Just like customer acquisition, customer loyalty is an important part of a brand’s business. It has an impact on performances that is far from insignificant. According to a Bain & Company theory, by increasing retention by as little as 5%, profits can be boosted by as much as 95%. * More or less successful and complex, loyalty programs can vary greatly depending on the brand. With the rise of new technologies, the loyalty landscape evolves and goes digital. Some have taken the plunge, others are still reluctant.
Yet, digitalizing your loyalty program is a strength. It opens new doors and creates new opportunities. So, should you go digital?
Loyalty is essential
Creating a solid basis
Customer loyalty drives positive behaviors towards the brand: repeated and regular purchases, satisfaction, commitment, increased shopping basket, … By accumulating these behaviors, the brand creates a solid and profitable basis.
However, they shouldn’t be taken for granted. It is very important to keep on challenging yourself, improve and always strive for better. We know how fickle customers are, they do not think twice before looking elsewhere. And the figures are there as a reminder. 77% of consumers are registered in at least one loyalty program, and the average consumers has 3 loyalty cards. However, a 2015 census report released by Colloquy found that while a typical U.S. household is enrolled in 19 to 29 different loyalty programs, it only actively uses five to 12 of them. And in France, 71% of consumers who are part of a loyalty program are not necessarily loyal, far from it. *
Loyal but fickle customers
Most customers are unable to see the added value of loyalty programs because of their uncanny resemblance. Most loyalty programs work with a point system. The more you buy or do something positive for the brand, the more points you earn that can be redeemed in exchange for rewards. We all know at least one program that works that way. Sure, it meets customer expectations, but the relationship is based on some sort of contract, and not on emotions and the element of surprise. Once again, figures speak louder than words: 58% of French customers do not feel privileged. *
Standing out from the competition, all the while being consistent with the brand’s identity and image, is more than essential to retain your existing customer base, especially with the growing number of pure play companies entering the market. Digitizing your program can be a good starting point.
*INIT 2012 study on usages and perceptions of loyalty programs and cards
Stand out with a digital loyalty program
In 2017, only 10% of loyalty programs were dematerialized and accessible online. * And a 2015 Capgemini consulting study found that only 9% of loyalty programs offer points redemption across all channels. However, a cross-channel customer experience has proven very lucrative for retailers. Given that consumers are fond of digital and it has become part of their everyday life, they prefer a seamless omnichannel loyalty program.
*Retail Explorer 2017, based on 50 loyalty programs
Changes in consumer behavior
Consumer behavior has drastically changed. Immediacy has become a key element. They do not want to wait until they have spent enough money to earn points and get rewards.
Moreover, they do not make any difference between digital and physical channels anymore. For them, accessing their accounts and customer information from anywhere and at any time is a given. Especially on their smartphone, which has become an essential everyday tool.
In addition to meeting their demands, a digital loyalty program would enable you to increase the number of interactions with customers through several channels. Via the website, the app, or even social media, it has never been easier to reach and interact with consumers. And all this, in real time.
A more targeted and personalized approach
Improving the digital side of their loyalty program enables brands to better personalize the relationship they have with each customer. With an implementation that is not only digital, but also omnichannel, brands can collect more and better data – with the consent of consumers of course. Then, they can analyze it and learn more about their customers’ behaviors and expectations. Based on this knowledge, they will be able to offer a customer experience and loyalty program that better meet their needs and demands, both practical and personalized. That way, they can stand out thanks to their loyalty program and strengthen customer engagement.
Here are brands that have undertaken this process and reaped all its benefits:
- Total: the French oil and gas company now differentiates its customers – professionals, regular customers, private individuals, … – and adapt its loyalty program accordingly, to be more relationship-oriented.
- Sephora: their Beauty Insider rewards program enables members to use their points for the product of their choice. I can be gift cards, limited-edition products or in-store beauty tutorials. They have more than 25 million members and it represent a significant share of sales and growth.
- Kiabi: their loyalty card is also digital, and accessible on all devices. It enables this European retailer to know when a customer visits its stores and welcome them in a more personalized way (customized discounts, welcome text, …).
