As the retail sector goes through its biggest transformation in history, so is the concept of retail loyalty programs which, thanks to digitalization, is getting a new lease of life, but only if brands get it right.

Consumers are tired of carrying around wallets or purses overflowing with physical membership and rewards cards, but being made to feel special, valued and important never goes out of style.

With the ubiquity of the smartphone has come an uptick in interest in loyalty programs as digital technology simplifies the signup and points collection process.

Loyalty programs build stronger bonds

According to customer engagement agency Bond Brand Loyalty, a well-considered loyalty program is still crucial for companies wanting to get closer to their customers. Its 2018 Consumer Loyalty Report, which surveyed over 50,000 consumers across the U.S. and Europe, found that 71 percent of loyalty program members see them as a meaningful part of the brand relationship.

What’s more, 70 percent say they’re more likely to recommend a brand with a good loyalty program to their peer group and 77 percent say such programs are a major element in them continuing to do business with a brand – 60 percent even admit to modifying their spend due to the program’s benefits.

Without actionable data, a loyalty program can’t take shape

“The benefits are clear to see, however, creating a program which really speaks to your customers and keeps your brand front of mind represents a real challenge,” begins Mike Small, Chief Client Officer, Sitel Group, U.S. “A successful loyalty program will help your organization increase brand engagement and boost brand advocacy, but only if you already have strong, actionable data insights flowing through your organization that you can use to design the program.”

That initial data identifies the premium customers you should be targeting, and how they should be targeted.

The way a program functions must reflect the way in which your customers already interact with your brand – the aim should always be to reward and encourage existing good behavior, not force people to change.

“If earning points requires customers to change their existing habits, your scheme is really going to struggle,” says Small. “For example, customers are now multichannel, moving online and offline on the path to purchase. Therefore, your program has to be omnichannel and accepted at any point of sale, not just in store, for instance.”

Make it easy to earn rewards

Cosmetics brand Sephora uses a simple points system for its Beauty Insider program where members earn every time they spend a dollar on- or offline. The points can be exchanged for cosmetics items but members can also benefit from free beauty classes and a yearly birthday gift. For the company’s biggest customers, there are two further tiers based on a customer’s annual spend that also offer monthly gifts, free makeovers, free deliveries and, in the case of the top tier, a beauty hotline and invitations to exclusive events.

The top Rouge tier is only open to those customers spending $1,000 or more a year at Sephora. But don’t forget that the definition of good behavior is much broader than simply making a purchase.

“Your biggest customers are your biggest and most authentic source of marketing and promotion,” Small points out. “Why not extend points to leaving product reviews, posting to social media or recommending friends?”

One company currently taking this idea to the extreme is Tommy Hilfiger. It has just launched a range of “smart” sensor equipped clothes that link to a supporting app. Wearers earn points for wearing the garments, for sharing pictures of themselves wearing the clothes and by traveling to certain locations at certain times of the day. The points, recorded in the app, can be exchanged for experiences like trips to fashion shows or items of clothing that will never go on general sale.

A mix of instant and delayed gratification

This very small-scale scheme has generated large-scale media attention is clearly targeted at members of Generation Z and highlights that different demographics need to be treated differently in terms of how points are earned and the types of rewards on offer. Customers with a young family may appreciate free home delivery, discounts at the point of sale or coupons for days out at a theme park – your data will tell you if such rewards will cause delight or disappointment. However, one thing all demographics have in common is impatience.

Discount Code via a Loyalty Program

“You need to offer the first benefits of membership sooner rather than later so as to keep customers interested in the program,” Small warns.

That’s why increasingly airlines are bundling in immediate savings on car parking or car rental as part of their frequent flyer schemes. Otherwise, passengers could be waiting for years before they’ve earned enough points to actually take advantage of their membership status and enjoy a free flight.

Membership opens the door to greater insights

Once on board and beginning to enjoy the benefits of membership, these programs offer the opportunity to get even closer to customers.

“Consumers want to feel that they are individuals,” says Small. “The best way for a brand to demonstrate this is via personalized offers and services – so much so that even in a moment in time where data misuse is often headline news, study after study still highlights that people are ready to reveal more of themselves and share more of their data, if it leads to a better, more personal service from their brands of choice.”

Direct communications sent our regarding a customer’s loyalty program status are more likely to be opened and read than other emails. They offer a rich opportunity to engage further, to ask for feedback and, most importantly, to let customers know how many points they’ve earned and what benefits they can already claim with that points total.

“One of the biggest annoyances for consumers regarding loyalty programs is keeping track of points earned,” explains Small. “Too often points or rewards have expired before the customer realizes, and that just makes them frustrated. Being active in this respect will make a huge difference.”

Or even proactive. An Oracle study published in February shows that 85 percent of consumers globally find the idea of a personalized experience where retailers automatically suggest, order or recommend products best suited to personal preferences appealing.

A prime area for innovation

The goal is to make members feel valued and one of the best ways to do so, as Amazon has amply demonstrated, is by charging a premium for its membership. The online retail giant recently increased the annual fee for its Prime membership to $119 – yet this has done nothing to dent the scheme’s popularity. Over 100 million people are Prime members

As Generation Z becomes the most influential generation – in terms of wages and wealth creation – expect these types of fee-based programs to become more popular.

A LoyaltyOne study found that 75 percent of 18 to 24-year-olds and 77 percent of 25 to 34-year-olds would consider joining a fee-based program if it was set up by their favorite retailer. When asked why, the consensus is that rewards that fit their needs are worth paying for and that privileges relating to a fee-based program will be more valuable.

“But whatever route you decide to take in aligning your customers more closely with your brand, it’s imperative to constantly measure its impact and success and to constantly refine it for the good of its members,” Small states. “Don’t forget that the average American is signed up to 14 loyalty programs but only uses six.”

From gathering and analyzing the insights needed to start building a loyalty program to promotion — including community management, optimizing channels and data management – Sitel Group can help your organization develop and maintain a differential approach to customer experience that will ensure it stands out from the competition.


Sitel Group


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