Retail loyalty program dos and dont's

Retailer loyalty programs are not one size fits all, but there are ways to engage customers and offer them value, and ways to do just the opposite. A look at all the dos and don’ts of effective customer loyalty programs can help retailers make necessary adjustments

Retail loyalty program dos and dont's

Are your customers loving your loyalty program?

Difficult times have a way of showing you who your real friends are. And, the uncertainties consumers are facing during the pandemic are quickly revealing to retailers whether they've truly cracked the loyalty code with their customers.

For example, many consumers have strayed from their typical shopping patterns. According to a McKinsey report, more than 75 percent have tried new brands, places to shop or methods of shopping during the pandemic. Some of the reasons for the change in consumer behavior include stockouts and better prices and promotions from competitors.

So, as the market continues to evolve and the holiday season approaches, the next few months are critical for retailers to figure out the best way to reconnect with consumers. And consumers will reward retailers who engage with them in a highly personalized way and provide a shopping experience that adds value for their loyalty, even when times get tough.

Below, we'll walk you through the many benefits of a retail loyalty program, along with some goals and dos & don'ts to consider when designing a loyalty program that will carry your brand through the pandemic and beyond.

 What are the benefits of a retail loyalty program?

Increased referrals – Customer referrals are always an important revenue resource for retailers which makes customer loyalty programs so beneficial, with 72 percent of loyalty club members saying they're likely to recommend your brand to other people.

Repeat business - An old business adage says that about 20% percent of your customers produce 80 percent of your sales—and, that 20 percent is made up of your most loyal customers. Repeat customers offer a steady flow of footfall in a retail store, creating a reliable income stream. And as adoption of your loyalty program increases, your retail sales numbers may become more predictable, creating an advantage in these uncertain times.

Higher satisfaction rates - Another benefit of a well-implemented customer loyalty program is customer satisfaction. If the rewards you offer interest your customers and bring them value, they'll feel appreciated and acknowledged—and they’ll be grateful for your brand in return.

Positive online reviews - Loyal and satisfied customers are more likely to publish positive reviews and ratings online, positioning them as your brand ambassadors. This is critical for retailers because 82 percent of consumers read online reviews when they’re deciding to make a purchase.

 What are the goals of a retail loyalty program?

Customer retention - The cost per acquisition (CPA) for a new customer is typically significantly higher than the cost of any discounts and deals awarded to existing customers through a loyalty incentive program.

Data collection & analytics - Bond's loyalty report also reveals that members who receive relevant offers that become more relevant over time are eight times more likely to go out of their way to use them. Retailers can create targeted marketing and advertising campaigns for their loyalty members by using the demographic and purchase data gathered from customer rewards programs.

Increased share of wallet - The percentage of disposable income that customers spend with any one retailer can be heavily influenced by using a well-executed customer loyalty program. Savvy brands use loyalty programs to differentiate themselves from competitors by creating a deeper connection with customers and increasing responsiveness to consumer desires.

 Retail loyalty program Dos

Now, let's dive into some dos and don'ts for retail loyalty program success.

 Do evolve your loyalty program as needs evolve

Some grocery chains recently took steps to connect their loyalty programs to services like curbside pickup to support consumers who want to shop while maintaining social distancing. In May, for example, Aldi began to roll out curbside pickup to 600 stores and expanded home delivery options in 35 states.

And, starting in June, consumers who use the grocery delivery service Food Lion To Go will have access to digital coupons and can redeem “Shop and Earn” MVP rewards program savings.

 Do drive footfall with push notifications

Send customers location-based push notifications for sales alerts or offer them a targeted reward to increase your retail store's footfall.

 Do integrate with POS devices

Integrate the user experience with online and offline channels by using a POS device that’s able to scan QR codes and barcodes to identify customers in your store. And, have the cashier—or your customer through self-checkout—scan the codes, allowing members to easily earn points for their purchases.

 Do offer a variety of ways for customers to earn and burn rewards

Drive growth and retention by offering loyalty club members several ways to collect and spend reward points. For example, Sephora's Beauty Insider rewards program provides their customers with products, gift cards, in-store beauty tutorials, and more, allowing members the flexibility to choose the rewards they want.

 Do keep your customers in the loop

If you've been paying attention, you have a good handle on what your customers like. So, reward their loyalty by letting them know about new products that match their interests. When a new product line is on the horizon, make sure your most loyal customers are the first to hear about it, and give them a sneak preview to make sure they are the first to enjoy them.

 Do leave it up to customers to decide what they want to share with you

Successful loyalty programs are data-driven. In fact, the only way to offer your customers a personalized experience is by leveraging information that tells you who they are and what they want. And most customers don't mind handing it over—with a couple of caveats. An Accenture study found that around 73 percent of consumers are willing to share more personal information if brands are transparent about how it’s used.

The study also found that nearly 69 percent of consumers would stop doing business with a brand if data usage became too invasive. Retailers must give their customers the ability to decide what personal information they want to share.

For example, many people are more comfortable giving their email address to a retailer than they are with their phone number. So, don't make providing a phone number a requirement for joining your loyalty program; instead, give them a few options, ultimately letting the customer decide.

