By definition, a retail loyalty program is a scheme that recognizes and rewards customers who purchase or engage with a brand on a recurring basis. These rewards actually come in different shapes and sizes: they often involve valuable points, free merchandise, coupons, or insider perks (i.e. early access to new offers). Their aim, however, stays the same – to encourage a customer to become a regular, or ideally, an avid buyer.
A good customer loyalty program can generate significant gains in recurring revenue for your business by improving the return on your marketing and sales budget.
Here are some facts:
- Keeping an existing customer costs up to five times less than winning a new one.
- It’s easier to persuade a customer who already knows you to buy again and/or buy more from you.
- Is a loyalty program right for your business?
Before developing a customer loyalty program, you need to know whether this will be a useful tactic for your business.
The first thing to determine is the value of a customer to your company and how much it costs to acquire one. This will help you decide whether to invest more money on developing new customers or on retaining and developing the ones you already have.
The Value of a Customer
Let’s say a good customer at a B2B company buys $30,000 worth of product in a year.
At the same time, you spend $175,000 a year in marketing and business development activities that yield, on average, 10 new customers a year. Therefore, your average customer acquisition cost is $17,500.
If you have several existing customers who don’t spend $30,000 with you in a year, why invest $17,500 finding a new customer? With a good customer loyalty program, you will most likely boost your sales to existing customers at a much lower cost.
Decide What Kinds of Rewards you Want to Offer
Rewards are limited only by your imagination. Here are some ideas:
- Points redeemable for purchases
- Free gifts
- Access to special sales or early access to products
- Free shipping
Ideally, your loyalty program will offer the option to set a wide variety of rewards.
Decide What Actions you Want to Reward
Some examples of behavior you can reward include:
- Making a purchase over a certain dollar amount
- Buying a specific brand or product you’re trying to move
- Buying during a slow time of day or slow day of the week
- Referring a new customer
- Mentioning your product on social media
To choose the most effective rewards, look at where your store needs to improve and tailor your rewards that way. For instance, if Sunday afternoons are always slow, offer rewards for customers who buy during that time.
Make it Appealing to your Customers
If customers don’t think there’s value in your loyalty program, they won’t sign up.
Offering a range of different rewards helps to convince customers of the value of your program and also keeps it fresh and exciting. Knowing your customers will help you assess what rewards will matter most to them and what type of loyalty program they’re likely to engage in—for example, whether they’re willing to carry another plastic card in their wallet or download a special loyalty app.
Review your Options and Choose your App
You can search for loyalty programs for retailers online or get advice from other retailers or industry associations. Before choosing a loyalty program, get answers to these questions:
- Is it easy for you and your team to set up, learn and use?
- Is it easy for customers to use and understand? (If not, they won’t use it.)
- What are the setup and ongoing costs?
- Does it integrate with tools you already use (such as your point-of-sale system or email marketing software)?
- Does it offer the flexibility to provide a range of rewards and to customize rewards for different members?
Start Signing Up Customers
Once you’ve got your loyalty program up and running, promote it like crazy. Use in-store signage and point-of-sale signage to encourage signups.
Announce the loyalty program on your website and your social media platforms, with a link to where to join. Send out marketing emails to your already loyal customers.
Employees are key to enrolling customers. Train your employees to promote the loyalty program during every sale. A good tactic is to share with the customer what rewards they could be getting for their purchase if they joined the program.
Top Retail Loyalty Program Examples
With the basics down, it’s time to take a look at some of the best retail loyalty programs and draw inspiration from them.
Urban Outfitters – UO Rewards
Urban Outfitters is a multinational lifestyle retail corporation headquartered in Philadelphia, Pennsylvania. The brand’s loyalty program stands out for giving customers multiple ways to earn points.
- The program combines points and tiers. Customers earn 20 points for making a purchase, and there are two tiers (Silver and Gold)
- Customers can earn points by submitting reviews, downloading the app, and visiting the website
- There are also giveaways, anniversary discounts and early access to upcoming sales
Boots – Advantage Card
Health and beauty retailer and pharmacy chain Boots serves a global market, including the United Kingdom, Ireland, Norway, the Netherlands and Thailand. The company has an earn& burn style program, with a heavy emphasis on retail loyalty apps and personalized offers.
- Customers earn 4 points for each £1 they spend. Points are for directly paying for products
- Students who purchase using a student ID automatically receive a 10% discount
- Two insider groups, for parents and customers aged 60+, receive additional benefits
- The membership account shows a constantly refreshing storefront of targeted offers
Sephora – Beauty Insider
Sephora is a French multinational chain of personal care and beauty stores, and its widely known for its loyalty program. The company demonstrated flexibility by changing the rules of the reward program following COVID-19.
- The company has a three-tier system with birthday rewards, early access and access to exclusive events
- Free shipping is available with certain conditions, with only the highest tier members having unlimited access to it
- Through seasonal savings, customers receive a discount on their order, depending on their level
Essentially, what makes the mobile loyalty programs work wonders is making sure that they emphasise company’s strengths, are tailored to users, and truly beneficial for both your customers, as well as your business in terms of meeting the long-term goals.
In order to make that happen and leverage the technology, though, you have to rethink your loyalty scheme and come up with a proper mobile strategy.
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