What Innovations are Taking Retailers to the Next Level?

Dec 3, 2013

Effective loyalty programs can be a key difference between highly successful companies and those that struggle – especially in a sluggish U.S. economic recovery, which took another hit with the recent government shutdown. A recent joint study by ORC for the International Council of Shopper Centers and Goldman Sachs found that 40% of consumers reduced their retail spending after the shutdown.

Though 70% of shoppers said they’re only cutting back a little, such belt-tightening adds up. Retailers know squeamish fourth-quarter spenders could be a serious end-of-year setback. Coupled with showrooming, extreme couponing, discounts and growing member disengagement, retailers face a series of challenges as they seek to engage customers more deeply and improve relationships beyond a discount or single promotion.

What new loyalty innovations can help retailers overcome these challenges and take them to the next level? Here are a few of the dynamic developments taking place:

Let’s Hear it for Tiers

One of the most important developments involves tiering. Popular among airlines for years, tiered loyalty allows retailers to segment shoppers into highly granular engagement categories. This approach helps keep a loyalty program fresh and exciting while incentivizing positive behaviors, like increased basket size and purchase frequency, by offering status-based and tangible rewards exclusive to customers in a particular tier.

Consider Sephora and Gilt.com. Sephora’s redesigned Beauty Insider program now includes a new tier for free shipping, early access to new products and VIP events for shoppers who spend $1,000 or more. Meanwhile flash-sale site Gilt.com recently launched its Gilt Insider Program. It also offers exclusive tiers as well as a VIP customer service line. Nordstrom, Best Buy, Starbucks and DSW have also recently implemented tiers with increasingly valuable offerings as a way to reward their top-spending customers and incentivize them to spend even more. For instance, Elite Plus members of the My Best Buy program get free expedited shipping, priority sales access and more time to return items – perks unavailable to Core and Elite members.

Mobile Wallets and Loyalty Programs Coalesce

Another next-step solution involves mobile wallets and coalition loyalty programs. While the latter are not as popular in the U.S. as in Europe or Canada, retailers are working to overcome cultural, travel and spending habit differences.

Mobile payments app Google Wallet is, according to my colleague David Andreadakis, already a “pseudo-coalition loyalty program.” In addition to payments, Google Wallet recently partnered with loyalty program provider Clutch, allowing for loyalty card integration with over 350 merchants including Godiva Chocolatier,

Harley Davidson and Swatch. Virtual loyalty cards, organized in one location, help boost customer engagement by de-cluttering physical wallets. They also help program providers gather more customer data and insights. Meanwhile, retailers like Stop & Shop and Walmart continue to experiment with mobile scanning checkout. While mobile checkout has yet to gain mainstream appeal, retailers remain optimistic that the technology will eventually become commonplace, improving customers’ in-store shopping experience and driving loyalty.

Keep It Simple!

Speaking of simplicity, a study by branding firm Siegel+Gale found that 75% of global consumers are more likely to recommend a brand provided it offers simple experience and communications. In the U.S., 29% of consumers said they would spend approximately 5% more for a simpler experience. One of the easiest ways to achieve clear messaging is to adopt an omnichannel framework.

Omnichannel loyalty, an enterprise-level initiative to drive, track, measure and reward incremental behavior throughout the enterprise and customer experience spectrum, engages consumers with the right message on their preferred channels. This establishes a positive feedback loop wherein improved messaging boosts customer engagement as well as rewards’ timeliness and relevance.

Keeping it simple doesn’t have to mean boring, either. With an omnichannel loyalty framework, retailers can harness the engagement power of these innovations. Tiering, mobile wallets, gamification and potentially coalition loyalty programs, are all great ways to keep customers enthusiastic about their loyalty status and brand affinity.

The myriad challenges facing retailers won’t disappear, but innovations like the ones above have the potential to reinvent how retailers attract, retain and engage their customers and, ultimately, how they drive loyalty.

What innovations are you using to enhance your customers’ loyalty and improve their experience? Let us know in the comments section below or email us at info@kobie.com.