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In the previous blog post, we have seen how loyalty has an essential impact on emotional engagement and therefore increasing brand loyalty. But what about loyalty programs? While we briefly touched upon them, this blog post will be dedicated to better understanding what they are, why they are important, and how to achieve a better one.
eCommerce has been on the rise for the past decade, and now with consumers having more time to spend searching for products, loyalty products are more important than ever as you will aim to keep all of the new business that you are getting. Relying solely on discounts won’t be enough to stand up to massive competitors like Amazon.
An eCommerce loyalty program is an important customer retention tool geared towards keeping and engaging your existing customers, so they will buy in higher quantities, shop more often, and interact with your brand more frequently. While many companies deploy high discounts to differentiate themselves, this has only conditioned shoppers to hunt for the best bargain, which made brand loyalty even harder to achieve. The best next-gen loyalty programs are not made of deep discounts but of fun and rewarding loyalty programs, which create an entire community around your brand.
But why are they important? On average, loyalty program members generate 12-18% more revenue per year than non-members. For Amazon Prime, shoppers spend a whopping 133% more per year.
We can all agree that loyalty programs are important, so let’s cover some of the most popular and successful types. There are multiple types of loyalty programs such as points-based, tiered, perk, hybrid, or subscription-based and below you’ll find the overview, with an example of each:
1. Points programs are among the most popular types of customer loyalty programs. Points are easy to earn and easy to redeem. For example, Walgreens has a popular customer loyalty rewards program that enables customers to unlock additional savings via coupons and special sales the more they buy. Personalization has been key in driving Walgreens' increased brand loyalty as they have collected their customer’s spending habits. This enabled them to offer personalized rewards and personalize their products and services to their customer’s needs.
2. Tier-based programs are video-like points programs that allow customers to earn rewards with every purchase unlocking different spending levels with more significant benefits and more perks. Designer Shoe Warehouse (also known as DSW) is a popular shoe retailer that operates a hybrid program, mixing together tiers and free perks. Their tiers were designed based on annual spending amounts and offered rewards like free shipping and extra points for donating unwanted shoes. This enabled the desire to continue shopping as it enabled unlocking of higher tiers and higher rewards.
3. Mission-driven programs such as the one driven by Lush can be highly effective. Lush created the Charity Pot program, and customers can purchase certain goods while they donate the sales to charities supporting various causes. The benefit of a mission-driven customer loyalty program is that it allows customers to feel like their purchase, whether big or small, helps improve others’ lives.
4. Gaming programs introduce an element of fun into the mundane task of making a purchase. The world’s most recognizable coffee brand has one of the best (and most used) loyalty programs among today’s consumers. Starbucks switched from a simple points program to a gamified approach in 2016, and now Starbucks leads the way among all major U.S. restaurant chains with 14M+ active U.S. members on the app. Customers can earn stars based on their purchases, but it doesn’t stop there. With the app, loyalty customers get two stars for every $1 spent. They have created a gamified tier system, for which customers can unlock free reward-of-choice. Most importantly, all of Starbuck’s interactions are personalized. They personalize emails with order options based on purchase history, and mobile order-ahead options are a nice perk for app members. Starbucks is one of the leaders because it covers the entire ecosystem, that spans from physical stores, an app, online and also uses location and purchase history to tailor the experience further.
There are multiple ways in which you can personalize your loyalty program in order to best suit your company’s goals and core values. However, you must have in mind that the average consumer belongs to 13 loyalty programs, but it is active in only half of them. Moreover, only 20% of customers say that they’re very satisfied with the amount of personalization that their loyalty program provides. And as we’ve seen earlier, personalization and tailoring the experience are part of every one of these loyalty programs’ success.
Let’s walk through the 2 steps to achieving loyalty program personalization, and it all revolves around data.
1. Firstly, you will need to obtain data. In addition to the basics name and email address, all further data points need to be carefully throughout. Ensure that you’re asking for information relevant to your product offerings and customer segments and developing a plan for how each data point will be leveraged. Finding out what additional information you need is based on the following 2 questions:
> How do I want to segment my customers?
> What do I know is an indicator of a high-value customer?
2. Secondly, in addition to the data you are asking your customers for, it is important also to track data. Some basics include:
> Purchase History, for example, includes how long a person has been a customer, how many days since the last purchase, and what their previous purchase was.
The more data you have on the ways in which people interact with your brand (particularly their purchasing history), the more you can tailor your messages to resonate with them.
Personalizing loyalty programs, for example, with preferred items (and often gamifying the experience) is a highly effective way to inspire purchases and encourage new buying behaviors.
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