CLARUScommerce

How to Build a Loyalty Program for the Modern Consumer

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IntroductionTraditional retail was all about the retailer.

So too were traditional loyalty programs. With points, discounts, and other purely transactional elements, everything focused on trying to make the customer loyal to the retailer. Loyalty was viewed as a series of transactions.

But modern retail is different. Today, it’s all about the customer.

We live in the Age of the Customer. Consumers have seemingly infinite choices. They demand more from brands than ever before.

It’s not enough to have a great product. Retailers must differentiate at a deeper level if they want to win the hearts and wallets of consumers. But what do modern consumers desire? How do loyalty programs stack up?

Here’s how to create a modern loyalty program for the modern consumer.

INTRODUCTION

CHAPTER 1

Think Deeper Than Discounts

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One of the knocks against traditional loyalty programs is that they don’t offer relevant, enticing benefits.

Most focus on transactional benefits. Consumers still respond to points and discounts because they make them feel like smart shoppers. But with most retailers offering similar rewards, traditional programs can feel very similar.

With these types of programs, customers often become loyal to the discounts and not the brands.

In addition to the discounts, consumers can hop online or on their mobile devices to find whatever they’re looking for at the lowest price. There’s no longer any pain or consequence in switching brands.

At the end of the day, points are an easy solution, but therein lies the problem.

53% of all consumers said it takes too long to earn a reward.

CHAPTER 1 - THINK DEEPER THAN DISCOUNTS

https://www.helloworld.com/insights/whitepapers/2019-loyalty-barometer-report/

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They’re easy to replicate by any retailer. They fail to create real differentiation between brands.

And many times, they simply take too long to show value anyway.

That’s why transactional benefits aren’t enough. For the modern consumer, deeper

differentiation is now a requirement for any brand seeking a competitive edge.

So, what are these consumers looking for?

CHAPTER 1 - THINK DEEPER THAN DISCOUNTS

CHAPTER 2

Make Members Feel Special

CHAPTER 2 - MAKE MEMBERS FEEL SPECIAL6

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CHAPTER 2

Today’s loyalty program members desire a feeling of exclusivity, like joining a club.

When they sign up, they want to get something that not everyone else can. This

triggers an emotional response to the benefit.

Consider events or services like Sephora’s in-store makeovers.

Sephora listens to its customers and aligns those desires with its Beauty Insider

loyalty program. It offers a tiered benefit system to its more than 10 million members

based on spend.

While basing rewards on transactions is typical of more traditional loyalty programs,

the experiential benefits that come with it are different than those of other retailers.

CHAPTER 2 - MAKE MEMBERS FEEL SPECIAL

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For example, members receive

access to experiences like

makeovers, a private hotline, and

invites to exclusive events. It all

depends on where they fall on the

purchase spectrum.

One of the most interesting benefits

is Sephora’s members-only Beauty

Insider Community. It’s a social

platform that allows members to

create a profile, upload photos, and

chat about products and fashion.

When loyalty program members feel special, there is an emotional attachment to a brand based on those experiences.

Loyalty marketers need to do a better job of providing exclusive member benefits.

CHAPTER 2 - MAKE MEMBERS FEEL SPECIAL

CHAPTER 3

Build EmotionalLoyalty

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10 CHAPTER 3 - BUILD EMOTIONAL LOYALTY

While transactional benefits are the ones consumers usually engage with the most,

it’s the experiential benefits that build deeper emotional connections and create

long-term impact.

These are also the benefits that create differentiation. This is where your brand can

get ahead of the competition.

It’s harder to create truly unique transactional benefits, but that’s not the case with

experiential benefits. What your customers value from you is different than what

other brands can provide.

Unique brand experiences spark heightened customer engagement. They build

advocacy that spreads throughout a customer’s network.

Experiential benefits need to revolve around your specific customers and offer

a better experience for them. These benefits also need to reinforce your brand

promise and create deeper emotional connections.

80% of consumers say they are more likely to do business

with a company if it offers personalized experiences.

https://www.edelman.ca/sites/default/files/2018-02/2018-Edelman-Trust-Barometer-Canada_ENGLISH.PDF

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80% of consumers say they are more likely to do business

with a company if it offers personalized experiences.

CHAPTER 3 - BUILD EMOTIONAL LOYALTY

Essentially, experiential marketing aligns tactics, touch points, and engagements.