Find your way to their smartphone
With a mobile penetration rate that is close to 100%, smartphones have become a key element in customer relations. Thanks to a digital loyalty program, brands can reach consumers through this device and implement gamification actions through, for example, a dedicated app.
Competition and objectives are two essential points to set the gamification mechanism in motion. It is a great way to create commitment and a habit all the while adding a playful side to it. In its program, a brand can consider creating several challenges or missions, with e-gift cards as a reward.
Thanks to a digital loyalty program, brands can access digital wallets. They can offer customers the possibility to dematerialize their loyalty cards and save them in their wallet. The same can be done with the rewards earned by loyal customers, like e-gift cards. With the app, the brand will be able to send push notifications regarding products the customer might like, or regarding the validity of their digital gift cards. You can even use geofencing to send it at the right time and place. It will make the relationship with consumers more fluid, punctuated with significant moments. Especially since SMS campaigns have over 7 times greater performance than email campaigns.
Digital rewards that are relevant to them
Rewards have long been an essential part of loyalty programs. Just like the program, rewards should be dematerialized and turned into digital rewards (subscriptions, e-gift cards, …) that can be delivered instantly. That way, the brand can enrich its portfolio and offer an immediate and personalized token of gratitude to their customer, combining transaction and emotional value. It deepens the brand’s relationship with its consumers, creates commitment and optimizes its return on investment.
One of consumers’ favorite reward is the digital gift card. It is customizable and holds a strong emotional message as it remains a gift, just like one a relative could give them. Its flexibility allows the brand to use it in multiple ways (redeem them for a specific range of product, choose the expiry date, …). E-gift cards are a digital reward with as many advantages for the customers as it has for the brand. E-gift card holders have proven to have higher shopping basket and choose higher end products.
How does it work when put in practice? Choice Hotel, for example, offers digital rewards available immediately to draw the young generation in: Millennials. They are particularly receptive to this kind of loyalty program.
How to set-up a high-performance digital loyalty program?
Have the right structure
Ultimately, a good loyalty program is customer-centric. All the technologies used must revolve around that. That is why it is very important, when going digital, to keep the big picture in mind and carefully structure your program. Identify all channels, as well as data collection processes in order to create customer profiles, personalized experiences and meaningful interactions. There are plenty of solutions to improve your program, but you still need to choose the most efficient one depending on the situation and needs. It is crucial to define KPIs in order to measure performances, the ROI of each action and the impact of such a big change.
Stir up emotion
If we take a step back and ask ourselves “What is a loyalty program exactly?” the answer is simple really: a series of singular and personalized experiences, adapted to each individual. By accumulating positive experiences, they will build a long-term engaging relationship with your brand.
In this sense, the brand has to be able to create context with digital tools, and use transactions to create relations. It can be based on short specific moments, when the customer is paying attention, to offer rewards and surprises that are meaningful to each customer on any channel available. If we look at the figures, 82% of consumers that have developed a close emotional bond with the brand will always choose this brand’s product when given the choice. And emotional commitment to a brand represents a potential 5% increase in revenue. * After all, loyalty is more about emotions and experience than it is about the product itself.
* 2017 Capgemini study
Be careful not to forget the brand identity and the values that surround it. Customers want a loyalty program that gives them an opportunity to know more about the brand. Every brand must create and adapt its program and rewards according to that identity. Although the point system has been overused, it doesn’t mean that it should be completely left aside. Some brands have been able to integrate it cleverly.
Let us take a look at Starbucks, which serves as a benchmark when it comes to loyalty. For some time now, the company has had a system with stars to earn for each purchase. Customers are then invited to redeem these stars for rewards. But for real added value, Starbuck has allowed its customers to read the New York Times via their application, or be the first to discover and try their new products.
More recently, the French brand Etam has also made changes to its loyalty program. It has a point system that customers can check online and redeem in all their physical and digital points of sale. In addition, they offer unique experiences in line with their brand identity: having a personal shopper, attending a lingerie workshop or photoshoot, …
These two examples show how important it is nowadays to create experiences that are only available through a loyalty program, to strengthen and energize the relationship with regular customers.