THE CLARUS Blog

3 Signs It’s Time to Rethink Your Loyalty Program (And What to Do About It)

Nearly 70% of consumers agree their loyalty is more difficult for retailers to maintain than ever before.

Consumers are empowered with all the information they could ever need about products at their fingertips. They can use their mobile devices to find the best deals anywhere, anytime.

That’s why it’s more critical now for brands to differentiate through their loyalty programs.

Because of this, many retailers are rethinking their loyalty strategies to better meet and exceed customers’ expectations.

Here are three signs it might be time to rethink your loyalty program strategy:

 

1. Engagement Levels are Slipping

All brands seek increased engagement from their customers. But what happens when engagement levels are flat or dip? You should view this as a warning sign.

And this is happening to many retailers due to a lack of differentiation.

Traditional, or transaction-based, loyalty programs train members to wait for coupons and discounts.

These incentives don’t build loyalty with a specific brand because these types of programs are largely the same everywhere.

With traditional programs, customers simply gravitate toward the greatest discounts or don’t use them at all.

Americans belong to an average of nearly 15 loyalty programs but are only active in less than half of them.

Traditional loyalty programs don’t impact positive behavioral change among customers.

You need to leverage your data to understand what benefits your customers value.

Survey your members. Find out their pain points: What they like, what they don’t like, and what doesn’t make sense to them.

Offering attractive benefits that your customers desire will increase engagement. Give them a reason to engage with your brand over others.

With a premium loyalty program, brands see right away enhanced levels of engagement from their best customers because these programs provide instant benefits that members can use right away.

By giving your members a VIP experience that they love every time they shop, engagement will increase, and your brand will remain top of mind for your members.

 

2. Repeat Purchases are Down

Following along the lines of engagement is repeat purchases.

You’ve spent marketing resources getting someone in the door. You want to make sure they come back again and again.

One of the biggest problems in the Age of the Customer is that your customers don’t need to put a lot of effort into finding the best deals.

And the fact that most traditional loyalty programs are similar doesn’t help. Because they don’t cater to the instant culture we live in today, your customers will jump to the competition if they get a better deal.

REI built its premium loyalty program around experiential benefits and the emotional connections attached to them.

These experiences set it apart, from outdoor classes to organized trips around the world. These once-in-a-lifetime adventures transform customers into lifelong brand advocates.

Premium loyalty programs offer instant benefits every time a member shops, which leads to greater purchase frequency. From the customer point of view, they know they’re always getting the best of your brand.

And after all, if someone is paying to be a member of your program, they’ll want to take advantage of the benefits.

In fact, 87% of consumers who are satisfied with the special benefits offered by a retailer’s paid loyalty program will likely choose that retailer over a competitor that is offering a lower price.

 

3. More New Customers Than Returning Customers

If you’re an established brand and you’re getting more new customers than returning ones, something isn’t right.

Customer retention is more profitable than customer acquisition.

Consider that the success rate of selling to a customer you already have is 60-70%, while the success rate of selling to a new customer is 5%-20%.

Traditional loyalty programs are good at getting people to sign up, but don’t boost engagement levels.

Consumers belong to an average of 13.4 loyalty programs, but are only active in half of them.

If you find your brand in this situation, it’s probably due to a lack of effective customer engagement.

Brands understand that they need to strengthen consumer relationships through trust and reciprocity.

Creating a value exchange that occurs at every touch point between you and your customers is important in gaining brand loyalty.

If there is too much of a focus on either acquisition or retention, it’s unhealthy for the brand’s overall performance.

Creating a committed customer-centric approach sparks elevated engagement and brand loyalty.

Meet your customers at every touch point and make the experience connected along the way, allowing for engagement every step of the journey.

See how Nutrisystem rethought its loyalty approach after it shifted away from acquisition.

 

Maybe It’s Time to Rethink Your Loyalty Program

If you’re seeing participation in your loyalty program shrink or if metrics are starting to flatten out, go to your customers.

Ask them what their pain points are. Find out what they want and need. And develop strategies and tactics to enhance and evolve the program around those wants and needs.

Brands need to think about loyalty program benefits from their customers’ perspective. What would entice them to become a member of “the club?”

Consumers don’t just want good products. They want great experiences every time they interact with your brand.

Don’t you want your loyalty program to be something your members can’t wait to engage in?

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