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What loyalty looks like in 2014


With Amazon’s customer retention rate hovering north of 90%, customer loyalty initiatives are understandably at the top of every retail CMO’s to-do list. Of course, it’s harder these days to find room in consumers’ wallets for another membership card, what with American households belonging to an average of 22 loyalty programs, according to the loyalty research unit Colloquy. But Colloquy also found that each household’s activity was concentrated on fewer than half that number of programs.

The reasons why are simple. As top retailers continue to evolve their programs they must do so inways that ensure they remain effective andrelevant to program participantsby delivering rewards.The top ways retailers are using loyalty programs to boost purchase frequency and generate customer lifetime value, include the following:

1: Extend loyalty beyond purchase

Loyalty rewards traditionally accrued through transactions — the point-per-dollar-spent model. But smart retailers know their relationships with customers extend far beyond the cash register, and they’re using their loyalty programs to connect with shoppers before — and between — the moments when money changes hands. Best Buy and J.C. Penney, for example, have run promotions where they reward shoppers for leaving product reviews. The trendy lifestyle retailer Gilt awards points for visiting its website every day. (OK, just one point, and it’s not worth that much, but it feels good to be recognized!) Office Depot gives shoppers points for completing member profiles, which contain questions ranging from occupational field and children’s schooling level to the importance that environmental friendly products have on purchase decisions.

2: Move from rewarding social to social rewards

By now, many retailers have at least experimented with rewarding consumers for social activity that enhances the brand. But some, including JetBlue and Citibank, have taken sharing one step further, permitting members to establish joint loyalty accounts — either through their own platforms or through Facebook — so that rewards can be earned and enjoyed by groups. The JetBlue Family Pooling program, launched in October, has seen more than 30,000 groups sign up in just three months. According to a joint study by marketing firm Directivity and digital agency Citrus, 65% of consumers want to share their loyalty benefits with friends, family or charities. Of those, 70% say they would shop more often if they were able to share rewards, and 45% say they would spend more.

3: Deliver true omnichannel loyalty

In an omnichannel world, consumers expect to be able to earn and redeem rewards no matter how or where they buy. No retailer meets that expectation better than Starbucks, whose loyalty program seamlessly spans in-store and online experiences. The company’s mobile app, for instance, can be used to make payments, accrue Starbucks Rewards, and check point balances. Starbucks even rewards consumers who buy its products through supermarkets and grocery stores: Last year, the company began applying a sticker with a unique 9-digit code — a “Star code” — to packaged coffees. Members who buy these items can peel off the sticker and type the code into their online accounts.

4: Personalize loyalty communications

With customers more careful about sharing personal information, loyalty programs are becoming the tool of choice for gathering the data necessary to deliver the kinds of smarter, more personalized experiences that drive higher sales and profits. Sephora’s Beauty Insider rewards program asks members to fill out a short beauty questionnaire about their hair and skin, and then provides customized product recommendations based on responses. Smart retailers are also initiating automated email promotions that target shoppers based on inactivity. For example, if a customer’s reward balance expiration is approaching, a message like, “If you make a purchase this weekend, we’ll give you double points and your balance won’t expire” can be incredibly effective at spurring incremental purchases and reducing churn.

5: Partner with complementary brands for strategic loyalty benefits

Savvy retailers are figuring out that their loyalty programs can win increased consumer mindshare through partnerships with complementary brands. For example, Safeway has extended its loyalty program beyond its own shelves by partnering with Chevron and Texaco gas stations. Shoppers earn Safeway Reward Points, which can be redeemed right at the pump for up to 20 cents per gallon. These types of strategic partnerships are an extension of a trend that began in the airline and hospitality industries, where brands like Delta and Starwood loyalty program members can earn and redeem rewards that span both brands.

Ashley Bienvenu is a loyalty analyst at 500friends, a marketing services firm founded in 2010 that is focused on loyalty and retention solutions. She can be reached at [email protected].

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