Creating Effective Loyalty Programs in The Retail Landscape

loyalty programsBy Nick Marchant

Milk, eggs, cleaning supplies… your list is complete and you’re eagerly waiting to check out and get home. Sound familiar? Retailers are well aware of this mentality, and face the challenge of making shopping at their store engaging and hassle-free. But how do you improve the shopping experience and make a particular store the ideal stop for a customer?

An often-used solution is the implementation of loyalty programs, allowing customers to earn points, rewards, or a plethora of options to entice a return trip. They abound, but they haven’t always garnered success. Some US supermarket chains have recently abandoned their loyalty programs because they were not seeing great results or the cost/value relationship was missing. Why is that? One expert suggests the reason is that they haven’t been engaging in a customer-centric way, and in turn aren’t providing an improved shopping experience. Unsurprisingly, you have to learn what your customers value and fill that need in order to establish a positive brand relationship. When used the right way, loyalty programs offer a compelling reason for customers to become regulars.

First, look at what people really seek in loyalty programs. A recent survey of over 2,000 customers by Maritz Motivation Services worked to dispel a few myths about loyalty program customer perception. Among the findings: 48% of respondents claimed they would be willing to pay to join a loyalty program, a hurdle often assumed by retailers to be too great to overcome. If the program is seen as being worthwhile, a simple registration fee can yield immediate results. Second, most program members are not just solely focused on point redemption. As alluded to earlier, they join to improve their overall experience with a retailer and relationship to their brand. So we are left with the conclusion that these programs are most effective not as a way to just get people into the store, but as a tool to improve their entire perception of the retailer.

Creating an effective program requires the mining and analysis of the customer data you gather. Surprisingly, this is not commonplace. A popular grocery chain in Scotland recently launched their own program and declared they wouldn’t gather a single byte of data from their customers. In my opinion, why not just offer a sale price on goods if you’re not going to mine the data? Retailers need to learn what products are vital to their customers, see when they prefer to shop, and digitize their program to directly target what customers value. Analytics and loyalty company Precima suggests retailers that take this to heart have in fact seen a 1%-4% sales boost and even a 4%-7% bump in gross profit.

To see this mentality in action, look no further than CVS, arguably the industry gold standard for loyalty programs. Beyond offering great deals through their ExtraSavings and ExtraBucks programs, which give personalized coupons based on shopping history, CVS prides itself on its level of service. Their app, mobile card, and customer service all come together to create a customer-centric experience that has yielded great rewards.

Also see the American Express Plenti program. Again, offering great discounts is just the start. This program has the advantage of offering discounts with multiple retailers under its umbrella, including Macy’s and Exxon Mobil. Tapping into consumer trends at various outlets creates a unified experience and sense of care to the customer. They feel “part of the club” being able to use the same card and rack up points at different stores. Keeping with the trend of successful programs, Plenti focuses on the customer.

If you create an engaging loyalty program that actually speaks to your target and what they value, you can see long term success. The mistake is assuming anything about a program’s effectiveness and passing up the chance to learn all you can about your customers. Decide to be customer-centric with your loyalty programs instead of dogmatically sticking to sales numbers, and you’ll see a marked increase of loyal customers.