If it seems like loyalty programs are becoming ubiquitous these days, it’s because they actually are — as of 2015, there were more than 3 billion programs in the U.S. alone. Brands are reaching out to customers with apps and hyper-personalization, and those kinds of programs are a great addition to that outreach. In fact, 75% of members feel that a loyalty program is essential to their relationship with a company. This is why we believe it’s wise for many brands to consider not only starting a shopper loyalty program, but doing so strategically and a way that is mutually beneficial to both you and your customers. Today’s post will cover five of the top benefits of having a shopper loyalty program.
1. Increased Sales
Believe it or not, a well-run loyalty program isn’t going to be a drain on your bottom line. The reason is, at the most basic level, it will actually increase your sales revenue. Nearly 50% of program members agree they spend more with a brand after they joined than before. What’s more, 72% of women and 56% of men say they spend more on a brand because of rewards. It’s not just surveys that support this, either. According to CrowdTwist, loyalty members have a 28% lift in purchase frequency. As a real life example, Kohl’s rolled out an app paired with its loyalty program, improving its ease of use, and in response the department store chain saw an average of two extra shopping trips per customer, for an average extra $80 per year per customer. If that doesn’t sound like a lot, consider the fact that those numbers reflect all Kohl’s loyalty shoppers, most of whom do not participate in the charge card program (about 60%).
2. Market Research at Your Fingertips
Loyalty programs offer your customers a number of opportunities, and one of them is sharing their information. Roughly 43% of consumers are willing to share loyalty program data. This data can can be used on a broad scale, giving you a solid glimpse into the audience segments that are the most (or least) active and loyal to your brand. However, this data can be used on a much more individualized level, letting you personalize offers specifically to that customer and their shopping habits. Remember to key into data like purchase history to gain a more meaningful understanding of your customers.
3. Incentivize Brand Loyalty
The adage “keeping a customer is cheaper than earning a new customer” is tried and true, and loyalty programs can be a key part of this method. Certain statistics — such as the fact that 67% of customers will modify the brands they shop with or for in order to maximize their points or rewards — might make it sound like that isn’t the case. However, once you take a look at what that actually means, you realize that loyalty programs actually give you the tools to influence that behavior in your favor. Roughly 69% of consumers admit their decision process (i.e., their path to purchase) is directly influenced by where they can earn rewards, while half of consumers will change their shopping behavior to reach a higher tier within a loyalty program. This can be extremely critical: During retail holidays, 40% of women and 31% of men favored retailers with loyalty programs of which they were already members. And of course, 87% of brands say that personalization impacts customer retention; as we already mentioned, your program gives you the data to do just that.
However, it’s worth mentioning that you need to position yourself with customers correctly. About two thirds of marketers see loyalty programs as a method for customers to prove their loyalty to a brand. However, in a time when customers expect personalization and their loyalty is subject to their needs in the moment, you should understand that 73% of customers see these programs as a way for brands to prove their loyalty to customers. When 60% of consumers believe a company only offers a loyalty program to get them to buy more, the experience you offer your loyalty members can make or break your program.
For example, Birchbox recently made changes to its rewards program that likely stemmed from the fact that the company was doing poorly already and had to lay off a large number of people, but the direction the company went in will do it no favors. It’s eliminating its points program starting in July 2016. Customers are leaving in droves in response because, as they saw it, part of the monthly cost was a prepayment on the points they’d receive per review. Worse still, its major competitors (Sephora Play and Ipsy) will retain their programs.
Conversely, Nordstrom is a leader in rewards experiences. It has a tier system to encourage increased purchase habits, but doesn’t skimp on the features offered to even the lowest tier. Its points system translates into a store credit system, but that’s hardly the end of it. Members are rewarded with early access to its anniversary sales (plus pre-shop options for top tier members) as well as alterations assistance, triple points days, special events, and, as the levels progress, special shopping parties and “extraordinary experiences.” The program is built on making customers feel like they’re getting more out of their rewards than just more shopping.
4. Attract Millennials
You’ve likely learned by now that Millennials value the experience more than almost anything else, so you shouldn’t be surprised to learn that this generation is also the most enthusiastic about loyalty programs. Nearly 70% of Millennial consumers are a part of a loyalty program, and of those, 70% are happy with that program. Also, despite the perception you might have of this generation (i.e., that they want everything for free), they actually put a higher premium on rewards than other generations. About 77% of Millennials feel rewards are worth paying for, versus 65% of Gen X-ers and 51% of Boomers. They’re also the most interested in being engaged by brand programs: 34% of Millennials describe participating in programs as “fun,” putting them 24% higher on the “loyalty programs need to be fun” meter according to Colloquy.
Again, it’s worth mentioning that you need to position yourself properly with them. Nearly half of Millennials quit a program due to irrelevant communications, versus only 37% of the general population. Another 18% quit due to the absence of a smartphone app (versus 13% of others), while another study showed 50% of Millennials left loyalty programs because points and/or rewards were either too difficult to accrue or took too long to accrue.
5. Differentiate Your Brand
Taking all the benefits we’ve mentioned above into account, your loyalty program can really make you stand out from the crowd. Consider the fact that a mere 11% of programs personalize their offers based on pertinent data like something as basic as purchase history or location. Given the power that personalization holds in the consumer decision process, offering a program that does exactly that could create a huge favorable impact.
You can also stand out by running truly creative offers within the context of your program, and it doesn’t even necessarily need to be complicated. For example, Yogurtland’s Flavor Quest promotion offered a virtual passport (available only to members) that got stamped every time an exotic flavor was purchased during the promotion period; participation in the program tripled, and 32% of participants went in at least once per week. Another great example is the restaurant, The Greene Turtle, which recognized that a large number of its customers were both sports lovers and competitive; the brand gamified its rewards program app, and those that played both visited 89% more often and spent 58% more than guests in that segment that didn’t play.
You should also remember that this differentiation can come via association. There are third party loyalty programs, for example American Express Plenti, which offer cohesive rewards for shopping at a network of locations. This alleviates some of the spending pressure on your brand , ties you to other prosperous, popular, or businesses, and even provides a certain amount of free marketing (e.g., being listed in every information packet about the program). What’s more, loyalty programs don’t necessarily have to be free. Aside from the statistics we mentioned about Millennials in particular, the stunning success of online retail giant Amazon’s Prime loyalty program is testament to the fact that consumers will put a premium on value, experience, and service, and they’re willing to pay for that value.
Now that you understand the benefits of having a shopper loyalty program, it’s time to evaluate whether a program like this is right for your brand. Remember, these benefits may outweigh the costs you feel are attached to offering a program, especially with the increased sales and loyalty. Don’t miss out on the great opportunities these programs can provide.