Ask any retail expert, and they will tell you how effective retail customer loyalty programs have been. It glues customers to the brand because they feel cared for and valued. Loyalty programs are not new, but how a brand utilizes them makes a big difference. As a retail store, you have to be skillful enough to mix up things in a way that they have a whiff of fresh air. In this article, we will see the programs, their types, and ways to effectively incorporate them into your strategy.
Table of contents
- What are Retail Customer Loyalty Programs?
- Types of Retail Customer Loyalty Programs
- Benefits of Retail Customer Loyalty Programs
- Challenges and Limitations
- The Top Brands and their Customer Loyalty Programs
- Retail Customer Loyalty Program: The Takeaway
What are Retail Customer Loyalty Programs?
Loyalty programs are the special incentives offered by the brands to customers. The incentives include rewards and discounts. This is one way a retail business can entice customers to stick to them and buy repeatedly from them. It is the reward customers get for their persistent patronage and creates a form of loyalty that binds the customer and retailers.
Customers are the backbone of any retail business; if a brand has the skills to entice them, it is one sure way to reach new paths of success. Moreover, the old customers who are continuously rewarded also share the word forward, which helps the brand score many more customers.
Types of Retail Customer Loyalty Programs
Retail Customer loyalty programs have always ensured brand recognition and customer retention. Different types of loyalty programs have, time and again, proven their worth. Let us look at them all.
Let us begin with the simplest loyalty program, the point program. These are the types of programs that brands are most commonly used. How does it work? Well, this program’s strategy is to give customers points after every purchase. The points are then translated into rewards of many kinds. It could be discounts or some special customer treatment.
The reward however is attained after having a certain amount of points. You can say that customers need to gather a specific amount of points to unlock the rewards. This makes us focus on how it keeps the customers engaged with the brand and how they have this fun activity of earning points so that they can get close to their reward.
The Spend-Based Loyalty Program
This is another exciting retail customer loyalty program that companies frequently use to entice their customers. As its name suggests, the customers get loyalty credits for the amount of money they spend on the brand. These programs are easier to maintain and organize because there is no complexity involved in them. Imagine the kind of brand loyalty this loyalty can provide. We also have to mention how it helps reduce the churn rate and increase the number of transactions.
This is one exciting retail customer loyalty program. We find it fun because it has ranks. The ranks of where you stand in terms of loyalty. The higher points you have, the higher the level. These ranks determine the kind of rewards you will get. For example, if your loyalty has been more than others, you will get more and better rewards from the brand. Each tier has a different set of benefits and rewards.
It also makes the more loyal customers feel special than others, and that is very important for brand loyalty. These people who outshine others will feel a stronger bond with the brand, and they will be attracted to shop more. This is one favorite loyalty program of all the retail stores because it helps them identify their true lovers.
Paid Loyalty Programs
Paid loyalty programs are also called fee-based loyalty programs. Paid loyalty program, which is for VIP members, only involves payment from customers monthly or annually( depending on the company). The customers have to pay if they want to enter the VIP club. The VIP club has several special discounts and services only for members.
There is one fun fact about it: consumers spend more money after they opt for a paid loyalty program. The benefits of such programs are many, from discounts to services and products that are only for the members of the club. The perks of having early access to new products and services are also included.
Now that is something exciting and fun here. Retail customer loyalty programs also have this fun program that involves a game. You must have often seen those spin-to-win games going around in stores. The wheel spins and stops at a point where different categories of perks exist. These could be discounts, buy one get one free, and also a free item. It all depends on where the wheel stops.
This loyalty program has been doing the rounds; people love this fun activity. They also find this activity addictive, and it binds them to the brand. The continued engagement of the customers is beneficial for the brands because it improves customer loyalty and retention.
Benefits of Retail Customer Loyalty Programs
There are many benefits of customer loyalty programs that we wish to highlight in a separate heading. Given below are some of the benefits that you should know about.
Every business wants to retain customers so their company keeps doing well. There is no doubt that customers are the soul of any business, and when they leave, the company crumbles. This is where we want you to think about how loyalty programs can help and fuel things for businesses.
When customers know that they are being offered a reward for the amount of money they are spending on a brand, they feel a stronger connection. They feel valued and cared for, which is one plus point for the company. The people who were one-time customers will be glued forever because of how loved they will feel by the retail customer loyalty programs.
