THE CLARUS Blog

5 Important Loyalty Lessons From 2018, Straight From the Experts

As the year winds down and many look toward 2019, we took a look back at the the most important loyalty lessons from 2018.

We saw some big shifts including many retailers rethinking loyalty, so we decided to talk to some outside loyalty experts to find out their biggest takeaways.

Here are five important loyalty lessons they learned that you can leverage positively in 2019.

 

1. Build Advocacy, Not Just Retention

Traditional loyalty was about being tactical. Retailers tried to drive loyalty with points and discounts. To truly build loyalty, retailers must shift toward building stronger two-way relationships.

Dr. Chip R. Bell, a world-renowned authority on customer loyalty, talked to Clarus Commerce about his customer loyalty observations from this year.

“I am seeing a shift from using gimmicks and tricks to woo customers to a strong interest by organizations in building deeper relationships, not superficial ones,” Bell explained. “There is a recognition that investing in the kind of experiences that build advocacy, not just retention, is much smarter than relying solely on sales and marketing to acquire new customers.”

Bell noted that the Prime premium loyalty program, Harley Owners Group, and Lady Gaga’s Little Monsters are a few examples where brands help customers embrace products and services that become part of their “I can’t live without” identity.

“Many organizations are becoming more assertive in asking customers for help in growing their reach in ways other than being a promoter,” Bell added. “Think of it as beta groups and VOC groups on steroids.”

Clarus CEO Tom Caporaso said, “Traditional, or transaction-based, loyalty programs that focus on discounting just 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.”

 

2. There’s More to Loyalty Than Points

Robbie Kellman-Baxter, a customer loyalty expert, is a consultant and speaker who has been providing strategic business advice to Silicon Valley companies for more than 20 years. She offered her thoughts about what modern loyalty programs look like.

She believes there is a move away from points-based and discount-only loyalty programs, and toward differentiated benefits that recognize preference and building ongoing relationships.

Annual program membership fees are value-laden.

“Membership is being reinvented by retailers, and traditional loyalty programs are falling to the wayside,” Kellman-Baxter explained.

She noted Prime’s dominance in this area and its potential impact on retailers everywhere.

“At $119 per year (for a Prime membership), that’s well over $10B in revenue before a single item is purchased—a significant business on its own,” Kellman-Baxter said. “Prime is reinventing loyalty programs. There are no cards, no points, and no tiers, and it’s not free—there’s a hefty fee for membership. And yet, more than half of all American households are members.”

Traditional programs that simply offer discounts and benefits based on frequency and depth of purchase are no longer seen by consumers as unique drivers of loyalty, Kellman-Baxter noted.

“I have so many retail and hospitality membership cards that I need a special cardholder in my wallet,” she said. “It’s not so much about loyalty as it is about making sure I get the discounts I earn.”

RH (formerly Restoration Hardware), Wayfair, and AMC Theatres are all offering paid loyalty programs targeting their most frequent customers.

So, how can you apply this new kind of membership program to your business?

“Take a step back and identify your best customers,” Kellman-Baxter said. “Your best customers are usually the ones with high Lifetime Customer Value, but who also use your products and services in a way that many others are likely to replicate (so no outliers!). What do they value and how do they behave? You want to design your membership so that lighter customers sign up and change their behavior to look more like best customers.”

How do smaller retailers compete?

“I know a bar that reserves the coveted window seats for members,” Kellman-Baxter said. “Nail salons that offer free touch ups to regulars. And restaurants that let members store their wines on site, to enjoy with meals. Big or small, companies have all kinds of opportunities to build relationships with the people they serve, whether by providing subscription pricing, membership benefits, or digital communities connecting like-minded people. The trick is to determine what it is that your customers really need and build a model that meets those need forever.”

 

3. Show Them You Know Them

It’s not simply putting someone’s name in an email. It’s about helping your customers find what they need while giving them a better experience. It’s based on data that they have willingly provided.

Ali Rauch, Director of Marketing for Chicken Salad Chick (which has 100 restaurants in 12 states as far west as Oklahoma, Arkansas, and Texas, along with North Carolina, Tennessee, and down to Florida), spoke to Clarus about this.

She said that personalization took on greater meaning for retailers in 2018 and its importance will only grow.

“When I look at customer loyalty trends for the future, continued personalization is a key one,” she said. “People want to feel like you’re speaking directly to them in your communication, the offers you give them, etc. For us, if a guest has never once ordered the ‘Buffalo Barclay,’ but consistently switches between our fruitier flavors, and then we only hit him or her up with our most cost-effective flavor that doesn’t align with his or her flavor palate, they may get frustrated and feel like Chicken Salad Chick doesn’t know them very well. Not only do we want to know our guests, we also want our guests to feel like we know them and care about them because we do!”

