Earning customer loyalty is harder than ever because consumers have more options, are trying new brands, and changing shopping habits.
According to our 2021 Premium Loyalty Consumer Data Study, 68% say their loyalty is more difficult for retailers to maintain than ever before.
Since the COVID-19 pandemic started in the U.S. in March 2020, we’ve seen unprecedented disruption in retail as thousands of stores closed and shopping shifted online.
More than ever, consumers want convenience, immediacy, instant gratification, and demand a pleasant experience. If they don’t find these things with your brand, they’ll look elsewhere.
According to a McKinsey study, 35% of U.S. consumers have tried a new brand since the pandemic began while 77% demonstrated new shopping behaviors, including new channels, stores, and brands.
Retaining customer loyalty has reached a critical crossroad. We reached out to some experts to get their thoughts on consumer behavioral changes and the future of customer loyalty.
Give Your Loyalty Program Members Value Now
Don’t make your loyalty program members wait to earn enough points to receive rewards. Consumers want instant gratification.
Our data study reveals that 79% of respondents say they don’t want to accumulate points anymore, and retailers’ loyalty programs should provide immediate benefits to maintain their loyalty.
Traditional loyalty programs certainly are effective if they offer immediate value and incentives.
For example, the Starbucks Rewards program has been very successful and company officials are always seeking ways to engage members even more.
Starbucks Rewards members receive value from as few as 25 Stars. After earning 25 Stars, members receive a free drink “customization,”, which can be an extra espresso shot, a different milk substitute, or even a dash of flavored syrup.
At 50 stars, members can receive a free brewed coffee, hot tea, or bakery item.
Robbie Kellman Baxter, keynote speaker and author of “The Membership Economy” and “The Forever Transaction,” told Clarus Commerce there is a half-life on member enthusiasm.
“That’s why it’s so important that right after you engage a new member, you do three things,” she explained. “Reinforce the wisdom of their decision. Demonstrate how they can maximize the value they get from their membership. Give them immediate value—ideally tied to the reason they came to you in the first place.”
Robbie said these three steps are crucial to onboarding a new member for long–term loyalty and engagement.
Lisa Erickson, Sr. Director Loyalty & CRM, Sleep Number Corp., told Clarus that the company’s InnerCircle Rewards program resonates with members (known as Insiders) because of the value received.
“Keeping our Insiders engaged with our brand through our InnerCircle Rewards Program is invaluable to our company,” Lisa said. “Our Insiders in the program appreciate that we are not simply trying to sell them more products. They like that we are providing them with valuable content to improve their overall health and wellness of which sleep is a major component.”
Give Your Loyalty Program Members Choices
One lesson that retailers learned especially since the pandemic began is consumers want choices.
This applies to retail loyalty programs.
Traditional loyalty programs will always have a place in retail as they are a great acquisition tool. But there needs to be an option for your best, most engaged customers.
That option is premium loyalty.
According to our study, 81% of traditional loyalty program members would join a premium program if their favorite retailers offered them.
Because of the unique benefit structure of premium loyalty programs, they remain top of mind to members. Premium loyalty members pay an annual fee to receive instant benefits accessible 24/7 and engage frequently with your brand.
Robbie explained how critical it is for brands to treat different types of customers differently.
“As my friend and colleague, Prof. Pete Fader of the Wharton School, often says, you should not treat all customers equally,” Robbie explained. “Figure out which of your customers want more from you and are willing to pay more in exchange for more value, and design something just for them. Expanding relationships with your best customers is often more profitable than just attracting more customers.”
Andrew Sonnichsen, Vice President of Loyalty Program Management at Cinemark, told Clarus that the movie chain’s loyalty program includes free and premium tiers.
“Customers love the dollar-based point system available with both and have been extremely engaged with the program since its launch,” Andrew explained. “The one program with two tiers has spurred excellent growth in loyalty.”
Be a Loyalty Company and Not a Company that has a Loyalty Program
To differentiate your loyalty program from the competition, it starts at home.
We always talk about making your loyalty program something that involves every department of your brand. To be successful, it needs to be a priority from the top down, and not a siloed asset off in the corner somewhere.
Be a loyalty company and not a company that has a loyalty program.
REI is a great example of this because it lives its loyalty program with and through its members.
This program is appealing for many reasons, including a $20 lifetime membership, exclusive events (garage sales) and discounts, and an annual member dividend.
Experiential benefits comprise the major theme of this premium loyalty program.
Lululemon is like REI in that its premium loyalty program is experiential-focused.
With a $168 (up from $128) annual membership fee, lululemon’s program is incredibly engaging.
Members receive a free pair of yoga pants or shorts when they join and have access to curated events and workout classes. Lululemon builds strong connections with members and creates a unified brand community.
“Investing in long-term relationships with customers is not the same thing as having a loyalty program,” Robbie explains. “A loyalty program is a tactic. But to really build loyal relationships, you need more than just a single tactic. You need all of the functional areas in your organization to collaborate, with a goal of supporting your best members throughout their journey with your organization.”
Loyalty Will Be Driven By Value, Options, and Internal Brand Alignment
The future of customer loyalty will be driven by ensuring program value, offering consumers program options, and achieving internal alignment from the top down.
True value is the greatest differentiator you can offer your customers in a loyalty program. Engaging and creating strong connections with your members will become even more important in the future.
Neil O’Keefe, V.P. Enterprise CRM and Loyalty Marketing, 1-800-FLOWERS.COM, Inc., talked to Clarus about the future of customer loyalty.
“We believe that people are not only seeking more meaningful relationships with each other, but also with the brands they do business with,” Neil explained. “We see this sentiment being a long-lasting impact as we move past this period. Brands will need to focus on their purpose and ensure they build an authentic experience for customers.”
Neil added that customer loyalty today is a result of an exceptional customer experience.
“Therefore, loyalty programs should help customers engage with the brand, enhance the shopping experience, drive purchase frequency, and increase customer lifetime value,” he said.
The power of attractive loyalty programs is boundless.
Jason Scoggins, Director, Loyalty & CRM, Chipotle, told Clarus that now more than ever, brands need to leverage the power of their loyalty programs and build long-term customer relationships.
“With all the uncertainty, customers are being more selective with their spend and brands that can create personalized and relevant loyalty programs will be the ones that customers gravitate toward,” Jason said.