It is a well-known fact that customer engagement is integral to any business. Customers engage with brands that offer loyalty programs that are specific and personalized. One strategy is to ensure that your customers get offers and rewards that cater to them directly.
What brands can do is gather all the pieces of information about their customers. This should include what they prefer, how often they purchase, and whether they shop from online stores or come physically. Once all the pieces are found, brands can create customer profiles and then make categories of the customers. The next step should be to provide them with targeted offers. This will ensure a well-thought-out strategy to engage your customers with the brand and extract the benefit.
Attracting New Customers
Another solid benefit is that brands can attract new customers. The brand awareness spread by loyalty programs reaches millions of customers, and they are tempted to shop from the brand. One quick tip here is that you reward customers merely for signing up. This will help you get the new customers’ attention quickly, and they will stick to the brand afterward.
If your budget allows, offer new customers the incentives for joining the loyalty programs. It will increase the sign-ups and show new customers swarming in. A smart brand knows that it is all about customer loyalty that takes the business to a new height of success, and they are willing to spend extra dollars for them because the return is going to be huge.
The better the customer loyalty programs are, the better your chances of getting past the competition. Brands should thoroughly research what their competitors are doing, and they have to devise ways in which they can surpass their competitors. Not many brands are willing to go the extra mile to give customers loyalty programs; this is why it is one department where a brand can take the lead.
Companies must ensure that their loyalty programs are different and better than others if they want to excel. The insights can be coupled with the strategy of loyalty programs, and brands can leave their competitors behind.
It is a well-known fact that companies need to develop a stronger bond with their customers. This bond ensures the longevity of the relationship between the brand and customers. Offering retail customer loyalty programs is one direct way to build that bond.
However, have you ever thought of going beyond the way and doing something nobody else has done before? We mean here that brands can also work behind the scenes to ensure brand loyalty. This is possible when you make a group of all the members of the loyalty programs.
Use social media to keep them connected to you and each other to add more value to the customer relationship. Use your imagination to go beyond the conventional ways and have a community. This will help you have a clear distinction between you and other brands. How you keep up with the members will say a lot about your brand’s core values.
Challenges and Limitations
It is not all glittery about customer loyalty programs. Some challenges and limitations cross the path of companies eager to offer loyalty programs to increase their brand’s name and awareness.
Loyalty Behavior is Hard to Gauge
It is hard to believe that one who is frequently buying from the brand is also loyal. There could be many other reasons, like enjoying the benefits of loyalty programs only. Loyalty is an emotion and it cannot be bought.
What companies can do is use persuasive ways to instill loyalty in customers. For example, pay them to write reviews or suggest the brand to others. This is one tactic that will help you see who really goes out of their way to vouch for your brand. This is what actually qualifies for loyalty. The marketing tactics like these need to be apt if loyalty behavior is to be gauged.
One common expectation of retail customer loyalty programs is that they will help generate profit as people will highly engage with the brand. The dark side comes in, and all the expectations go in vain when the consumers’ purchasing habits change. The changes in their lifestyle and income heavily affect how they use loyalty programs.
There comes a time after they witness changes in their lifestyle and income when they opt out of the loyalty program. This means that the loyalty programs do not cater to their needs anymore. Brands that spend lots of money will see a drop and have to bear the consequences.
Many experts rely heavily on measures like RFM. RFM stands for recency, frequency, and monetary value. However, in such cases, this measurement also ceases to work, and that is one con to look at.
Competing with others and standing out is hard because every company has more or less similar loyalty programs. Every company wishes to introduce a unique loyalty program that falls short on many ends, and this is one con of competing for offering the best loyalty programs. Brands can spend money on ensuring their programs stand out, but most fail to do so. The competition is tough, and it is difficult to maintain your uniqueness.
As people have a large pool of options to choose from, some weaker brands will suffer gravely. This is one risky factor here that gets to every brand’s nerves and we do not blame them. The competition is tough and there has to be something really different about the brand’s loyalty program if they want to be on top.
Limited Loyalty Data
You cannot expect to have all the data by using loyalty programs. For example, it will not provide you with the details like purchases from other brands. Moreover, it is a troubling situation when your incentives of the program require your customers to share data they do not feel like sharing. This could be a breach of their privacy and you are stuck in the middle of nowhere.