All of this, Rauch noted, starts with having the right technology in place to understand your guests, and then the necessary tools to execute campaigns according to those learnings.

“It’s an exciting time and it’s just the beginning right now!” Rauch said.

Jeff Pearson, SVP, Marketing & E-commerce, LIDS, talked to Clarus about the importance of tailored messages to customers that contain unique offers and sweepstakes opportunities.

“They want to receive surprise and delight offers,” Pearson said. “They certainly expect to receive a relevant and worthwhile birthday message. And, as customers demonstrate more loyalty, they expect to be better rewarded. For 2019, we will be working to improve on every one of these facets of our loyalty program called Access Pass.”

The good news is that now, more than ever, customers are aware of this. They realize that for companies to tailor relevant messaging and experiences, they need to share more personal data.

 

4. Balance Transactional with Experiential

Tony Chivari, Senior Vice President, Enterprise Marketing, 1-800-FLOWERS.COM, Inc., talked to Clarus about two loyalty takeaways from 2018.

“First, more and more brands are looking for ways to create memorable experiences that engage their customers in different and unique ways,” Chivari explained. “These immersive experiences are designed to deepen relationships with customers and inspire two-way conversations.”

Chivari said that 1-800-FLOWERS.COM recently launched Harry & David® Dinner of the Month, a series of thoughtfully-curated local events featuring custom menus, providing customers the opportunity to explore the brand’s gourmet food offerings in a new and exciting way.

“During these events, talented chefs infuse innovative recipes with Harry & David products to create an authentic, multi-course meal in an intimate setting,” Chivari explained. “Through this program, we’ve been able to connect with loyal customers across the country, as well as introduce new customers to the brand.”

What’s more, brands must continue to provide transactional benefits like free shipping programs.

“We know this is something that is very important to our customers,” Chivari said. “To ensure we were providing a unique offering in this regard, we introduced our Celebrations Passport® loyalty program, which provides members with free standard shipping and no service charge for one full year on purchases made across our family of brands. The program has proven to be very popular with customers, while increasing the frequency of shopper interactions with all our brands. We’ll continue to evolve the program, looking for new ways to provide value and differentiated offerings for our customers.”

 

5. Pay Even More Attention to Amazon

This one seems obvious, but it goes deeper than some may think.

While Amazon truly is a behemoth and not every retailer can compete on things like price, there is a lesson to be learned.

Put your customers at the center of everything and make your loyalty program indispensable.

“Amazon’s Prime loyalty program has made people realize that people will pay for ‘premium’ services,” Rauch explained. “AMC Movie Theatres has moved in that direction and, although that doesn’t align with what I believe is the future in the restaurant space, I do see that as the future of loyalty for comparable companies. For restaurants, we look at premium loyalty as ‘how do we take it to the next level?’’’

Taking it to the next level requires listening to customers. Back in 2005, customers told Amazon that shipping costs were their biggest pain point. As a result, Amazon removed those costs by launching Prime. For a $79 annual fee ($99 today), customers enjoyed free two-day shipping and competitors scrambled to compete.

Amazon’s effective listening led to a keen understanding of what truly resonates with its customers. The program has stayed fresh and attractive with added “next level” benefits like unlimited video and music streaming and more.

Taking it to the next level for a restaurant chain, Rauch added, could mean a more robust rewards store with significantly higher point value items, or unique one-of-a-kind experiential rewards like “Lunch with the Founding Chick.”

Amazon charges for Prime membership, but Rauch believes there are ways you can create a premium loyalty service that doesn’t require a one-time fee from the guest.

“We have a lot to figure out to make this work, like a new way to fulfill those rewards instead of guests coming in-restaurant for them, but we believe they’re worth the added value and investment to truly give our guests a one-of-a-kind Chick-sperience,” she said. “At Chicken Salad Chick, our loyalty program truly is about rewarding our most loyal guests. The added benefits of repeat visits, higher sales, etc. are all exciting benefits that come from it!”

 

Modern Loyalty for the Modern Consumer

If 2018 has taught us anything, it’s that to build loyalty with modern customers, retailers need modern loyalty programs.

Traditional retail focused on the retailer, but now that we’re in the Age of the Customer, we have flipped the paradigm.

Stop thinking only in points. Think about actual relationships. Show customers you truly know them. Balance transactional benefits like free shipping with exclusive experiences to truly connect with customers.

And more than anything, put your customers at the center of everything you do. Again, it’s not about what’s easier for the retailer from a business perspective, but rather what is easier for the customer.

Heading into 2019, a modern loyalty program will only be as good as the value it provides.

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