Where material rewards incent and reinforce desired behaviors, experiential

benefits engage channel partners, customers, and end users.

Experiential benefits should be thoroughly researched, intelligently executed, and

constantly evolved. When this happens, your program will move with its members

and stay fresh and relevant.

CHAPTER 4

Blend Transactional and Experiential Benefits

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CHAPTER 4

Transactional benefits (especially

instant ones) such as discounts

and free shipping impact

consumers’ behavioral loyalty

because they invoke an emotional

response: They make consumers

feel smart.

And these are some of the first

rewards a program member will

encounter. They’re the “hook”

to entice enrollment. It’s the

excitement of those rewards that

will hopefully attract them.

But the goal of a loyalty program

isn’t just to get signups. It’s to

make members engaged. It’s

focused on the customer.

However, if the program focuses only on transactions, it’s not really focused on the

customer. It starts to feel the same as all the other programs out there.

When that happens, customers simply shop a brand when they receive a

discount or coupon.

So, points still hold value to consumers, but there’s more to creating loyalty.

CHAPTER 4 - BLEND TRANSACTIONAL AND EXPERIENTIAL BENEFITS

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87% of loyalty marketers use loyalty currency and 63% use instant discounts

or cash back in their programs. But, less than half of loyalty marketers use

experiential benefits or personalization of offers and interactions.https://www.helloworld.com/insights/whitepapers/2019-loyalty-barometer-report/

Memorable experiences hold the key to emotional connections. Emotional

connections are critical for brands building lasting relationships with their customers.

Emotion is one of the strongest unique drivers of loyalty metrics, and is directly tied

to retention, enrichment, and advocacy.

Building emotional loyalty helps bridge the gap between transactions and

true loyalty.

CHAPTER 4 - BLEND TRANSACTIONAL AND EXPERIENTIAL BENEFITS

CHAPTER 4 - BLEND TRANSACTIONAL AND EXPERIENTIAL BENEFITS

CHAPTER 5

Show Members You Care

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16 CHAPTER 5 - SHOW MEMBERS YOU CARE

Philanthropy enters the elevated benefits conversation as well in the form of

incentives for donations. Many members of loyalty programs are attracted to a

charitable element.

A perfect example of this is DSW’s Give A Pair benefit. VIP members can donate

shoes at DSW stores through Soles4Soles or BeStrong in exchange for points.

Members can also donate Rewards.

Meanwhile, Target’s new Target Circle loyalty program also draws on charitable

interests. Program members can vote on Target’s local charitable initiatives.

When consumers can identify with a brand because of a social message that supports a worthy cause, it creates a deep and enduring bond.

Consumers will engage more and commit to a brand because of emotional

connections triggered by a philanthropic component within a loyalty program.

CHAPTER 5 - SHOW MEMBERS YOU CARE

CHAPTER 6

Stop Thinking Only in Points

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18 CHAPTER 6 - STOP THINKING ONLY IN POINTS

Traditional loyalty programs train consumers to wait for discounts and benefits

based on purchase frequency. But this approach is no longer seen as a unique

driver of loyalty.

These programs are great for collecting email addresses and serving the retailer,

but not for building loyalty with your customers. A problem with traditional

programs is that they are mainly focused on transactional benefits. They struggle to

engage consumers beyond that point.

Given the countless retail options combined with technological advancements,

there is little differentiation among brands today. And differentiation is more

important than ever because customers want to engage with brands they relate to

on an emotional level.

Modern customers want a brand to

offer a loyalty program where they can

receive relevant and enticing benefits,

engage on a regular basis, and always

feel valued.

With traditional programs, customers

simply gravitate toward the greatest

discounts or don’t use them at all.

CHAPTER 7

Consider a Premium Loyalty Tier?

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20 CHAPTER 7 - CONSIDER A PREMIUM LOYALTY TIER?

In recent years, we have seen many brands rethink their retail strategies by using

paid, or premium loyalty programs.

As loyalty program benefits become more experiential-based to attract additional

customers and build emotional connections, many brands are considering these

fee-based membership programs.

A premium loyalty tier allows a brand to offer benefits that extend beyond

typical transactional incentives. These benefits can take many forms, including

convenience perks such as free shipping and returns, as well as experiential ones

that deepen emotional ties toward a brand.

