THE CLARUS Blog

Should Your Loyalty Program Focus on Transactional or Experiential Benefits? [Video]

Traditional loyalty programs have focused on transactional benefits, but now we’re seeing a shift toward experiential benefits.

So, which loyalty program benefits attract the most members?

 

What’s In It for Me?

If you’re in a store and make a purchase, chances are you’re going to be asked if you’re a member of its loyalty program.

And if you aren’t, would you like to join?

The first question I always ask myself is, “What’s in it for me?”

 

Most Loyalty Programs Offer Little Value and Don’t Differentiate

The problem is most loyalty programs have the retailer in mind and they’re not providing true value to the customer.

Everyone has a loyalty program and they all look the same.

Loyalty program points are the easy answer, but they often involve complex systems that take far too long to show value and they’re viewed as margin killers.

And points-based transactional programs don’t do much to differentiate you from your competition.

As a result, your customers aren’t becoming more loyal.

 

Make People Feel Smart and Special

To run a successful loyalty program, you need to combine transactional and experiential benefits.

Transactional benefits typically represent the first loyalty moment that your customers will experience and serve as a vital hook in retaining them as members.

A brand’s goal for a successful loyalty program isn’t just to enroll people. It’s getting them to become engaged and active members.

Remember, transactional benefits make people feel smart, but experiential benefits make people feel special.

 

Look at Restoration Hardware, Lululemon, and Starbucks

Restoration Hardware provides instant transactional benefits that are easy to understand:

25% off all purchases but also offer interior design services

90% of purchases come through RH Members loyalty program

Canadian athletic apparel retailer Lululemon Athletica has tested a premium loyalty program for more than a year and seen great results!

Lululemon’s program offers fitness classes, exclusive products, and free expedited shipping on online orders.

It has been so successful that Lululemon officials raised the membership price as the program continues to roll out in major cities.

A slightly different example is Starbucks, whose program includes one of the most heavily used apps out there and adds value by allowing members to order ahead.

While its benefits are still on a traditional points program, Starbucks revamped it this year to focus on creating more benefits so customers can be rewarded faster.

 

Seeking Those Emotional Connections

As you can see, it’s not about transaction versus experiential.

It’s about using both types effectively to create value all the time.

Remember, transactional benefits make people feel smart – especially when they receive the benefits all the time.

Experiential benefits make people feel special and allow you to differentiate.

The brands I mentioned provide experiences to their loyalty members that only they can.

At the end of the day, the more emotional connections you can make with your customers, the more loyalty they will be.

What is your loyalty program doing to create emotional connections with members?

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