Reimagining Customer Loyalty Through Value-Driven Strategies

Loyalty concept chart hand drawing on blackboard

by Neeraj Purohit

posted on 06-23-2020

How many offers have you received in the past few days from loyalty programs you subscribe to? Now consider for a minute – how many brands are you actually loyal to?

Traditionally, marketers heavily allocated their budgets to acquire customers. Then research showed the path to profitability was through repeat sales. Thus, retention became the new acquisition, and CMOs set their sights on loyalty programs to keep customers coming back.

These loyalty programs mostly focused on “earn and redeem” – rewarding customers based on transactions. However, with the growth of e-commerce and the rise in experiential shopping, marketers have the opportunity to transform their programs beyond a transactional utility for rewards to a journey-based experience that elevates relationships with customers. The COVID-19 pandemic, too, has brought to the forefront the need for brands to better engage with customers on digital channels and understand their pain points.

All of this requires marketers to rethink their loyalty strategies. Here’s a look at how some leading brands are evolving to differentiate their programs.

Deeper understanding of customers

Consumers said they believe the most important way brands can interact with them is by “surprising with offers and rewards,” according to HelloWorld’s “2019 Loyalty Barometer Report.” Surprises, the report said, drive emotional loyalty and true brand connections. But first marketers need to understand what their customers want – and for that they need customer input.

Online clothing retailer StitchFix, for example, thrives on a deep understanding of its customers to drive loyalty-engendering personalization. The company asks customers a series of questions to gauge their shopping habits, style preferences, and the like, and then delivers a few handpicked items at their doorsteps. Customers pay only for what they keep, but in the process StitchFix gathers even more data on customer preferences and uses that information to curate relevant products and ultimately drive repeat sales.

Rewarding journey touch points

Brands have the opportunity to embed loyalty in the entire customer journey – at the moments that matter the most to customers and not just for sales. Take Tarte, a cosmetic and skincare retailer that rewards customers not just for purchasing, but also for creating awareness, engaging with the brand, and advocating it. For example, customers earn reward points for posting selfies with Tarte products on social media, writing online reviews, and posting video tutorials.

Without even encouraging customers to spend more on the products, Tarte drives its loyalty program on user-generated content, an important catalyst in influencing buying decisions for the beauty and skincare industry.

Offering an experience

While personalization and rewarding journey touch points can improve the loyalty experience, brands also need to create an emotional connection. The North Face, a leading apparel and outdoor gear retailer, treats loyalty as an experience for customers. Loyal customers are rewarded not just with products but with actual experiences, such as a mountain climbing adventure in Nepal with well-known athletes. These experiences stay true to the unique selling point of the brand: Think of an adventure, think of North Face.

In another example, the NikePlus loyalty program inspires users to remain fit by setting fitness goals through personalized training. The users are rewarded “Peak Points” based on their achievements, and in the process Nike develops a strong relationship with them – all of which helps the brand drive repeat sales and customer retention.

Empowering customers with choice

According to the “Bond Brand Loyalty Report,” customers are sitting on $100 billion worth of unredeemed loyalty points. Reward diversification empowers them to redeem points the way they want to.

For example, Sephora’s successful Beauty Insider loyalty program lets customers choose to redeem their rewards points for quicker product delivery, personalized services, and free beauty makeup classes by experts, to name a few options.

As brands look to evolve their loyalty strategies to better compete in a digital environment, they can learn from the success of other loyalty programs that are improving customer relationships. Remember: No one is loyal to bad experiences. The onus is on brands to embed loyalty as part of the customer journey and treat loyalty as an outcome, instead of a scheme.

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Topics: Personalization

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