Discover the main components driving loyalty program participation and member profitability.
- Top loyalty program features include an engaging value proposition that’s simple to understand and allows members to easily earn rewards.
- Convenience, regular communication, reward and earn options, and member tiers also rank high on customers’ wish lists.
- The top 10 loyalty program benefits include discounts, free services, no-receipt returns and early access to sales.
- The top five factors driving customer loyalty have remained fairly consistent, but they’re also influenced by demographics and shopping personalities.
- Understanding your unique audience segments is critical to developing an optimal mix of loyalty program features, rewards and benefits.
Loyalty program features and benefits are what truly drive long-term customer participation and profitability. While some loyalty program elements maintain evergreen popularity, others can shift in favorability as consumer expectations, behaviors, age and preferences change. It’s critical for your program to stay in-tune through regular assessments and, if necessary, updates. That means you need to know which loyalty features, rewards and other benefits customers want today.
We’re here to share that information, including insights gleaned from 10 years of our proprietary Voice of the Customer surveys of nearly 25,000 consumers and five years of our annual Retail Customer Brand Loyalty Study.
Top 5 Features of Customer Loyalty Programs
What are the criteria for a successful loyalty program? It starts with the features that form a program’s basic structure and functionality, before rewards and benefits are added. From that perspective, we’ve identified these top five features: an engaging value proposition, communication, convenience, options and tiers.
1: Engaging Value Proposition
An easy-to-understand value proposition will be inviting for customers, letting them clearly see what’s in it for them (and how they can get it) if they enroll. It’s also a good thing for your tech team who needs to make the program work, for associates who must explain it to customers and for the marketing team that has to promote it.
Part of making the value prop enticing is the basic program structure. Our research showed that customers prefer a structure based around getting a reward for spending a set dollar amount. That’s closely followed by earning a percentage of purchases back. These structures rank first and second when all consumer responses are pooled and when responses are segmented by age or income. The lone exception is households with incomes under $50,000 where the positions are flipped.
Interestingly, earning points per dollars spent (and using points to earn rewards) is the least favorite of these three program structures.
Year over year, the most common complaints consumers have about loyalty programs are that it takes too long to earn rewards and it’s too difficult to earn them. Obvious takeaway: Your value prop must show members a way to get rewarded quickly, and convey that earning rewards is simple and achievable.
One way to address this issue is to provide a little instant gratification to new members. For instance, new DSW VIP members get a 20% off coupon within four days of making their first purchase as a VIP. That’s a great incentive to get people back to the stores to spend more and start earning their next reward.
Similarly, new Proactiv Perks members get 300 points when they join and make a purchase, giving them an automatic boost toward their first reward.
Giving members ample opportunities to earn points will also help them see how easy it can be to achieve rewards. (More on that later.)
If customers are hooked by your value prop, program structure and quick-win benefits, don’t lose them with a lengthy or complicated enrollment process. It’s another customer hot button. To keep it simple, require minimal information at sign-up. Then have a communications plan that encourages members to complete their profile over time. You can even offer incentives for adding details — 5 points to share your style preferences, a birthday discount for sharing your birth date and so on.
2: Regular Communication
While members should be able to look up program information when and where they choose, they also shouldn’t have to. Believe it or not, they aren’t keeping your loyalty program top of mind 24/7. So, it’s up to you to push information out and keep your brand and your loyalty program front and center.
Regular communications should include sending status updates at least quarterly. In fact, receiving a notification when a reward is available is one of the highest-rated loyalty program factors in our Voice of the Customer surveys.
Besides new reward alerts, you can use trigger campaigns to stay in touch at other critical moments, such as when someone joins, earns their first points, is near a reward, has a reward about to expire or qualifies for a new tier. To help reinforce the value of the program, include frequent reminders of all the benefits members can enjoy.
Circling back to convenience and optimal customer experience, you should ideally allow members to choose how they want you to communicate with them. Email, texts and mobile app notifications are currently among the most popular (and cost-effective) methods.
Today, overall customer experience is more important than ever, and convenience is a major factor driving a positive experience. Consumers want easy, frictionless interactions with your brand and your loyalty program across all channels.
As much as possible, provide a one-stop experience that allows customers to enroll, earn, redeem, check status and review benefits through any single avenue — such as your mobile app, an online member microsite, an in-store self-serve kiosk or checking in with associates. And make sure that the experience is available through all those channels, so customers can choose their favorite or use several without problems.
