How many loyalty programs are you signed up for? How many do you actually use? In a 2016 sample of over 19,000 North American consumers, the average person was a member of about 13 different loyalty programs, but was only active in seven during the past year. Many loyalty programs offer an initial incentive for signing up, but leave the consumer with little motivation to continue. Difficult to navigate points systems, poor digital experiences, and lack of personalization are all common culprits in the failure of most of these programs.
Before you implement your own rewards program, it’s important to know both the type of program that will work best for your business, as well as how to adapt your program to the digital landscape. Reports show that Millennials are 1.75x more likely to say they’d like to be brand-loyal than Baby-Boomers, but their needs have changed—offering a paper rewards card that results in a free sandwich in three months is a quick way to get forgotten.
Before you choose the program that is best for your brand, you need to know what’s out there.
The simplest and most-straightforward option, customers accrue points by spending money, sharing on social media, or referring friends. Accrued points can be redeemed for free items or credit towards future purchases.
Offer increased incentives as customers move up designated tiers. The most common example is a frequent flyer program. For each level you climb, you earn more points for the same purchases as well as receive additional perks and exclusive access.Lifestyle-Based
Specifically targets different demographics with rewards that are most valuable to them. This can mean differentiating benefits for families, women, college students, or even data-based such as average transaction value.
Take advantage of existing structures within a physical or digital community. Whether it be a coalition of local businesses, a group of like-minded people, or even an entire town, these established networks provide a solid base for driving higher engagement.
Digital Loyalty Drives Sales
In the digital age, consumers demand a seamless omni-channel experience when engaging with your brand and your loyalty program is no exception. While 57% of loyalty members would like to engage with a loyalty program via their mobile device, only 30% are satisfied with their current digital experience.
One of the easiest ways to improve the digital aspect of your loyalty program is to reward brand engagement. Whether providing incentives to drive online reviews, offering points for every check-in or featuring a share button to post recent purchases with relevant hashtags, you are not only encouraging loyalty, but also serving to drive additional sales. According to Nielsen, 92% of people trust word-of-mouth recommendations and referrals from friends, generating more than twice the sales of paid ads.
Loyalty Is a Two-Way Street
A common misconception is that customer loyalty programs are meant to showcase the customer’s loyalty to your brand. If you’re starting from here, your program will fail. The purpose of your loyalty program is show how loyal you the brand are to your customer.
What this means for your brand is that offering perks, special benefits, or personalized rewards to your most loyal customers is a necessity—simple point-per-dollar systems are no longer enough. Non-monetary incentives such as early access to new products and in-store (or online) perks for members go a long way in providing the emotional and experiential factors that are the top drivers of repeat business for true “Brand Loyalists.”
Furthermore, creating a loyalty program with hard-to-reach benchmarks and meager rewards is a surefire way to let your customers know they don’t matter to you. When Starbucks announced their new loyalty structure involved spending $62.50 before receiving a free item (the old program required just 12 visits, regardless of dollar amount) the backlash on social media was widespread with many customers utilizing the hashtag, #lostmyloyalty. While the program isn’t likely to negatively affect those who spend upwards of $5 a day on a venti latte, they managed to alienate an entire cohort of loyal, high LTV customers.
Personalization Is Key
One of the most underutilized aspects of loyalty programs today is personalization. According to a 2016 study by American Express, 48% of Millennials expect brands to customize offers to suit their needs, and 39% will go out of their way to use a customized offer vs. 32% of other age groups. Yet only 22% feel “Very Satisfied” with the level of personalization they experience with a program, down from 28% in 2015. The tides have shifted and millennials demand more from brands in exchange for their loyalty than any previous generation.
In the age of Big Data, personalization isn’t as hard as it seems. Consumers are more than willing to provide personal details such as their birthday, location, and purchase history in order to receive offers tailored to their interests. Don’t let all that data you’re harvesting go to waste.
Managing Your Loyalty Program
If you aren’t tracking the effectiveness of your rewards program, you may as well be throwing those rewards out the window. Your loyalty program should be increasing your customer retention rate, lowering churn, and positively affecting soft metrics such as your Net Promoter Score and Customer Effort Score. Luckily there are plenty of tools and programs available to help you manage everything from a simple point-based system to a complex, multi-tiered program with personalized rewards.
A 2015 study by Capgemini Consulting found that 77% of transaction-based loyalty programs fail in the first two years. That same study found that only 25% of loyalty programs reward some form of engagement, and only 11% personalize rewards based on purchase history or location data.
The digital landscape has changed the way consumers view brands, the way they engage with them, and what consumers expect in exchange for their loyalty. People don’t shop the same way they did 20 years ago, so why would the same old loyalty program be effective?