Loyalty programs are a part of every retailer’s comprehensive customer relationship strategy since they work as an effective customer identification tool for retailers to identify individual customers and reward them for desirable behaviour. Not only this, these programs bring in valuable data for retailers, by measuring and understanding individual behaviors, which in turn enable basic benefits such the ones listed below:
- Shift – Acquisition of new customers
- Lift – Increment in the amount spent by existing customers
- Retention – Improvement in the natural churn rate of customers
- Profit mix – Shift spending to higher margin products
According to the Center for Retail Management, Northwestern University, a mere 12% to 15% of shoppers are loyal to a single retailer. However, even this small percentage of loyal shoppers is capable of generating around 55% to 70% of company sales.
Most retailers now understand the significance of a loyalty program and strive to make one such that shoppers enroll in and actively use. According to last year’s Colloquy Loyalty Census, US consumers hold 3.3 billion memberships in customer loyalty programs. However, most of the consumers use only around half of the number of loyalty programs they enroll in.
This triggers an immediate question – Why so? What is it that they find unappealing about these loyalty programs? What are retailers doing wrong when building loyalty programs? Here are the three mistakes that retailers must avoid when building their loyalty program:
Mistake 1: Offering irrelevant rewards to customers
Traditional loyalty programs end up offering irrelevant rewards to customers. Today, customers demand and appreciate services especially tailored for them. So, a loyalty program that does not take every individual customer into account is of no good.
Solution: Retailers should offer personalized rewards that take the individual customer’s shopping behaviour and interests into account instead of spending a big share of their marketing budgets on sending out discount coupons to people who don’t care to use them.
Image source: blog.theshoppad.com
Tip: Customer loyalty programs work best when they are intertwined with everyday preferences and needs of your customers. This is why retailers are leveraging beacons to understand customers better, enable personalization and to take their loyalty programs up by a notch. Starbucks’ reward program ‘My Starbucks’, for instance, is a great example of championing customer loyalty with beacons as they incentivize customers regular purchases.
Mistake 2: Making customers use non-digital services
The digital era of connected technologies and an increasing smartphone adoption rate across the globe has lead to an increase in the number of informed and empowered customers. Most services are digitised and thus customers expect loyalty programs to fall in the same bucket. However, some traditional loyalty programs still do not allow you to collect points or use discounts without your credit card, while some still require you to print out a paper coupon.
Solution: Retailers need to digitise their loyalty programs via a mobile app. Most retailers do have a mobile app but they don’t integrate loyalty programs into it. This makes for a major disadvantage. 79% of loyalty programs include a mobile app, according to a report by Capgemini Consulting. However, these apps don’t serve much purpose as only close to 24% of mobile loyalty programs allow customers to redeem bonuses via a mobile app.
Image source: blog.apps-builder.com
Tip: What can small and medium businesses do to digitise their loyalty programs in the absence of a dedicated mobile app? The best solution in this scenario for them would be to go for Eddystone, Google’s open-source and cross platform beacon protocol, since it can be leveraged by businesses if they do not have an app. Eddystone sends out a passive notification which leads a user to a URL that can simply open in a web browser vis-à-vis specific apps. For iOS devices, it is supported by the Chrome browser, whereas for Android devices, it is supported on the ‘Physical Web’ browser.
Mistake 3: Offer rewards that can only be redeemed by making a purchase
A brand fails to engage its customers in a more meaningful manner if its loyalty program only rewards a customer for making a purchase. The loyalty program then remains unsuccessful in two aspects. Firstly, the brand misses out on leveraging loyalty programs to understand how its customers feel about the brand and developing its strategies accordingly. At the same time, customers are unable to connect to the brand and do not feel valued.
Solution: Loyalty programs should incentivize customers to engage with a brand in a more meaningful way. For instance, a brand should ask its customers to take surveys or write reviews. A loyalty program should make customers feel valued and show them that their suggestions matter to the retailer.
Image source: te-ex.ru
Tip: Retailers can also use meaningful ways, such as delivering product related information via beacons, to engage with customers and allow customers to earn loyalty points via usage. Most importantly, they should strategise when to reward the customers. For instance, they can give out rewards to customers for
– visiting physical store locations,
– purchasing a certain quantity or value of goods,
– or even purchasing items from a seasonal catalog.
Beacons, popularly known for delivering contextual content, are being widely leveraged for many more objectives. They are primarily becoming a tool of proximity marketing for retailers as they allow retailers to have a deeper understanding of their target audience’s behavior, actions, demographics, and location. Besides enhancing loyalty programs, beacons assist in click-and-collect services, in-store assistance, mobile payments and much more. To know how brands are using beacons to uplift their loyalty programs and how proximity marketing with beacons is changing the retail landscape, explore this advanced guide ‘Retail 2016: Proximity Marketing with Beacons’. It includes all need-to-knows, valuable tips, market insights, and mock campaigns, all jam-packed into one for you to start a proximity marketing campaign.