As another part of offering a convenient experience, don’t weigh members down with plastic cards or paper coupons. Focus on digital alternatives that have printable options.
It’s no longer enough for a loyalty program to have just one reward option. Consumers today want choices. That includes allowing members to choose from several rewards alternatives and decide whether they want to use a reward now, later or as a gift for someone else. In fact, a longer-lasting reward — allowing the member more flexibility in deciding when to redeem — was a top-rated loyalty program feature in CCG’s Voice of the Customer surveys.
Some retailers find it helpful to split options based on points earned, so members with fewer points get fewer (and smaller) rewards, while more and larger rewards await members who pile up the points. This is the approach taken by the Chick-fil-A One club.
Consumers also want multiple ways to earn rewards, making it easier to accumulate points — another top-rated loyalty program feature. Beyond the traditional transactional approach (spend money, get points), consumers want to earn points based on behaviors, including leaving online reviews, referring friends, posting about you on social media, downloading your content or playing games.
In fact, gamification has become a popular way to give members something they crave: instant wins — or at least the opportunity for instant wins. For instance, let members play a digital spin-to-win game for prizes, points or an entry into a sweepstakes.
Also let customers personalize the points-earning experience when you can. For instance, Nordstrom’s The Nordy Club lets Influencer-level members pick their own day to earn double points, so shoppers can work it into their personal schedules.
Establishing multiple levels of membership is a tried-and-true way to both encourage enrollment (making it easy to earn a reward even at the most basic tier) and motivate desired behavior (incentivizing members to do more to earn more). In fact, 15% of people want the ability to earn special VIP status as part of a loyalty program, according to our research.
There is no one right or wrong tier structure. Perhaps the most common approach is to have levels based purely on spend. Another tactic is to have free tiers and a paid tier. Some programs have one level of benefits for store cardholders and another for multi-tender buyers.
For example, Talbots’ Classic Awards has a base level available to all customers, regardless of how they pay. A second and third tier are open exclusively to Talbots credit cardholders, who gain access to additional benefits (with the third tier based on cardholder spend).
Analyzing your data can help you understand ways to segment customers and get an idea of the potential size of tiers based on different approaches. The best practice is to establish a tier threshold that would make your top 25% to 30% VIPs.
Top 10 Loyalty Program Rewards and Benefits
If the factors above are a loyalty program’s foundation, rewards and benefits are the window dressing, helping to catch the eye of new members. But they do much more: Adding the right mix of rewards and benefits can also increase active participation while helping to build your brand, increase revenue and meet your marketing objectives.
The top 10 list below includes a mix of hard (monetary) and soft (non-monetary) benefits, with rankings based on CCG’s Voice of the Customer surveys as well as other industry sources.1,2 (Note that some sources count “cash back or percentage back” as a leading benefit. We consider that a leading program structure or feature, as discussed earlier, so we haven’t added it to this list.)
2. Free products, services, samples
3. Special birthday gift or offer
4. Double or triple points events
5. Free shipping events
6. Personalized offers & recommendations
7. Surprise thank-you gifts
8. Easy, no-receipt returns
9. Early access to sales
10. Early access to new merchandise
It’s worth noting that when Shopify asked consumers what they wanted from a loyalty program other than discounts and free shipping, early access to sales and early access to new products were picked by 60% and 51% of consumers, respectively.
Other loyalty program rewards and benefits that often rank well with consumers include: private sales events; a members-only merchandise section on your website; ability to convert points to charitable donations; virtual badges; exclusive services; members-only content; and experiences.
Top Factors Driving Customer Loyalty
For the past five years, CCG has conducted proprietary research to identify trends in customer loyalty. The statistics shared in the resulting Retail Customer Brand Loyalty Study apply to loyalty in general, not specifically to loyalty programs. However, the findings can help inform and guide decisions you make about your program features, benefits and more.
Overall, we’ve found that the top five factors driving customer loyalty — whether or not a retailer has a loyalty program — have remained fairly consistent over the years. In order of popularity, these are:
- Having a convenient shopping experience
- The ease of making purchases
- Having a positive shopping experience
- Receiving incentives to shop
- The ease of making returns
In the past two years, we’ve seen customer service move onto the list, pushing out incentives to shop in 2021 and ease of making returns in 2022.
