THE CLARUS Blog

Want to Build More Customer Loyalty in 2021? Here are 5 Actions to Take

2020 has been a year unlike any other.

COVID-19 has changed people’s routines, habits, and most of all, our expectations.

As a result, this paradigm has impacted retailers of all sizes.

And as a retailer, it’s important that you identify these changes and adapt your go-to-market loyalty strategy to stay relevant to your best customers.

Let’s look at five action items you should consider for your loyalty program in 2021.

 

1. Be Bold and Be Different in Your Loyalty Strategy

COVID-19 has required consumers to quarantine for long periods of time which has changed consumer shopping habits.

In the past nine months, there has been a massive shift toward e-commerce which has dramatically disrupted the consumer shopping pyramid.

As we prepare for 2021, it’s important that you develop bold new strategies to attract and engage new and existing consumers.

Walmart tried to copy Amazon Prime a few years back with its Shipping Pass program, which ultimately didn’t work and ended in early 2017.

But this year Walmart staked its claim with Walmart+, which launched in September.

Walmart+ is like Prime in that it’s a premium loyalty program that consumers can pay a fee for in exchange for valuable benefits.

But there are differences.

Walmart leveraged its strengths to create a program that is different enough from Prime to appeal to its broad customer base.

Amazon competes on the number of items it sells, but Walmart leans into its massive physical footprint and grocery business to offer something that’s different enough from Prime.

Walmart+ includes same-day delivery of groceries, fuel discounts at 2,000 locations, and access to Scan & Go (which allows customers contactless checkouts with their phones so they can skip lines). Plus, its annual fee is $98 ($21 less than Prime).

Just two weeks after the launch of Walmart+, 11% of Americans had already subscribed to the program. Also, 45% of those Walmart+ members also belong to Prime, cementing the current rise in premium loyalty programs.

In 2021, building customer loyalty is going to take more than offering a similar program to that of your competitors. Observe what they’re doing and figure out how to offer benefits that are unique to your customers.

Learn why your loyalty program needs to be a differentiator.

What unique strengths can you leverage to break away from your competitors and offer awesome benefits that your customers love?

 

2. Focus on What Your Customers Value

As mentioned above, many loyalty programs out there feel very similar and simply offer discounts or rewards after members spend money.

But consumers want to feel an emotional connection with the brands they engage with and the best way to do that is for you to speak directly and specifically to them.

Sephora does a great job at this.

Through its Beauty Insider program, Sephora makes loyalty engaging and fun for its members.

The best loyalty programs combine transactional and experiential elements, but it’s the latter that differentiates you from your competitors.

Sephora’s experiential elements are predominantly through meet-and-greets in-store, makeup services, and shopping experiences with brands and founders. These experiences are personal and make members feel important and valued.

Lululemon is another great example.

Its program is engaging through the workout and yoga classes offered, which fits into members’ lifestyles. Members become members because they want to be engaged through all the program benefits that all promote a healthy lifestyle.

All the benefits and perks in the examples above are unique and only make sense for the customers of those retailers.

What do your customers value the most? How can you save them time, money, or enhanced their lives through your loyalty program?

 

 

3. Innovate and Enhance Your Loyalty Program Over Time

What your customers value today can change over time.

That’s why it’s important for you to stay creative and continue to innovate your loyalty program. COVID-19 has significantly accelerated online shopping and the power is now squarely in the hands of the consumer.

It’s imperative for you to find new and unique ways to engage and reward consumers.

Amazon Prime is one of the biggest and best examples of this.

In 2005, Amazon set out to solve one huge customer pain point with Prime: Shipping costs.

From there, more benefits were adding over time. Streaming music and video, eBooks, discounts at Whole Foods, even faster shipping.

What makes the program so good is that Amazon continues to add valuable benefits.

Amazon has 150 million global Prime members, who spend twice as much as non-members.

Not everyone is Prime, but there are many brands out there that have continued to innovate and enhance their loyalty programs based on customer feedback.

For example, Macy’s went all-in on customer loyalty.

The venerable retailer revamped its Star Rewards loyalty program several times in recent history, which now allows every member to earn on every purchase, regardless of how they pay.

Prior to the changes, only Macy’s members on the top tier or platinum level earned a percentage of their purchases back as rewards.

Based on annual spend, Macy’s cardholders are automatically enrolled in Star Rewards (which has nearly 30 million members) at one of three levels: Silver, Gold or Platinum. Company officials believe this revamped program will elevate member engagement.

