THE CLARUS Blog

Why Loyalty Program Differentiation is Key to Increasing Customer Engagement

Brands spend a tremendous amount of time and money on differentiation.

From product to price point to marketing to customer experience, it’s one of the biggest topics in retail.

So, what about your loyalty program?

In a world where nearly 70% of consumers agree their loyalty is more difficult for a retailer to maintain than ever before, why do so many loyalty programs feel similar?

Loyalty, at its core, revolves around a mutually beneficial value exchange. The keyword here being value.

To increase customer engagement, your loyalty program should be at the top of your list of differentiators.

 

Differentiate Through Your Loyalty Program, Not Just Your Products

Differentiating at the product level isn’t enough today because consumers have so many options based on price, selection, and availability.

Many loyalty programs feel similar because, well, they are.

Buy X amount of a product and receive one free. Or, receive a coupon for X percentage off your next purchase.

But your loyalty program can be one of the biggest things to set your brand apart from the competition.

In the Age of the Customer, you must build emotional connections with consumers to create true loyalty. It’s all about offering a unique experience.

At the brand level, you win on customer experience, quality, and value alignment. Provide an attractive value proposition for your customers that is reinforced at every touchpoint.

Millions of consumers carry way too many loyalty cards in their wallets because too many programs are similar.

You elevate your customer engagement because your loyalty program is different and filled with value.

When designed well, a loyalty program can serve as a deep level differentiator for your brand.

 

Find the Right Experiential Benefits and Create Emotional Connections

Transactional benefits like discounts and free shipping are important, but they alone don’t make a compelling loyalty program.

Experiential benefits in a loyalty program create deep emotional connections with customers that resonate and provide the deepest value.

When Forrester analyzed whether ease, effectiveness, or emotion had the biggest impact on customer decision making and brand loyalty, the result was clear: Emotional connections have the biggest impact.

But mixing transactional and experiential loyalty program benefits produces a winning combination and gives your loyal customers and brand advocates.

Lululemon is making an impact with its new premium loyalty program.

For $128 annually, members receive a free pair of pants or shorts. Since most of those articles cost over $100 anyway, it makes sense to join the program if you’re planning on mailing one purchase per year.

It’s a simple value proposition with a smart transactional benefit.

But, like RH, Lululemon takes it a step further. Also included are curated events and workout classes for members. Special experiential benefits.

That’s why the Lululemon premium loyalty test program is doing so well.

Consumers want to feel special and buy from companies that are relevant to them. If you give them attractive benefits in your loyalty program, they will engage with you regularly and become a brand advocate.

Philanthropy enters the elevated benefits conversation in the form of incentives for donations. A fitting example of this is DSW’s Give A Pair benefit.

When DSW VIP members donate a pair of new or lightly worn shoes at any location, they receive 50 reward points. It’s these emotional connection customers receive when they donate that builds deeper loyalty.

Members of the REI Co-op loyalty program pay $20- for a lifetime membership. Every year, the co-op invests in the work of nonprofit partners who help hundreds of organizations improve outdoor access for all.

For loyal REI customers who hold an REI credit card, REI donates to the National Forest Foundation every time they use their card, which is a great opportunity for any outdoor enthusiast.

Beyond philanthropy, providing experiential benefits unique to your customers is a great way to differentiate your loyalty program.

 

Loyalty is Harder to Earn and Retain

It could be because 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.

These programs don’t generate loyalty or provide any competitive differentiation. They train members to wait for coupons and discounts.

Differentiation is the key to stand out from your competitors. Customers want to find brands that instill emotion in them.

Without any brand differentiation, consumers won’t have any reason to be loyal and will instead be loyal to wherever the discounts and coupons lead them.

Always make your customers feel special because that is the key to retention and long-term brand loyalty. If you don’t, you risk losing them at any time.

Consider that consumers with an emotional connection to a brand have a 306% higher lifetime value, stay with a brand for an average of 5.1 years vs. 3.4 years, and will recommend brands at a much higher rate (71% vs. 45%).

What experiential benefits will work for your customers?

That’s where you need to know and understand what your customers want.

 

Give Your Consumers a Reason to Engage with Your Brand

If your loyalty program doesn’t give consumers a reason to engage with your brand, they won’t.

Brand differentiation can’t happen at the product and price levels alone.

Because they have limitless options today, consumers can easily find a better product and/or lower price.

Where your brand can make a difference in your customers’ lives is through a compelling, engaging loyalty program.

But you need to provide an attractive value proposition for their customers.

Show customers that you truly know them. Balance transactional benefits like free shipping with exclusive experiences to truly connect with customers.

Making emotional customer connections is crucial.

Every brand has a compelling story to tell.

Why not tell yours in a way consumers can connect to?

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