Rewards and loyalty programs have been valuable tools for companies to drive a stronger engagement with their customers and provide incentives for their behavior. However, many companies, especially retailers, have not adapted with changing technology and consumer preferences, and thus have lost a valuable lever to drive organic revenue growth. At a minimum, a well-designed loyalty program should act as a tie breaker for a customer choosing between competing alternatives; at its best, it can build lasting loyalty and deliver phenomenal customer lifetime value expansion.
When retail loyalty programs first began gaining momentum, customers would receive points in exchange for repeat business. Point redemption was mostly confined to dollars off a future purchase or offer of a “free” item. Fast forward to today, and despite lightyears of innovation in most facets of the retail landscape, loyalty programs remain relatively unchanged. In an increasingly transparent and dynamic environment riddled with hyper-informed customers, retailers must use every tool at their disposal to attract, grow and retain customers.
Below are three ways retailers can evolve their loyalty programs to achieve organic revenue growth:
1) Embrace innovation. Many loyalty programs rely on plastic cards that the customer scans, or punch cards. However, with nearly two-thirds of Americans owning smartphones, retailers must embrace the shift to mobile by creating more engaging and user-friendly apps that offer incentives to keep customers coming back. Additionally, companies need to tie these apps into all the channels where people interact with their brand, which will build stronger relationships and create a more comprehensive understanding of the customer base.
2) Target specific customer groups. With so much emphasis on personalization in retail, why does every customer get the same vanilla loyalty program? The right customer segmentation could enable targeted loyalty program options that appeal to various customer needs. Some may be satisfied plodding along accumulating points towards that elusive future freebie, but in today’s instant gratification society there is no doubt a cohort seeking more immediate and tangible recognition. It’s vital to study your customers in order to determine what their preferences are because there’s never a “one size fits all” solution.
3) Offer an experience, not a discount. Consumers increasingly value perks in the form of an experience rather than a monetary discount. Amazon has no doubt perfected this practice through its Prime program, where customers essentially pay Amazon for the opportunity to become more loyal. Retailers should seek to offer services that amplify a customer’s experience, creating greater engagement and likelihood of repeat purchases (even if they can’t get away with charging for it like Amazon!).
It’s time for retailers to rethink their outdated loyalty programs. Growing and retaining existing customers is far more cost effective than acquiring new ones, and it’s clear that loyalty programs can be a strategic lever to support these efforts. Using the above guidelines, retailers can create sustainable loyalty programs that resonate with customers and convert them to lifelong brand devotees, thus driving organic revenue growth through greater customer lifetime value.