This year, Starbucks listened to its customers and simplified its highly successful Starbucks Rewards loyalty program (which has nearly 20 million members).

In 2018, Starbucks changed its program from visit-based to spend-based, the most requested customer change.

Last year, Starbucks eliminated tiers so Rewards members could redeem benefits sooner.

This year, Starbucks added more payment options rather than reloading cards, which was the most requested customer change.

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

But now, members can link their credit or debit cards, or PayPal accounts to pay within the app. If program members want to pay in person, they can use cash, credit or debit cards, or select mobile wallets and still earn points.

It’s important to always be optimizing. Consumers’ tastes can change, and you need to stay ahead. And the best way to figure out what your customers want is to ask them. They want to tell you.

 

4. Add a VIP or Premium Loyalty Tier

All consumers are different.

So, adding tiers to your respective programs addresses the different stages of the consumer lifecycle.

Some consumers are willing to wait and aggregate their points or miles while some want instant gratification and enhanced benefits.

Premium loyalty tiers are the hottest trend in retail because consumers are willing to pay a fee to receive special benefits, immediate value, and exclusive experiences. And they shop more often and spend more money when they do.

Our 2020 Premium Loyalty Data Study shows that 70% of consumers would pay to join a premium loyalty program if their favorite retailer offered one and the benefits were valuable.

CVS is a prime example.

Its free loyalty program appeals to roughly 80% of its customers while its premium loyalty tier attracts the top 20%.

That sums up the 80/20 rule where about 80% of your sales comes from your top 20% of customers.

The CVS CarePass program provides delivery perks, discounts, and $10 monthly to spend in its stores.

Program members 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 premium loyalty tier is a good move for CVS because it provides an ancillary revenue stream, allows company officials to engage more with their best customers and gain better insights, and creates a culture of instant gratification, and builds deeper and stronger two-way relationships.

Today’s consumers expect instant gratification and they’re comfortable paying a subscription fee to get what they want when they want it. With more and more retailers launching premium loyalty programs in 2021, this is the year to consider it.

 

 

5. Support Causes Your Customers Care About Through Your Loyalty Program

Consumers want to feel good about the brands they engage with and the best way to do this is to layer in a charity component into your loyalty program.

This enhancement allows you to create deeper relationships with your best customers by supporting causes that are important and personal to their best customers.

Nearly 70% of the U.S. population donates with an average of 4.5 charities per person.

The Target Circle loyalty program is a prime example of focusing on charities.

Target officials have always been committed to giving back to communities, an area of keen focus in Target Circle.

Target Circle members can vote to help direct Target’s giving to about 800 nonprofit organizations in their local communities.

Consider that millennials are attracted to loyalty programs that include giving back and being connected to charitable causes.

DSW and its Soles4Souls program is another great example of a retailer partnering with a charitable organization.

DSW customers can give back through the company’s loyalty program. When DSW VIP members donate a pair of new or lightly worn shoes at any location, they receive 50 reward points.

Soles4Souls creates jobs and provides relief through the distribution of shoes and clothing around the world. Since 2006, Soles4Souls has distributed more than 35 million pairs of new and gently worn shoes in 127 countries.

Think about some non-profits or charitable organizations that you can get your loyalty members involved with. Just make sure to be authentic.

 

Look Ahead With Confidence

As we get ready to say farewell to 2020, you can look ahead with confidence for 2021!

Be bold. Coming off a year that saw many consumers become less loyal and prioritize convenience above all else, 2021 is no time to sit back. Organize those brainstorming sessions and implement great ways to connect with your customers.

Innovate. If your marketing department has any old documents related to new and innovative ideas to spark greater brand loyalty, 2021 is the year to dust those off. Your competitors already have.

Focus on what your customers value. If you’ve done a good job listening to your customers, then this should be easy. Deliver on the value piece of the loyalty equation and you will be successful.

Add tiers. This is a great way to satisfy your loyal customers. It gives everyone something beneficial from a free program, and a premium tier targets your best customers who engage the most and spend the most.

Support charitable causes. This has become increasingly important to all generations and it makes your brand stand out from the crowd. Consumers are drawn to brands for many reasons, but having a charitable component is among the most important.

If you want to launch, revamp, or tweak your loyalty program, keep these five things in mind because they will make a positive difference for your brand and customers.

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