitive advantage?

Don’t be deterred by the ubiquity of loyalty programs.  They may be everywhere, but only a select few are getting it right.