How does this affect the business? There could be problems for you to understand consumer preferences. The limited data also affects how you tailor your marketing strategy to fit the needs of customers. All of these factors can make it hard for you to retain customers and you will see a dip.
The Top Brands and their Customer Loyalty Programs
There are many brands today that have excelled in their fields by providing amazing customer loyalty programs. Mentioned below are some of the brands we want to use as our examples of excellent customer loyalty programs.
Sephora Beauty Insider
Sephora is one of the leading brands of the world. Keeping up with the legacy of the brand, they have exemplary customer loyalty programs. They use a point based loyalty program. In this program, customers get points after every purchase.
Wait a minute, is that all you think there is, well no. There is something unique about their loyalty program and that is how they give their customers an option to spend their points. The “choice” factor is what demarcates them from other brands. They have also worked hard on keeping their program unique by naming it “Beauty Insider.”
There are many benefits of the beauty insider. One key benefit is that these customers have access to the new products. More benefits include the invitations to events and free shipping. What we learned from here is that Sephora Beauty Insider is different from others as they give their customers the choice to use their rewards how they want.
Another brand that is worth mentioning is North Face. They have named their customer loyalty program as XPLR Pass Program. It has something similar to Sephora’s Beauty Insider as how they are flexible in allowing their customers to choose how they want to redeem their reward points. In this program, customers earn points after every purchase.
Here comes the interesting point. The point is that they can earn points in other ways as well. For example, customers can earn points by attending events, checking in certain locations or simply by downloading the app of North Face. Doesn’t it sound interesting and unique?
Because customers have the choice to redeem points how they want, people often use the points to travel as well. They can use their points to go mountain climbing in Nepal. This has been their most lucrative offer so far which has garnered them much attention and appreciation from all over the world.
Starbucks Reward Loyalty Program
Who does not love Starbucks? What people love more about its coffee is their reward loyalty program. Their customer loyalty program is perhaps the most famous program till now. How they achieved the milestone was by launching Starbucks rewards on its mobile app. In this unique strategy, what they did was that they made people buy coffee from their mobile app instead of physically getting it. The points were given when a purchase was made from the app.
You would be thinking, how would that help Starbucks, this is a valid question. The answer is that these app purchases made them familiar with the consumer data. The data helped them to know what drinks were everyone’s favorite, the seasonal favorites and the location of the buyers.
After collecting the data, they could work on how to offer more relevant advantages to their customers.They could also work on making the communication with their customers more effective. There is a lot for small businesses to learn from this technique used by Starbucks.
The Body Shop Loyalty Program
How can we skip this entirely different loyalty program offered by Body Shop. Their retail customer loyalty program is different because it is based on charity. Body Shop surpassed others when they inculcated emotional appeal in their loyalty program. Body Shop did that by making animal welfare an integral part of their program.
The emotional appeal in this charity based loyalty program compelled people to join hands with the brand. People who have similar values are inclined to the brand and it increases the brand awareness.
One lesson for smaller businesses to add some charity with the loyalty program to win hearts. This also helps brands to develop a unique tone of their brand. The uniqueness of the brand is what leads them to heights of success. Emotions have this phenomenal power to attract people and when brands do it, it means more profit and more name.
Barnes and Noble
Here comes our last example. Barnes and Noble are also one brand that we have to mention. Their loyalty program is a paid one. What happens is that customers who are eager to be a part of their loyalty program have to pay $25 annually. Their program offers free shipping, special birthday offers and early access to the new products. The harder side of this program is that Barned and Noble pay keenest attention to how they market their programs to the customers.
One of their most used tactics is to nudge their customers by providing social proof. Their social media handling is top notch because they use influencers to market the products and review them.
The learning point is that paid loyalty programs cannot do well without a well structured marketing plan. If a small business wants to use this type of loyalty program, they must have a clear understanding of how they can first make their brand known. Without brand awareness, this type of program does not cater well to any retail business.
Retail Customer Loyalty Program: The Takeaway
There is no doubt that retail customer loyalty programs have made it easy for brands to connect with their customers and have a stronger bond with them. The kind of intimacy it creates between the brand and the consumer is unmatched. However, this road is slippery, and every brand needs to see how they can stay relevant and up to the mark in a highly competitive market. A loyalty program coupled with the proper marketing tactic is what brands need if they want to stay on top of the clan, and this is not impossible to do.
Featured Image: VisionEdge Marketing