Discover the strategies and tactics that propel some of the retail industry’s most successful loyalty programs.
The battle for customers is hotter than ever, and for retail marketers to succeed, it’s crucial to stand out from the competition, differentiate your brand — and adapt to evolving technologies and customer behaviors. That includes taking a close look at your retail loyalty program to ensure it’s doing all it can to increase customer engagement and sales.
New research from CCG’s groundbreaking retail customer loyalty study found that more than a third of customers are likely to select one retailer over another if they receive incentives to shop with that retailer. In addition, research shows that the traditional “low price, great service” formula is no longer the primary force it once was at driving customer loyalty.
With pressure mounting on retail marketers to create customer loyalty programs that place their brands at the top of the pack, the key question is: What are the best-in-class loyalty program features that drive loyalty engagement and sales? It’s one of the most common questions we’re asked by our retail marketing clients. The answer, however, isn’t as simple as you might think.
Although there are elements of several of the most successful loyalty programs that stand out, there isn’t a single customer loyalty program that hits it on all cylinders. And there’s no single loyalty program that outlines exactly how it should be done for every retailer. So we’ve highlighted features of several best-in-class loyalty programs below that offer distinct opportunities for you to consider in 2019.
Create a Compelling Customer Rewards Structure
Numerous studies show that consumers are more likely to stick with a brand that offers a loyalty program, and 66 percent of customers say the ability to earn rewards changes their spending behavior. One of the most effective ways to get customers to stick with a brand — and entice them to keep coming back — is to create a compelling rewards structure.
ULTA’s Ultamate Rewards® program, which boasts 24.5 million active members, gets this right. Members earn one point for every dollar spent on products and services, and can redeem points on more than 20,000 products. More points earned equals more dollars off a future purchase. In addition to perks like free birthday gifts and the ability to earn up to 5x points on specific purchases, members can reach platinum level when they spend $450 in a calendar year — or diamond level after spending $1,200 — to unlock even more perks. As an added incentive, members can earn two points per dollar spent at Ulta when they pay using an Ultamate Rewards credit card.
Focus on Customer Engagement — While Building Brand Affinity
Outdoor enthusiast retailer REI is an example of thinking outside the box when it comes to engaging shoppers. REI moves the focus away from getting customers to spend more, and instead, focuses on creating more value for the customer while building brand loyalty. For $20, customers can become a lifetime member of the REI Co-op. Membership not only grants access to special discounts on clothing and gear, but also experiences like adventure classes, events and shop services. As an added bonus, members receive an annual dividend based on how much they spent during the previous year.
Offer Unique Ways for Customers to Earn and Burn Their Loyalty Rewards
Providing members with distinct ways to amass and use loyalty rewards points can not only help your retail loyalty program stand out from a crowded playing field, but also drive growth and retention. Below, we highlight some unique (and successful) tactics that retailers are using to increase engagement in their rewards programs.
Sephora’s Beauty Insider rewards program boasts more than 17 million members, with members making up nearly 80 percent of Sephora’s sales. What’s unique is the many ways customers can use their reward points. From products to gift cards to in-store beauty tutorials, members enjoy the flexibility to choose the rewards they want. Other member perks include a birthday gift, access to free beauty classes and the ability to rack up points that can be used toward free products.
Create a Successful Loyalty Program by Offering Variety
Best Buy is an example of a company that has differentiated itself amidst the challenge of selling one of the most commoditized products in the marketplace today — electronics. Best Buy has been using My Best Buy Rewards to offer something for everyone. In addition to earning points on every purchase, members are given early access to new products, special sales and offers. Best Buy also offers customer perks like price-matching and free shipping to help differentiate the retailer from online competitors like Amazon, while also offering help and expertise from a live person.
Create a Personalized Experience
While its program has been around for a while, DSW continues to keep customers engaged with an active campaign that reminds members about the rewards program. Personalized emails include current deals, information about recent purchases, point status and how much the member has saved — as well as how many points the member needs to get their next reward certificate. By leveraging their customer data, DSW is able to create a deeper level of personalization that increases the relevancy of their communications.
Make Your Retail Loyalty Program So Easy, Customers Don’t Know They’re Using it
There’s no denying that Kohls has done a lot of things right in developing one of the industry’s most successful loyalty programs. And one of the most appealing aspects is how easy the program is to use. Kohls recently combined its three most popular perks into one easy-to-use program on a single platform that’s simple, convenient and focuses on providing the most value to customers.
Create Tiers to Reward Higher Spending Customers
As you and your retail marketing team work to create blueprints for highly valued tiers in your loyalty program, ask yourself this: “How does our loyalty program support our brand?” Sophisticated, targeted tiers should not simply provide a specific reward when a spending threshold is met, but instead should deliver benefits and features that allow you to deliver a unique loyalty program and help maintain your brand’s individual attributes. Consider the successful customer loyalty program examples below.
Meaningful Tiers Set Your Customer Loyalty Program Apart
Online and brick-and-mortar clothing company Moosejaw uses reward tiers to successfully differentiate itself amidst the crowded field of apparel. At its most basic level, Moosejaw offers one of the most generous rewards programs — 10% back on every regular item purchase and 2.5% back on every discounted item purchase in the form of Moosejaw Reward Dollars. Top spenders who fall into the High Altitude group enjoy perks like free shipping, early access to promotions and an annual Madness Gift.
Loyalty Program Tiers Should Fit Your Customers to a “T”
Designing unique, compelling benefits for program tiers is a challenge, but not an impossible one. Understanding your customers, your brand proposition and your competitors is just the beginning. Remember to take a step back and push yourself out of your comfort zone as you take a unique approach to loyalty program tiers that will make customers not only jump at the chance to join your loyalty program, but also stay engaged for the long term.
Create Exclusive Rewards for Top Customers
Customers who feel known and valued are more likely to become brand advocates. Retailer Nordstrom recently revamped its loyalty program to incorporate a traditional points system, popular customer benefits, and enhanced services and experiences for its highest spending customers. The top-tier shopper status, known as Icon, rewards shoppers who spend $15,000 annually with perks like unlimited free alterations, free same-day delivery, a complimentary dining or spa experience and Nordstrom After-Hours, which allows Icon members to shop in private after stores close.
Create Your Own Best-in-Class Loyalty Program
As you can see, there’s more than one successful loyalty program to emulate. These best-in-class loyalty programs represent just a few examples of how you can offer your customers unique ways to not only earn and use their rewards, but also remain loyal to your brand. Maybe not every best-in-class program feature will work with your program — and that’s okay. Focus on the features that your customers will use and appreciate. With out-of-the box thinking, you can create a program that’s compelling for your customers — and difficult for your competitors to duplicate.
Are you ready to take your retail loyalty program to the next level? CCG has focused on helping our clients build stronger, more profitable customer relationships for more than 40 years. See an overview of our retail marketing services and solutions, including loyalty program development, refinement and management, Statistical Loyalty Program Optimization™ and retention program development. To see how we can specifically help your organization meet its customer retention goals, contact one of our retail marketing consultants today for a complimentary consultation.