Top 5 Reasons why Loyalty Programs Succeed

The pandemic has expedited the need for unique customer experience and engagement. Businesses have gone all out and embedded various digital strategies to provide a seamless experience to their customers. Today, customer loyalty and retention are indispensable in keeping businesses’ doors open.  

According to Cross-Channel Marketing, 82% of companies agree that retention is in fact cheaper than acquisition. Loyalty programs help brands build strong relationships with their customer base, retain existing customers, and increase customer lifetime value. This emphasizes the importance of customer loyalty programs and why it should be a part of your retention strategy.

Listed below are the top five reasons why loyalty rewards programs succeed:

1. PERSONALIZATION 

Today, loyalty programs are all about providing a connected customer experience – something that is unique to the customer. Studies suggest that when companies efficiently personalize their loyalty program, it creates a 6.4x lift in member satisfaction. To provide a connected and personalized experience, brands must focus on three aspects:

• Personalized dashboards: Create a loyalty rewards program with a responsive design that can be accessed on all devices, be it laptop or mobile. Ensure your dashboard includes the customers’ purchase history, reward points, tier levels, etc. This makes them feel connected to the brand and builds a strong recall value. Go a step further and suggest lookalike products based on their purchase history. 
• Dive deep into customer data: Data – and the optimum use of machine learning & and artificial intelligence – can elevate your loyalty program and deepen customer relationships. Brands should capture the data in real-time across all channels – social media, chat, in-store, online. Using these multi-channel interactions, brands can create various customer cohorts, run loyalty-based campaigns, trigger product recommendation notifications on completion of a purchase, suggest complimentary products, etc. 
• Focus on tailored emails: Brands should segregate customers into different clusters based on their buying behavior. Brands should distribute emails to various segments and encourage users to make their next purchase. Tailored emails on birthdays make users feel special and entice them to make purchases. Brands can further target dormant users with personalized emails to win them back.

2. EASY TO COMPREHEND LOYALTY PROGRAM 

A loyalty rewards program should be easy to comprehend, interesting and appealing. An overcomplicated loyalty program that leaves the customer feeling confused is a recipe for disaster. Brands should provide a clear bifurcation of the rewards that are both tangible and intangible. Cashback, extra points, freebies or access to early sales, a new collection, tailored letter from a CEO, exclusive invite to an event etc. make a program enriching and enticing. 

The loyalty program landing page should be self-explanatory, yet compelling. A complicated one will lead to loss of interest and eventually lead to drop-offs. Here’s an example of a well-defined, engaging, and a successful loyalty program – Sephora’s Beauty Insider Program. 

Read More: Making the Most of Marketing During The Pandemic

Sephora’s loyalty program success correlates more closely with user experience, emotional connection, and user-behavior. The program does not just work on points, the brand has deep dived into what their customers want and created a truly engaging program. The program is three-tiered and offers unique rewards and incentives at every tier. The tiers are Insider, VIB, and Rouge. Sephora takes the program a notch further and amplifies it by offering members the benefit of personalizing their perks. Not only is the program easy to understand but the explainer page is user-friendly and alluring. The program clearly articulates the terms and conditions making it easier for its members to adapt to the loyalty program.  

3. DEEP EMOTIONAL CONNECT

A study by CapGemini found that 70% of emotionally engaged consumers spend up to two times or more on brands they are loyal to, compared to less than half (49%) of consumers with low emotional engagement. Transactional loyalty entices customers through points, rewards, and incentives; and emotional loyalty creates a more deeper connect with a brand! 

Customer service always triggers a set of emotions. When your customer signs up for your loyalty program, it is precisely during this moment you should connect with them and show some appreciation. The customer not only feels special, but it leaves them feeling warm and elated. Personalized services like a session with a brand stylist, a tailored letter from a CEO, etc. evoke a set of emotions and builds an affinity towards the brand. Investing in your loyalty program to drive an emotional connection with your customers will meaningfully increase the lifetime value of your customers and attract new customers to your brand. 

4. A TIERED PROGRAM 

We all like to feel special. This is exactly why successful brands bring tiers into their loyalty program. This not only makes the customer feel unique but higher the tier, the more they are willing to spend and make repeat purchases. To tempt customers to alter their spending habits, brands must introduce tiers with interesting perks and rewards. According to Technology Advice, consumers are 56% more likely to join customer loyalty programs that offer tiered rewards and exclusive treatment for top customers.  As members move up the tiers, they get incremental benefits, which are both monetary, non-monetary in nature. These perks lead to a genuine sense of belonging and exclusivity. 

Tiers gamify the loyalty program and make it exclusive. To keep your customers engaged, ensure there is a value at every tier that makes the customer feel privileged.  

Nordstrom’s reward program – The Nordy Club – is truly a one-of-a-kind program. The membership levels are based on annual spending and each tier offers unique perks. 

• Member (free to join)
• Influencer ($500 spend per year; cardmembers start at this tier)
• Ambassador ($5,000 spend per year)

If you are an Ambassador member, you get invited to exclusive events and access to a visit from a Nordstrom stylist (in-home stylist). This perk not only makes a customer feel elated but also makes them emotionally attached to your brand.

5. PROGRAM AWARENESS 

You can create a truly compelling loyalty program with all the elements discussed earlier, but if the customers are not aware of the program, it’d amount to nothing! According to eMarketer, 18% of US Internet users said they were not aware of how many loyalty points they have for their favorite brand, whereas 52%, which is a majority of the customers, mentioned they weren’t sure.  

This is a serious problem as customers may abandon the loyalty program. While creating your loyalty program, it is imperative to build an awareness, branding & PR strategy in parallel. Promoting the loyalty program through social media channels, ad campaigns, emails will entice the customers’ interest and bring attention to your loyalty program. The loyalty program should be an extension of and compliment the overall brand proposition.

As you design your loyalty program, you must strike a balance between transactional, personalized, and emotional loyalty. A loyalty program cannot sustain on rewards alone. The right mix is important to deliver value to the customer and make them feel connected to the brand.