Innovative Loyalty Programs in Retail

Innovative Loyalty Programs in Retail

Jen Kinnear
February 6, 2020

Loyalty programs have been part of the retail marketing toolkit for quite some time now. They're a tried and tested way of increasing profits, customers love them and new technology means that they are able to do much more than just deliver a discount or reward. Here we look at why it pays to set up an innovative loyalty program.

It's a Story of Statistics

 If retailers were in any doubt as to why they should offer a loyalty program, then it's a story of statistics.

"As many as 84% of consumers say they're more likely to stick with a brand that offers a loyalty program."

 As a recent article in TRB (The Retail Bulletin) highlighted, 67% of fashion retail customers stated that they would be encouraged to sign up to a loyalty program that offered "money to spend in-store" as a reward.

And, a recent post on the Shopify website reported that "As many as 84% of consumers say they're more likely to stick with a brand that offers a loyalty program."

Despite these stat's and others like them, many retailers still aren't offering loyalty programs, but why?

A basic loyalty program is not difficult to set up and acts as a good starting point for something more sophisticated - once the right model has been put into place, the rewards can be substantial and added value is there for the taking.

Top Three Models

  • Points system - customers are awarded points for each purchase and can cash them in at a later date.
  • Tiered system - the more a customer spends, the higher their loyalty level becomes and the more rewards they receive.
  • VIP membership - paying subscriptions gets the customer rewards - discounts and free shipping for example.

We are also seeing loyalty program partnerships. John Lewis and Waitrose have recently teamed up, customers can use the app online and in-store when shopping with either company.

"my John Lewis is more than just a membership card. It helps you get the most from shopping with us by giving you rewards and treats throughout the year."

Loyalty Programs Plus

Those who are at the cutting-edge of retail loyalty program design and deployment, Starbucks for example, are using mobile phone apps, not just to provide a better customer experience and loyalty rewards, but to gather big data - here we begin to see the added value.

Starbucks use their loyalty program app to collect data about customer behaviour, such as, what they buy, where they buy it and when. Once processed using AI algorithms, the data allows Starbucks to deliver personalised recommendations and promotions, via notifications, sent directly to customers who have been using the app. This helps to maximise profits and improve the overall customer experience.

Another loyalty program that has achieved stratospheric success is Amazon Prime. With over 100 million signed up customers, it's little wonder that Amazon founder, Jeff Bezos, is currently the third richest person on the planet, with a net worth of around £83 billion!

"Amazon Prime customers spend more than other customers - up to 400% more in fact."

Amazon Prime's subscription model allows them to do the same sort of data gathering as Starbucks, plus the upfront fee encourages shoppers to spend more. 

The Proof of the Loyalty Pudding

Studies show that, on average, a 5% increase in loyal customers can improve profits by as much as 25%. What more evidence do retailers need to set up an innovative loyalty program?

When doing so, one of the best pieces of advice is to do things a little differently - be distinctive! Loyalty programs that capture the imagination of customers and have a USP are the ones most likely to deliver the best ROI, drive retention and add all-round value.

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