For example, Lululemon is testing a

premium loyalty program right now

and it’s going very well. As part of the

program experience, for example,

members get a free yoga or fitness

class at a different location every

month. That experience supports the

brand fully and wouldn’t make sense

for every retailer to do.

Last year officials at Boxed launched a premium loyalty program called Boxed

Up. Through research, they designed the program with their customers in mind

and worked internally and with their partners to offer differentiated perks and

experiences.

CHAPTER 7 - CONSIDER A PREMIUM LOYALTY TIER?

CHAPTER 8

Focus on the Value to Your Customers

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22 CHAPTER 8 - FOCUS ON THE VALUE TO YOUR CUSTOMERS

For loyalty program members to engage and renew, they must perceive the program to be valuable above all else.

Members of the Lids All Access Pass Premium loyalty program pay a $5 annual fee

and they receive 20% off hats. In this loyalty program model, one hat purchase can

pay for the membership.

On the other end of the pricing spectrum, members of the RH Members program

pay $100 annually and receive 25% off all purchases.

The membership not only gives its members transactional benefits, it also provides

experiential benefits in the form of interior design services. It all comes down to

asking, “What would make life truly better for my customers?”

To build a truly successful loyalty program, you must really know your customer,

know what you can realistically offer, and be aware of what your competition is

doing so you can differentiate.

CHAPTER 9

Offer Members the Best of Your Brand

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source

CHAPTER 9 - OFFER MEMBERS THE BEST OF YOUR BRAND

The best loyalty programs offer members instant gratification and the best benefits

the brand can offer on a 24/7 basis. They increase engagement with the brand. The

more a brand becomes a part of someone’s life, the more likely they are to engage.

Amazon holds the ultimate exclusivity card with its highly successful Prime program

eclipsing 100 million paying members.

We wouldn’t suggest building a program exactly like Prime, but there is a lot we

can learn. Prime provides an unparalleled combination of shopping and content

benefits that only members have access to.

The value customers find in Prime is clear:

Quite simply, Amazon provides an incredible value to its members, a value they’re

willing to pay for.

Prime members spend more than double the amount

of non-members.https://www.businessinsider.com/amazon-prime-customers-spend-more-than-others-2018-10

CHAPTER 9 - OFFER MEMBERS THE BEST OF YOUR BRAND

CHAPTER 10

Realize the Importance of True Customer Loyalty

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26 CHAPTER 10 - REALIZE THE IMPORTANCE OF TRUE CUSTOMER LOYALTY

Loyalty programs are important in today’s marketplace because consumers have

so many different shopping options. They can help increase customer loyalty and

retention by providing immediate value to customers.

Loyalty programs help brands find that crucial alignment with their customers’

needs and desires, which paves the way for sustainable engagement and

brand loyalty.

They allow brands to meet and exceed customer expectations, gain deep

behavioral insights, and forge lasting two-way relationships.

There is an ongoing shift in the loyalty industry toward building true customer

loyalty through deeper two-way relationships based on the right mix of

transactional and experiential benefits.

CHAPTER 10 - REALIZE THE IMPORTANCE OF TRUE CUSTOMER LOYALTY

CHAPTER 11

Create Loyalty Moments

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28 CHAPTER 11 - CREATE LOYALTY MOMENTS

In the Age of the Customer, consumers possess all the power. An effective loyalty

program must meet them at every touch point and engage them with relevant

content. Make sure you’re reinforcing your brand messaging at each of these

moments.

Loyalty serves as both a motivator and a reward for moving customers along the

continuum from unidentified consumers to engaged customers to advocates.

Unlock loyalty with a balance of rational, emotional, and utility-driving connections.

These connections should deliver greater value, stronger customer loyalty, and a

bigger bottom line.

CHAPTER 11 - CREATE LOYALTY MOMENTS

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It’s critical to identify customers

across channels, build more robust

customer profiles, create personalized

experiences, and measure

and optimize in new ways.

Loyalty isn’t about points or miles or discounts. It’s about the journey and the relationships that brands create with their customers.

To create true loyalty today, brands need to take a more personalized approach

that helps build emotional connections.

Because of this shift toward consumer empowerment and rising expectations, a

call to action for marketers is clear.

Don’t you agree that customer loyalty matters now more than ever?

CHAPTER 11 - CREATE LOYALTY MOMENTS

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