Loyalty Programs Are in the Midst of Major Renovations

Whether it is a trip to the coffee shop or the pet store, by now most of us participate in loyalty or rewards programs, meaning we’re offering up our personal information in exchange for points that we redeem, discounts or opportunities to bypass long lines for faster service (because who doesn’t want to feel super important and cool?)

Now imaging you’re a retailer: Can you imagine making money from your loyalty programs? That is exactly the trend that is unfolding today.

Looking back at 2017, as many as 64% of consumers still found it appealing to earn points for their purchases, however, 75% of them wanted to be rewarded beyond a purchase. Just earning points for spending wasn’t enough. Then along came…

The loyalty evolution

In 2018, numerous companies overhauled their programs, making it the year of loyalty renovation according to one analyst at Forrester. Companies that want to stay competitive with their loyalty offerings must change their strategies to go beyond traditional rewards that focus mainly on transactions.

Kohl’s, Target and Nordstrom were among the retailers renovating their programs last year. Renovations consisted of a variety of changes: rewriting ­membership terms so customers were not excluded regardless of what payment method they used, special apps, more personalized customer service, etc. It all meant that different models were being tested, and more fine-tuning is sure to come.

Loyalty programs generating revenue

What, you say? Imagine charging a fee for an exclusive program for loyal shoppers who visit you regularly, like Amazon Prime does. The retailer offers multiple benefits for either a monthly or an annual fee. Benefits, like ­free two-day shipping, free same-day delivery in certain areas, discounts at Whole Foods, music streaming, Prime video, and more keep Prime members excited to be a part of it. (For the record, as a guy who specializes in shipping, nothing is ever “free” BUT it’s the perceived value that’s key.)

Clearly, this provides more proof that the customer experience is driving satisfaction more than monetary discounts do. Today, 37% of consumers say they would pay for enhanced benefits when it comes to signing up for a loyalty program. I’d be willing to bet my all of my “reward points” that the percentage will be even higher next year at this time.

Another company dipping their toe in the revenue-generating model is Lululemon. Their yoga pants loving cult following has turned the company into one of the most successful retailers to open up shop in the past ten years. Following in the footsteps of Amazon Prime, for about $128 annually, Lululemon will begin a new loyalty program. They’ll be offering special classes and events, faster shipping, and exclusive yoga pants or shorts to members only.

Ironically, as I type this, my mobile carrier just sent me a text about their new program, “Join today and start earning rewards like gift cards to Amazon, and Starbucks, dollars off your next upgrade… plus immediate perks like up to 50% off dining and activities.”

Examine old program approaches as soon as possible

As you review your loyalty program, keep in mind that half of U.S. online (adult) shoppers are already loyal to a brand when signing up for a program. In other words, do not focus on discounts that can chip away at margins and discourage already loyal shoppers from paying full price.

Companies tend to focus on the younger tech-savvy shopper, but don’t overlook baby boomers. The majority of them feel overlooked and inadequately rewarded. Data shows that 84% of boomers use smartphones while researching and/or purchasing. This more affluent generation is low-hanging fruit for retailers. Using data-driven insights is an easy way for companies to better tailor online marketing, or even direct mail, turning boomers into repeat customers. (Hint: We can help you with that localized, targeted direct mail.)

With any route you choose, data should always be a huge part of the equation when designing a program for loyal customers. A good strategy is to ask customers what motivates their loyalty, as you can’t – and shouldn’t – assume you know what they want. Marketers should not miss this step.

Building a program that brings an additional revenue stream is the new trend, but experts still suggest that you don’t overlook a more widespread program that will provide you with valuable customer data in exchange for benefits.

To be outstanding, don’t think of yourself as having a great loyalty program, rather, aspire to be a loyalty company. You must offer unique benefits to customers who are loyal.

Allied Market Research reported that the global loyalty management market is predicted to grow to $6.9 billion by the year 2023. So, what are you waiting for? Now is the time to revamp your loyalty program if you have not already done so.