You’ll see that several of these factors relate back to convenience — one of the top loyalty program features we mentioned earlier. And, of course, a loyalty program is an ideal vehicle for presenting many of these factors to your best customers — from incentives to a streamlined return process to a members-only checkout line.
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The Influence of Demographics
Digging deeper into the data from the Retail Customer Brand Loyalty Study, we found that loyalty drivers are influenced by demographics. For example:
- For men, seeing a brand as a status symbol and having trust in the brand consistently rank high as top loyalty drivers.
- For women, though, loyalty is driven more by receiving VIP treatment and incentives to shop.
- Gen Z consumers in 2022 showed loyalty to retailers they felt were socially responsible and those who demonstrated fair treatment. They were least affected by incentives to shop.
- Millennials are consistently influenced by VIP treatment and brand as a status symbol.
- Gen X loyalty drivers continue to change over time. Good customer service is a fairly reliable factor, while brand as a status symbol and social responsibility have gained importance over time.
- Baby boomer loyalty tends to be more influenced by incentives to shop and the ease of making purchases, and least influenced by seeing a brand as a status symbol.
Other studies have likewise shown that loyalty influencers vary by demographic.¹ For instance, consider the concept of “surprise and delight.” Millennials and Gen Z tend to rank these moments higher than does Gen X, who rates free products and samples higher. Similarly, Gen X and baby boomers tend to rate discounts higher than do Zs or millennials.
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How Shopping Personalities Affect Customer Loyalty
The Loyalty Study also broke the overall consumer population into three shopping personalities to see which factors drive loyalty the most among Loyalists, Roamers and Neutrals.
Loyalists want a positive, convenient, streamlined shopping experience. They want to easily make purchases and look up past purchases online or through your app. But fair treatment and having trust in the brand also are consistently top loyalty drivers for this shopper type. Caring staff and being socially responsible have gained ground as loyalty builders in recent years with this audience.
Roamers are heavily swayed by receiving incentives to shop, which means loyalty program rewards and benefits can be strong drivers. Ease of making purchases and returns also consistently lead to loyalty for Roamers, so work these factors into your loyalty program if you have a large Roamer contingency. Special customer service features may also help build loyalty with this group. In recent years, Roamers have also become more interested in the lowest price, and the ability to look up their past purchases and other helpful information online or through your app.
Neutrals are consistently influenced by receiving fair treatment and an informative retailer website. While these should be available to all customers, it’s worth noting that this group has also become increasingly swayed by incentives in recent years — supporting the importance of solid loyalty program rewards.
Get Exclusive Customer Loyalty Statistics and Insights
Our Retail Customer Brand Loyalty Study shares the factors that make consumers choose one retailer over another — and stick with them. Understanding what drives customer devotion can help you build a better loyalty program and guide your overall customer retention initiatives.
Know Your Customers to Define the Right Loyalty Program Features and Benefits
As much as these loyalty program factors, benefits and rewards are based on research and decades of experience, they’re still general truths. For the best outcome, you need to understand and cater to your unique audiences. First-party research (including focus groups and surveys) as well as analyzing customer data can help you identify what your customers want in a loyalty program, which benefits will resonate most (including which ones members actually redeem or ignore), and how customers feel about your current or proposed program.
Then structure your loyalty program around those insights. But remember that your customer base and consumer preferences change over time, and loyalty programs themselves go through lifecycles. So, it’s a good idea to repeat your research periodically, especially if you notice program performance lagging.
Finding the right combination of loyalty program features, rewards and benefits can help your brand gain engaged, active and profitable loyalty program members — driving business today and into the future.
If you want a partner to build, review or refresh your customer loyalty program, consider CCG. As pioneers in retail customer relationship and retail marketing, we’ve helped create and improve dozens of innovative and effective loyalty and CRM initiatives for retailers across North America. Learn more about our expertise and our solutions. Or contact us for a complimentary consultation — call 303.986.3000 or click the button below.
1 “2022 Loyalty Barometer Report,” Merkle
2 “7 Innovative Customer Loyalty Programs and How to Start (2022),” Lindsey Peacock, Shopify.com, posted June 22, 2022, https://www.shopify.com/blog/loyalty-program, accessed Dec. 15, 2022