THE CLARUS Blog

Retail Recap Q4 2018: Momentum Builds For Premium Loyalty

In our fourth edition of Retail Recap, we saw various companies step into the premium loyalty arena including Lululemon, CVS, Wayfair, Cineplex, and Loblaw’s.

We also saw Amazon record its two biggest shopping days ever on Black Friday and Cyber Monday.

What’s more, Forrester released its Now Tech Report for 2018, which recognizes certain hybrid loyalty solutions providers.

Here’s what we learned from the fourth quarter:

 

Lululemon Athletica Strides Into Premium Loyalty Arena

Canadian athletic apparel retail Lululemon Athletica recently announced that it’s been testing a premium loyalty program that charges members $128 annually.

Because the results were quite promising, officials for the athleisure brand plan to expand the test into additional markets, possibly at a higher membership price point.

Lululemon’s premium loyalty test was successful because it offers a mix of transactional and experiential benefits. Successful loyalty programs combine transactional and experiential benefits to create differentiation.

Competition is heating up in the athleisure market and Lululemon’s program satisfies that emotional need to shop smartly by offering benefits like free shipping and a pair of pants or shorts.

But, there’s more to it.

The program also awards members curated events and workout classes. Those are the experiences that are more memorable and unique to Lululemon, satisfying an emotional desire for exclusivity. These kinds of experiences become so valuable to customers and often become a part of their daily lives.

Lululemon’s premium loyalty test program offers a clear value proposition.

For $128 annually, members receive a pair of pants or shorts.

If you click over to the Lululemon website, you can see that many of the pants are around the $100 price point, with some of the more hip looking women’s leggings coming in right at $128. Coincidence? Probably not.

If someone plans to buy one pair of those leggings a year, that membership just paid for itself.

Our CEO, Tom Caporaso, offered Loyalty360 his thoughts on Lululemon’s premium loyalty program test.

“It makes sense that Lululemon’s premium loyalty program test has been such a success,” Tom says. “Transactional benefits like free shipping and discounts are still important to consumers, but there’s more to it than that. To build loyalty with modern consumers, brands need to balance transactional and experiential benefits to differentiate themselves and this program does that. If the benefits are valuable enough, customers are more than willing to pay for membership.”

 

Wayfair Does Premium Loyalty “MyWay”

Wayfair, which offers one of the world’s largest online selections of furniture, home furnishings, décor, and goods, including more than eight million products, wanted to implement a premium loyalty program in its own way.

And that’s just what happened when Wayfair launched a premium loyalty program called MyWay, which carries with it an annual membership fee of $29.99. MyWay members receive benefits including access to insider sales, 25 percent discounts on installation and assembly services, free shipping with no minimum, and next-day delivery.

Traditional and one-size-fits-all loyalty programs, while still appealing to many, struggle to create significant differentiation that truly modifies customer behavior and builds brand advocates.

Customers have needs ranging from transactional utility to emotional connection. There are many ways to deliver utility and transactional benefits beyond discounts, which include focusing on the experience—making shopping easier, offering enhanced shipping, member-only checkout, etc.

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 vitally important to gain brand loyalty.

 

CVS Plans to Test Paid Loyalty Program

Shortly after Wayfair announced its premium loyalty program, CVS Health announced plans to launch a pilot membership program that provides delivery perks, discounts, and $10 monthly to spend in its stores.

This move by CVS comes after Amazon’s impending entry into the pharmacy business with its acquisition of PillPack.

Titled CarePass, the new membership program will initially be rolled out in about 350 locations in the Boston area. Program members will pay a $5 monthly fee or $48 for an annual subscription.

According to the company website, the membership program includes free one-day or two-day delivery on certain prescription drugs and “eligible purchases” with no minimum amount required.

Launching a paid loyalty program is a smart move for CVS because it provides an ancillary revenue stream, allows company officials to gain better insights on their best and most loyal customers, elevates customer engagement, creates a culture of instant gratification, and builds deeper and stronger two-way relationships.

 

Amazon Sets Company Records On Black Friday, Cyber Monday

Does any company in the world receive more good news than Amazon?

It’s been a historic year for the Seattle-based online behemoth and that trend continued on Black Friday and Cyber Monday.

After Amazon’s highly successful Prime premium loyalty program eclipsed 100 million members in April, the company registered a record-setting Prime Day in July when shoppers spent an estimated $4.2 billion during the 36-hour shopping extravaganza.

Then, Amazon announced that Cyber Monday and Black Friday were its biggest shopping days ever.

While Amazon officials don’t disclose sales figures, they said that customers ordered more than 180 million items during the five days from Thanksgiving through Cyber Monday, with the latter being its single biggest shopping day in company history.

Another key reason for Amazon’s historic success over the long Thanksgiving weekend could be that it offered free holiday shipping for everyone. Normally, non-Prime members would have to spend $25 or more to receive free shipping, during this holiday season everyone will get free shipping from Amazon, member or not.

In its third-quarter earnings report, Amazon indicated that it expected revenue for the holiday season to range between $66.5 billion and $72.5 billion.

The power of Amazon’s Prime loyalty program came into play on Prime Day in July and likely played a role in the company’s historic performance over the Thanksgiving weekend.

Prime Day lured new Prime members in search of deals and, while Amazon did not provide hard numbers, the online retailer reported that more new members signed up on July 16 than any single day in Amazon history.

The power of Prime includes the company’s keen ability to continually expand its loyal member base. The Prime ecosystem continues to grow and, most certainly, did over the Thanksgiving weekend.

Forrester Releases Now Tech Report; Recognizes Hybrid Loyalty Solutions Providers

Forrester released its Now Tech: Loyalty Marketing, Q4 2018 report, which recognized Clarus Commerce as a hybrid loyalty solutions provider.

Vendors in this hybrid loyalty solutions category combine technology and services capabilities to address the broadest spectrum of loyalty requirements, from strategy to program launch and management to loyalty measurement and analytics.

“Helping our retail partners enhance relationships with their customers is our mission,” Tom says. “That’s why our focus is on premium loyalty. We believe that offering a paid tier is the most impactful way for brands to offer the value that their best customers demand.”

Clarus offers a full turnkey approach to developing loyalty programs that covers program design, implementation, management and ongoing support and optimization. As a part of that, Clarus provides client services, full marketing and creative support, branded customer service for loyalty program members, tech and data science and more.

 

Takeaways from Q4 2019

As customer expectations and desires continue to rise, momentum appears to be building for premium loyalty programs.

Many brands that seek competitive differentiation see premium loyalty programs to make their best customers exponentially more valuable.

We saw in the fourth quarter how Lululemon, CVS, Wayfair, Cineplex, and Loblaw’s plan to create stronger relationships with their customers via new premium loyalty programs.

A common theme that emerged from many of these brands, and one that is building in the industry, is the balance between transactional and experiential benefits. Millennials and other younger generations love experiences.

Experiential marketing will be a major trend moving forward.

Customers should leave an experiential marketing event feeling more valued and more emotionally invested in your brand.

While consumers still appreciate transactional benefits like discounts, customer loyalty success, now and in the future, will be largely shaped by experiential benefits. It has become more about the emotional attachment to a brand, based on those experiences. Interactivity and real-time engagement will play a role, but also the ability to leverage technologies such as artificial intelligence to help recognize and reward customers for their loyalty and deliver unforgettable experiences.

With Amazon leading the way atop the premium loyalty world, brands see that success and want to achieve that for themselves.

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