 Do focus on offering real value

The best-received retailer’s loyalty program isn’t only based on what's in it for their brand, they excel at creating value for members. A great example of this is REI, an outdoor enthusiast retailer that offers a $20 lifetime membership to its REI co-op.

Once they’ve signed up, members receive access to special discounts on clothing and gear, as well as unique experiences such as adventure classes, events, and services. To top it off, members are also rewarded with an annual dividend of the co-op's yearly profit based on how much they spent during the previous year.

 Do demonstrate generosity and gratitude

Evaluate and refine your loyalty value proposition to ensure it’s on par with anticipated future customer behaviors and that it shows gratitude to the customers who have stuck by your side in the most challenging times.

Recently, to provide support to the entrepreneurs and small businesses at the heart of the professional beauty industry, L'Oréal USA extended any Level Loyalty points that were due to expire in March or April through the end of May 2020. Also, all points used to book canceled in-person classes were returned.

And, 41 percent of consumers indicate that saying “thank you” is one of the most significant ways a brand can interact with them. So, the simple act of saying thank you is an effective way to gain emotional loyalty from your customers.

A great example of this is the popular 7-Eleven Free Slurpee Day, 7-Eleven's busiest day of the year. It was canceled this year due to the pandemic, but that didn't stop the convenience retailer from giving their customers another option. Instead, they shifted the campaign to their 7Rewards loyalty program. To comply with social distancing, customers were encouraged to download the free loyalty app to get a coupon for a free Slurpee that was redeemable last July.

 Do show them that you understand and care

The first step to showing empathy is taking the time to understand the issues your customers are currently facing to tailor appropriate and relevant messages and offerings to help them solve their looming problems. Some examples include:

  • A toy store can offer parents fun activities to entertain kids stuck at home
  • A home decor retailer may offer loyal customers the chance to win a home transformation package to make their living space more inspiring
  • A grocer could send customers tips about how to keep their food fresh
  • A sporting goods store could provide demos of exercises customers can do at home to stay in shape

 Retail loyalty program don'ts

 Don't focus solely on rewards

Focusing your loyalty efforts on discounts and rewards is a dangerous game. You'll likely end up with customers who aren't exactly loyal, they’d mainly be looking for the lowest prices. And, they'll likely jump ship the minute your competitors present a better offer. Instead, focus on engaging your customers and bringing them more value.

 Don't view your loyalty program solely as a way to generate sales

Loyalty is about relationships. If your only goal is to use your retail loyalty program to grow your bottom line, you likely won't see much success. Customers can see through insincerity. If your heart isn't in the right place—centered on how you can better serve your customers—they'll sense it and move on to a competitor that truly cares.

 Don't think in terms of channels

You no longer have the luxury of planning specific, separate loyalty campaigns for in-store, mobile, online, social media and other channels. Today's consumer expects a seamless brand experience across every touchpoint.

So, don't create a loyalty strategy for each channel—make it a customer loyalty program so it’s one seamless every-channel experience.

 Don’t stop at brick-and-mortar

Loyalty programs shouldn't be limited to brick-and-mortar stores. Online retailer Amazon Prime took a creative approach with its Whole Foods subsidiary, tying its loyalty program to its affiliated brick-and-mortar locations.

Thanks to technology, any type of business can run a loyalty program, including all forms of wholesaler, retail, and e-commerce stores. While their structures may differ, the value delivered through loyalty programs is the same for every type of business.

 Don't send generic offers

Modern consumers have an expectation to be recognized, engaged with, and rewarded based on their personal tastes and preferences. Offer them exclusive access to the specific products and experiences they desire in exchange for their loyalty.

 Don’t be flippant with the data

Loyalty programs are opt-in and permission-based. But, maintaining full compliance with privacy laws and winning your customer’s trust means clearly disclosing what loyalty member data is being collected and how it will be managed. Ensure that your program offers consumers the right to see and access their data and opt-out of or delete your loyalty program (if it’s in an app). And give them the ability to see whether they’re receiving equal services and pay with your program.

 The keys to a successful retail loyalty program strategy

Once you've identified your loyalty program's goals and how you'll use it to drive real results in your retail business, take a moment to evaluate your existing loyalty strategies and consider where your efforts have been successful and where they've missed the mark. Then, drop what hasn't worked and keep the things that have resonated with your customers while adding in some of the strategies listed above to take your retail loyalty program to new heights.

Partner with vendors and technology platforms that can help you accomplish your goals. This can include everything from software for your member database, customer service, POS system, email service provider, customer engagement, advocate marketing, loyalty program, e-commerce, AI chat functions, and more.

But, you'll need to be careful about using a tall stack of technology solutions. Instead, have your entire system integrated into one single setup and execution point across all channels.

Once you roll out your new program, make a habit of listening to your customers on an ongoing basis, noting what they like and dislike, and making necessary changes along the way.

By staying tuned into the wants and needs of your customers and playing to your brand's strengths, you can design a retail loyalty program that increases customer satisfaction, encourages your customers to make large and more frequent purchases, and forges a stronger emotional connection to your most loyal fans, even in times of crisis.