Every business owner recognizes the importance of customer loyalty. Loyal customers spend 67 percent more than new ones – and the cost of selling to them can be 25 times less than that of marketing to new prospects.

A rewards program can be a highly effective tool for keeping customers loyal. Problem is, most loyalty programs are far too focused on enticing customers with discounts — creating a discount-dependent customer base, customers who might not be particularly loyal to the brand itself.

Thanks to this discount dependency, many traditional loyalty programs are on the decline. Membership in initiatives like punch cards and points programs has been declining by several percentage points each year, with less than half still in active use.

In response, some retailers have taken an altogether different approach to loyalty programs, focusing on building personal relationships that deliver delight and cultivate a sense of exclusivity. And in today’s competitive retail landscape, it’s this creative approach to loyalty that’s coming out on top.

From rewards to relationships
The world’s first brand-loyalty program launched in 1896, when the department-store chain Sperry & Hutchinson (S&H) began issuing “green stamps.” Customers received these stamps when they made purchases at supermarkets, gas stations, and other retailers, and could redeem them for products in the S&H catalog. The program was wildly successful, continuing well into the 1980s – and spurring many customers to go out of their way to purchase from retailers who issued green stamps.

Green stamps loyalty program
Photo by Flashbak

As successful as S&H’s program became, it was also highly generic, addressing the broadest possible range of customer segments with a reward system that appealed to everyone. Even today, when most forward-looking companies are investing heavily in personalized customer experiences, many brands continue to think of loyalty in terms of rewards points, discounts, and similarly generic benefits.

Today, many retailers recognize that while a generic loyalty program may build loyalty to the program’s benefits, it doesn’t build loyalty to the brand itself. To address this loyalty gap, forward-looking brands have implemented loyalty programs more closely aligned with their customers’ individual tastes, and with their brands’ core values and personas.

The success of such a customer-centric, value-aligned loyalty program depends on the interplay of three crucial factors: the use of personalization over broad-based messaging, a focus on delivering delight rather than pressuring customers to purchase, and a use of individualized communication to foster a sense of exclusivity.

Let’s take a closer look at some brands that combine these three factors into brilliant customer loyalty programs.

Using personalization to cultivate exclusivity
Sephora’s Beauty Insider program has created an aura of exclusivity at scale, leveraging customer preferences to deliver curated recommendations, beauty tips, product sets, and even experiences such as free makeovers and beauty classes. In a similar way, denim retailer Madewell provides loyal customers with a velvet-rope experience by dividing its Madewell Insider loyalty program into three tiers with rewards that progress from free monogramming and hemming to personalized semi-annual gifts.

Sephora loyalty programs
Photo by Sephora

But retailers are using meaningful loyalty programs to create exclusivity in a wide range of industries, far beyond fashion and makeup. Outdoor retailer REI, for example, offers member discounts on bike repair and outdoor survival classes – or sometimes provides the classes to loyal customers completely free.

Each of these loyalty programs is aligned not only with the brand’s products and services, but also with the core values that each brand represents: beauty for Sephora’s customers, bespoke jeans for Madewell’s, and hands-on outdoor skills for REI’s. Starting from those values, each program uses personalized messaging to serve up tailored offers that create a sense of delight and exclusivity.

When these three factors come together, a loyalty program delivers not only rewards, but personalized experiences that foster a sense of intimacy with the brand persona.

Communicating delight to each customer
The key question, at this point, is which communication channel best serves the goal of connecting with customers in a personal way to cultivate that sense of belonging to an exclusive club. While some retailers orchestrate these conversations on social media, that channel presents significant limitations. Social posts have extremely low click-through rates, and tend to fade from customer’s memories quickly. Plus, even personalized social posts won’t connect if the recipient isn’t a big fan of the social network they appear on.

Email, by contrast, is an ideal channel for building intimate customer relationships. We all check our inboxes multiple times every day, and pay much closer attention to email messages than to posts on any social media channel. Many of us don’t even think of it as a “channel,” at all, but as an integral part of our lives. In other words, email feels inherently personal, in a way that no other channel can – especially when we receive a message that speaks to our individual interests in a format that connects with our most immediate needs.

In this way, personalized emails serve as the final piece of the puzzle: the ideal channel for delivering individualized messaging that serves up offers tailored around each customer’s tastes and needs, creating a sense of delight and exclusivity. When these three come together, the result is a lasting customer love not only for the loyalty program, but for the brand’s persona itself.

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