THE CLARUS Blog

Why Your Loyalty Program Needs to be a Differentiator

Did you know that 70% of consumers agree that their loyalty is more difficult for a retailer to maintain than ever before?

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 build a greater degree of loyalty because they fail to provide any competitive differentiation.

They tend to train members to wait for coupons and discounts.

These incentives don’t build loyalty with a specific brand because these types of programs are largely the same everywhere.

 

Why Most Loyalty Programs Feel Similar

Eighty-eight percent of consumers agree that retailers could do more to earn their long-term loyalty.

Yet U.S. consumers hold 3.8 billion memberships in customer loyalty programs.

So, where’s the disconnect?

Just because people belong to loyalty programs doesn’t mean they use them.

Because so many traditional loyalty programs are one-size-fits-all, they feel the same and offer little competitive differentiation.

The “collect points to redeem a reward in the distant future” approach to loyalty has worn out its welcome.

And this has led to loyalty fatigue among consumers.

Read more about loyalty fatigue.

Consider that consumers belong to an average of 13.4 loyalty programs, but are active in only 6.7 of them. Add to this the fact that 54% of loyalty memberships are inactive and you have a rather bleak picture around customer loyalty.

Traditional retail focused on the retailer, but now we’re in the Age of the Customer and the paradigm has flipped.

Instead of thinking in points, you need to think about developing personalized, two-way relationships to achieve differentiation.

Transactional loyalty is one thing, but experiential loyalty elevates the member experience and creates sustainable emotional connections between brands and consumers.

This stands as a golden opportunity for retailers to differentiate themselves through their respective loyalty programs.

 

You Want Consumers Loyal to Your Brand, not 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.

Building true loyalty requires brands to offer unique experiences that aren’t available anywhere and add significant value to their lives.

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%).

To know what experiential benefits will work for your customers, you must first know and understand what your customers want.

That’s where the opportunity to differentiate comes enters the picture.

 

Your Consumers Need a Deeper Reason to Engage with Your Brand

You need to give consumers a reason to engage with your brand.

Rapidly changing technology has forever changed consumer expectations in terms of speed, convenience, and personalization.

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 brands can make a difference in their customers’ lives is through a compelling, engaging loyalty program.

Retailers need to provide an attractive value proposition for their customers.

A loyalty program can serve as a deep level differentiator, when done right, and offer a deeper reason for consumers to engage with your brand.

For example, GameStop offers a Game Informer magazine to its premium tier PowerUp Rewards members.

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

The LIDS Access Pass Premium program costs members only $5 a year. The benefits include 20% off head wear and embroidery, 10% off apparel and novelties, and exclusive access to high profile sporting and entertainment experiences.

And, of course, Amazon’s immensely popular Prime program that eclipsed 100 million members last year.

If your brand seeks elevated customer engagement, you need to give your customers a reason to engage more often.

Listen to your customers, identify their pain points, and design exclusive benefits around your findings.

 

Differentiate Through Loyalty

More retailers desire greater differentiation in the marketplace, a competitive edge, and more brand advocates.

An abundance of choice leads consumers to brands willing to invest in creating memorable experiences, or loyalty moments.

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

To attain that lofty goal of long-term brand loyalty, making emotional customer connections is crucial. Especially with so many similar loyalty programs out there and consumers being drawn to discounts and coupons.

Do you want you want to be a brand that differentiates through loyalty and offers a deeper reason for consumers to engage?

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