Most retailers concentrate all their energies on engaging new customers and creating short-term experiences that drive to the immediate next transaction, especially during recognized selling seasons like Spring Break, Back To School, or the critical Holidays. The difficult part is re-engaging and keeping the loyalty of a customer who has already been in your store. Savvy marketers should always think about how to engage, and re-engage, customers throughout the year. A great tactic to do this is by leveraging a strong loyalty program. It’s key to create memorable experiences for shoppers in order to foster loyalty long-term.
Enrolling new members is only the first step, and brands can easily fumble when it comes to creating an engaging loyalty experience after gathering contact information at sign up. That’s often because they pull out only one tool in the marketing toolkit: discount incentives.
Yes, discounts are a staple component of rewards programs, and no customer will turn down a reduced price in the checkout line. But discounts are so common that they are easily forgotten or expected – and worst of all, easily matched by competition so there is nothing differentiating about your reward.
What matters more is the experience. The best loyalty programs make it easier to do business with a company and more memorable for customers. Those who have attended the Kobie OnPoint conference have also seen us explore this concept, along with innovative ways to optimize the customer experience. Here’s how to ensure customers will get the most out of your loyalty program:
Reinforce the core value proposition after enrollment
After the holidays or big shopping times like Back to School, many programs find that they exceeded all their enrollment goals, but that they now have a database full of that dreaded customer: the “one and done” member. Often the problem has to do with “one and done” marketing of the program. Reinforce what customers get from the program early and often. What exclusive benefits exist just for joining? What benefits vest with the next engagement or next purchase? Talk about them right after enrollment and reinforce them again in line with your normal repurchase cycle.
Avoid the temptation to talk about all the tier benefits unless the member is close to a tier – fit the message to where they are in their lifecycle with the program. Customers want to feel that the next benefit is near and achievable. What do they need to get to their first reward? Once they’ve gotten to their first reward, tell them how to redeem it and ensure they experience the benefit having earned a reward before it expires. Then tell them what they need to get to their next reward or start to introduce tier benefits if a tier is the next achievable milestone.
Personalize every contact
Loyalty programs are especially effective because they not only encourage repeat purchases, but also provide insight into a brand or retailer’s most valuable customers. Customers self-identify where they are, what they are buying, and what they are using to pay for their purchases in order to earn points or status in a loyalty program. They’ll also complete profiles, write product reviews or answer surveys to earn more points. With data about buying behaviors and preferences, marketers can not only improve the experience of the loyalty program itself, but also the overall relationship of the customer to the brand.
The challenge is to act on the information. Most retailers feel pressure to send every message to every customer on the assumption that even low response from a larger audience will still provide more traffic than high response from a smaller targeted audience. This is how cat owners regularly buying kitty litter receive offers for dog food and vegetarians buying only produce receive special member pricing on sliced sandwich meat. Instead of advertising the brand, it advertises how little attention the brand has paid to the individual member and can lead to customers unsubscribing due to irrelevant content.
Starbucks used to send non-stop coffee offers to tea drinkers. Now they send coffee offers to coffee drinkers and tea offers to tea drinkers, with cross sell incentives for bakery goods and sandwiches. On rare occasions, tea drinkers will see announcements of coffee-based drinks in the context of showing what’s new at Starbucks, but the focus of incentives remains on tea-based beverages. They are still contacting their entire database at least once a week, but there are lots of different messages and each message is relevant to the individual member. This approach has paid off for them – even with traffic declines overall and market saturation, member spend is up 20%.
Give the customer a sense of control over their rewards
One of the trends in loyalty programs outside of brick and mortar retail has been to give customers more choice and control over what they want to redeem and when. Hotels have “money + points” rewards that enable customers to feel they are getting value from a program even when they don’t have enough points for a completely free night—they can redeem any amount of points they have to get a discount off of a room night.
Coffee chains as diverse as Starbucks, Panera, Dunkin Donuts and 7-Eleven all let members choose a free item as a reward. Credit card programs such as American Express Membership Rewards are partnering with Amazon so that members can choose to redeem their credit card points for a discount at Amazon as they check out – they can choose to redeem all or any portion of their points in real time.
By comparison, most retail programs auto-issue dollars-off reward certificates that are “use it or lose it” within 30-90 days, with a few higher-end retailers offering 6 to 12 months for reward redemption. The member has to worry about both how long they have before their points expire and then they have to worry how long they have before their reward expires. The reward almost becomes another promotional offer rather than something special that they’ve earned. Being able to select a free item feels more like a gift – when you wear it, you remember how you received it.
Not to say that there isn’t a time and place for dollars off rewards – customers are over twice as likely to redeem a $5 off reward they earned with points than to redeem a $5 off coupon that was sent to them as a promotion. The point is to recognize that the $5 or even $10 reward will not be as differentiating from the competition or as memorable as a free item or a special experience.
If executed correctly, a loyalty program can radically enhance the customer experience for new and returning customers alike. Programs that provide easy to understand, memorable and personalized experiences will strengthen customer connections and that enable retailers to reap the rewards of their rewards programs. Are you looking for new ideas to re-engage customers or re-design your loyalty program? We can help. Contact us today.