THE CLARUS Blog

Loyalty in 2021: What Retailers Should Focus on, According to Experts

As an incredibly challenging 2020 draws to a close, retailers are looking ahead to 2021 with renewed hope for strengthening customer relationships and retaining loyalty.

If you want to continue building loyalty post-pandemic, it’s going to take a new mindset to emerge stronger.

So, what about loyalty in 2021? What trends can you embrace heading into the New Year? And how will they positively impact your year?

We asked several experts to weigh in. Here’s what you should focus on going into 2021.

 

Listen to Your Customers and Offer Value

Now more than ever, listening to your customers and offering value in a loyalty program is critical for brands to be successful.

“Businesses are adapting to meet consumers where they are, whether that’s online, at home, in-store, or curbside,” according to Sallie Burnett, President of Customer Insight Group. “We know that innovation, customer-centricity, and being nimble will be staples in the plans moving forward.”

It all starts with listening and then providing value.

 

“Implementing a program without knowing what customers want is a recipe for disaster. This is why talking to customers and prospects directly and surveying them is key.” – Sue Duris, Director of Marketing and Customer Experience at M4 Communications

 

For example, Sephora is allowing its customers to support the black community through its Beauty Insider rewards program. Customers can turn earned points into donations to the National Black Justice Coalition.

Another brand that always listens to its customers and provides value is Starbucks.

See why Starbucks is giving Rewards members new ways to pay.

One of the ongoing requests regarding the program was to make it easier for members to use the program, especially payment flexibility in its rewards program.

Starbucks Rewards members have always had to use pre-loaded gift cards for payment.

So, this fall Starbucks started allowing its Starbucks Rewards members to link their credit or debit cards, or PayPal accounts to pay within the app.

If program members want to pay in person, they will be able to also use cash, credit or debit cards, or select mobile wallets and still earn points.

 

“Brands should ask how a program can help them both provide extraordinary value to their customers and differentiate themselves from the competition.” – Adam Toporek, President, CTS Service Solutions

 

Sue Duris, Director of Marketing and Customer Experience at M4 Communications, says finding out what your customers want is critical.

“Listen to them,” Duris says. “Then, implement something they would buy into, something that they want, and something that they would actually buy. Implementing a program without knowing what customers want is a recipe for disaster. This is why talking to customers and prospects directly and surveying them is key.”

Adam Toporek, President, CTS Service Solutions, adds: “Brands should ask how a program can help them both provide extraordinary value to their customers and differentiate themselves from the competition.”

 

Focus on Your Best Customers

Focusing on your best customers, typically the top 20% that accounts for roughly 80% of your sales, is a great way to generate incremental revenue, enhance engagement, and create brand advocacy.

This is what premium loyalty programs do.

In a premium loyalty program, members pay a fee to access exclusive discounts, perks, content, and experiences. The most famous example is Amazon Prime, which charges an annual subscription fee in exchange for free two-day shipping on many products, video and audio content, and much more.

 

“I anticipate that even more retailers of all shapes and sizes will hop on the premium loyalty bandwagon in the months ahead. Subscription loyalty programs are appealing to the top 20% of customers.” – Sallie Burnett, President of Customer Insight Group

 

Walmart solidified the rise in premium loyalty when it launched Walmart+ in September.

Here’s what the experts think of Walmart+. 

Many other brands offer premium loyalty programs such as CVS, Cinemark, Lululemon, Overstock, Wayfair, Restoration Hardware, and Barnes & Noble.

These programs take a brand’s best customers and make them exponentially more valuable.

 

“It’s a worthwhile exercise for any organization with episodic customer transactions to consider as a tool to smooth out and deepen relationships with their best customers,” – Robbie Kellman Baxter, Customer Loyalty Expert

 

Our 2020 Premium Loyalty Data Study found that nearly 70% of premium loyalty program members will join another premium loyalty program in 2020.

And 70% would join a premium loyalty program if their favorite retailer offered one and the benefits were valuable.

“I anticipate that even more retailers of all shapes and sizes will hop on the premium loyalty bandwagon in the months ahead,” Burnett says. “Subscription loyalty programs are appealing to the top 20% of customers.”

Following Pareto’s Principle, Burnett adds, those top 20% of customers may represent 70%-80% of revenue. Customers that retailers want to retain.

“Programs that are designed to have higher customer penetration and engagement provide insightful data that helps grow customer relationships of the top 20% of customers,” she says.

Focusing on your best customers is a great exercise to strengthen brand loyalty. But relevant communication is crucial to keeping those two-way relationships strong.

“But you also have to close the loop on feedback – listen to them, implement what they told you, and circle back with them to tell them what you did,” Duris says. “What type of program would excite them enough to buy? Brands don’t do enough co-development with customers on the types of products and services brands offer.”

Robbie Kellman Baxter, a customer loyalty expert who created the popular business term, “Membership Economy,” says premium loyalty programs might not be the best fit for every retailer, but they should be considered.

“It’s a worthwhile exercise for any organization with episodic customer transactions to consider as a tool to smooth out and deepen relationships with their best customers,” she says.

Duris adds: “These types of loyalty programs are great – they do drive revenue. But it has to be a loyalty program customers want. Personalize the loyalty program. Offer benefits customers feel are of value to them. Offer rewards for referring, for content creating, for commenting on social, etc. Encourage reviews and make sure to double and triple down on a stellar omnichannel experience, especially mobile. Also, consider creating a community for loyalty program members.”

“Retailers need to take a strategic approach and assess if a subscription-based premium loyalty program meets their business goals, is sustainable, and adds genuine value to the customer,” Burnett says.

 

Offer a Tiered Loyalty Program

While a premium loyalty program targets a brand’s top 20% of customers, offering a free program for the other 80% makes perfect sense.

A free loyalty program offers a low barrier to entry which makes it easier to acquire members.

By design, free loyalty programs are great for getting lots of signups because of that low barrier to entry for consumers. The problem is value. They fail to provide a rich mix of benefits that drive true emotional engagement among members.

When retailers offer premium loyalty tiers on top of their free loyalty programs, you are giving your best customers the option to self-identify, regardless of their annual spending. This truly marks your most loyal customers.

“If the value proposition is right, subscription-based premium loyalty programs can be very attractive to consumers,” Toporek says.

Burnett says, “premium loyalty programs are popular with investors, CFOs, and customers when they increase revenue and add value to the customer relationship.”

 

Double Down on Customer Relationships With Loyalty Programs that Add Value

Many retailers are looking for ways to make up for lost revenue due to cutting services and budgets, Burnett says.

Listening to your customers will never be as critical moving forward. Offering value-laden loyalty programs will be a must to gain success.

Consider focusing on your best customers with a premium loyalty program and offer a free program for the others.

A free program with a premium tier gives a brand the best of both loyalty worlds.

Building, strengthening, and retaining customer relationships must be a priority.

“Retailers that double down on customer relationships will not just survive, they will thrive in 2021,” Burnett says. “Customer loyalty programs offer companies a way to focus their resources on engaging, keeping, and growing customer relationships. Loyal customers provide a stable revenue stream, higher profit margins, and brand advocates who do much of their marketing for them.”

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