Loyalty Program Enhancements in Action

As in-store experiences become few and far between, consumers must be empowered with all the information they need at their fingertips. One of the most powerful ways retailers can provide customers with up-to-date, relevant information is through there, which is why many retailers are now rethinking their loyalty strategy. Today, most popular brands have some kind of loyalty or rewards program, whether it be simple or sophisticated. Brands often forget, however, that they cannot simply introduce a loyalty program and maintain it by updating the rewards and relevant offers. Rather, they must consistently analyse and evaluate the program and its performance, and adapt to changing circumstances.

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Today’s Loyalty Trends

When we look at younger generations, such as millennials, we see that consumers are increasingly emphasising a loyalty program’s originality and trendiness. According to KPMG’s report, The Truth About Customer Loyalty, 96% of millennials say companies should find new ways to reward loyal customers, 78% would switch to a company that offered a better program, and 69% agree that most schemes are too hard to join and/or earn rewards. Based on these statistics, it is clear that companies must be vigilant in consistently testing their program and ensuring it is satisfactory to their members. Because loyalty is easier (and cheaper!) to retain than it is to acquire, brands should prioritize customer retention, and set out to create the best possible customer experience for their existing members.59% of consumers use their favourite loyalty program less than once a week, which means there is an obvious need to be consistently introducing new and different benefits and functionalities that excite customers to stay top-of-mind and guarantee return customers. With this in mind, however, it is also imperative to remember that a loyalty program should not be the only touchpoint between a brand and its customers that establishes and maintains loyalty. Brands must create a well-rounded, comprehensive loyalty strategy – the loyalty program is simply a piece of this. Customer loyalty is far too important to be left to just a customer loyalty program. Every interaction a brand has with consumers, whether it be a tweet, a customer service interaction, or rewards for past purchases, matters. In some cases, rather than make changes to an existing program, brands instead choose redesign their entire program or start again from square one. Sometimes this is done when an existing program is simply not performing as it should, and sometimes a brand sees a high ROI in establishing a new program.

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Loyalty Program Enhancements In Action

A classic example of a recently enhanced loyalty program is the Starbucks® Rewards™ loyalty program, which was revamped in 2019. The program was officially launched in 2009, and the marketing team decided it was time to implement big changes with the overall goal of putting the choice in the hands of their customers. The biggest changes made include the ability to earn and redeem Stars for Rewards immediately after joining the program to bring ‘instant value’ to customers, as well as a new, tiered Rewards structure which offers customers more ways to use their Stars toward free items.This revamp effectively ended their previous tiered member approach, in which customers became green members when they first signed up for the loyalty program and gold members when they earned at least 300 stars in a year – and only gold members could redeem stars for free items. Essentially, in customers’ eyes, the new redemption system increases the rewards yield for ‘entry-level’ customers while reducing the yield for its more premium members. In the past, the program had benefited and rewarded larger spenders, but the company instead decided to focus on growing the frequency among its more casual customers.Naturally, there are risks associated with any large change or enhancement a brand decides to implement. In the case of Starbucks, they faced some discontent from members who were loyal to the brand and saw the ‘enhancements’ as a downgrade from the previous program, because it meant that their previously recognized loyalty to the brand no longer meant what it used to. With no more ‘gold status,’ some were upset that they were no longer being acknowledged as they would like to be. By choosing to make the loyalty program and its rewards more accessible to the general public, Starbucks was able to expand its loyal customer base. Within a year of the redesign, the number of active US members enrolled in the program grew over 20%, from 16 million to 19.4 million.Another key example is Macy’s, which relaunched its loyalty program in mid-2017. Similar to Starbucks, their old program was a tiered plan that gave special privileges to its most loyal and big spending customers. A year after the implementation of their new program, Macy’s reported third quarter 2018 earnings that nearly doubled Wall Street’s predictions, and the chain attributed a portion of the growth to its new “Star Rewards” program. The new program allows shoppers to accumulate discounts and offers based on how much they spend at Macy’s every year. One of the main reasons Macy’s sought to revamp their program was that they felt that it had become overly complex and confusing for customers.

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Here are a few key goals to keep in mind when thinking about a program revamp or redesign:

- Making the program as usable and intuitive as possible. Make sure potential members understand the value of joining the program, also known as WIIFM (What's In It For Me).

- Reducing user friction

- Increasing engagement

- Increasing perceived/apparent value.

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A few ways that retailers can use loyalty programs to offer a unique experience to their customers include:

- Add a paid loyalty tier: Paid loyalty programs are a great way to provide elevated experiences to customers who have shown the most interest in your brand.

- Personalised offers: Most customers today are willing to give up some privacy if it results in a more personalised experience.

- 85% of consumers would like to select the benefits and rewards they receive by personalizing their loyalty program based on their specific purchases and individual preferences

- Reinvent the loyalty program as an extension of the brand: Customer loyalty must be a companywide mission and responsibility, and it all starts with truly listening to your customers. Loyalty programs should support the brand’s value proposition and customer experience.

Implement a more dynamic loyalty program and strategy to account for our new normal.