Smiling woman standing ouside holding loyalty card

Retail

Why Innovative Loyalty Card Programs Can Significantly Improve Customer Retention & Engagement

Membership levels based upon the amount a customer spends are the most common form of loyalty program. The appeal of a loyalty program like this is that it motivates customers to climb the loyalty ladder to reap even bigger and better rewards. Behavior scientists explain that the reasoning behind this phenomenon is because it reinforces achievements.

Sephora, for instance, starts customers with the Beauty Insider Program. VIB (Very Important Beauty) status arrives when a customer spends $350 in a calendar year and spending $1000 in a calendar year awards the loyal customer with the much sought-after Rouge Status.

However, according to a recent study, 79% of customers don’t want points to accumulate now for benefits later1. Instead, shoppers are clamoring for instant benefits in the form of immediate discounts on their purchase (53%) and faster shipping (51%). Savvy retailers are updating their customer loyalty programs to increase customer satisfaction and ensure customer retention.

The Profitability of Keeping ‘Em Coming Back

The lure of loyalty cards remains the same since its inception: it’s more cost efficient to retain an existing customer than it is to acquire a new customer. Consumer data clearly backs up this strategy: 84% of consumers say they’re more apt to stick with a brand that offers a loyalty program2. And 66% of consumers say the ability to earn customer rewards actually changes their spending behavior3.

Starbucks is often cited as a gold standard when it comes to implementing a loyalty program and with good reason. Members of its loyalty program brew up 40% of the chains’ revenue. Further, of users who regularly use a mobile app, 48% of them use the one created by Starbucks4! With 16 million active users, Starbucks’ loyalty program not only boosts order frequency, but also the average order size. According to Starbucks CFO Patrick Grismer, “we know from our experience that when customers join our rewards program, their total spend with Starbucks increases meaningfully”5.

6 Benefits of Implementing a Loyalty Program

Creating a solid loyalty program reaps the same benefits as creating an unforgetting brand:

  1. Boosts Sales – Loyal customers spend 67% more than their non-member counterparts and 49% report spending more after joining a program6,7. For instance, at Athleta, loyal customers spend twice as much with the athletic apparel firm compared to non-loyalty members and 50% of its sales come from its loyalty program, according to Chief Digital Officer Kim Waldmann8.
  2. Cements LoyaltyA loyalty program is a crucial customer retention strategy. In addition to previously mentioned data, 73% of survey respondents reported that they shopped more with retailers with which they have a reward program membership.
  3. Builds Referrals – 88% of premium loyalty program members are likely to recommend a retailer with valuable benefits to a family member or friend. Retailers also can sweeten the opportunity for referrals by adding in an incentive. Leisure brand, Lively, for example, awards 100 reward points to the referring person and a $10 coupon to the shopper referred.
  4. Creates Word-Of-Mouth Buzz – With the advent of social media, customers enjoy sharing their unboxings, products, and perks with followers. In essence, a happy customer is a vocal customer.
  5. Transforms Shoppers into Brand AdvocatesCreating raving fans who tout your benefits is a free form of relationship marketing. A successful reward program not only reinforces the purchase decision for an existing customer but can also bring a new customer (or customers) into the fold.
  6. Increases Customer EngagementCustomer loyalty program members are more open to receiving emails, opening emails, and engaging with the retailer whether through their website or loyalty app. Starbucks customers, for example, feel engaged with its annual free birthday drink.

The Rewards of Rethinking Your Loyalty Program

Retailers typically reward loyal customers with perks, discounts, and/or free products. Athleta broke this model by introducing AthletaWell, a digital community for content, as well as a partnership with Obé for exclusive virtual workouts. In other words, it went beyond the closet to create better engagement in a way that works with current consumer safety concerns rather than against them.

By contrast, Lululemon Athletica kicked up sales 23% to $916 million in the third quarter of 2020 thanks in part to its loyalty program9. Similar to Athleta, it offers exclusive workouts for its premium loyalty program members, but they must attend classes in-store as opposed to online.

When it comes to benefits, customer needs and wants continue to evolve. Whereas in 2019 42% of customers wanted early access to sales, today that number has jumped to 60%. Exclusive offers and tailored recommendations are also critical to winning shoppers’ heart and purse strings.

Leveraging BOPIL® to Boost Loyalty Enrollment & Success

A successful customer loyalty program starts with the sign-up process. It must be quick, easy, and simple to understand with the immediate benefits delineated. Matching the enrollment offer with the right channel remains key. For example, in-store shoppers should be offered the opportunity to enroll at checkout versus sending them online. By the same token, mobile shoppers should be incentivized to join the loyalty community on their smartphone.

Retailers can leverage the power of a retail pick up locker – such as Buy Online, Pick-up in Locker (BOPIL) by Parcel Pending – to incentivize loyalty as customers retrieve their BOPIS orders. Since the research is clear that 61% of all customers make an additional purchase when retrieving an online order in-store, this is the perfect opportunity to invite new members into a loyalty program with a discount10. Plus, with BOPIL, retailers can integrate their loyalty program into their associate and customer-facing workflows, providing better tracking for order pick-ups and returns.

With consumers continuing to try new brands, now is the time to implement or adapt your loyalty program to meet changing customer behavior . Integrating your customer loyalty program with retail solutions like BOPIL allows you to increase your customer lifetime value. To find out how you can  maximize customer lifetime value within your customer base, check out our related blog post with post purchase experience tips to implement. 

Ready to learn more about our innovative solutions and integration options? Talk to a Parcel Pending by Quadient customer service representative today.

Sources:

  1. Clarus Commerce. (2021). 2021 Premium Loyalty Data Study [Report]. Retrieved from: https://info.claruscommerce.com/WC-2021-FQ4-PL-DataStudy_MainLP.html
  2. Peacock, Lindsey. Shopify. Keep Them Coming Back: 7 Innovative Customer Loyalty Programs (And How to Start Yours). (2021, April 29). https://www.shopify.com/blog/loyalty-program.
  3. Reichheld, Fred. Bain & Company. Prescription for Cutting Costs. (2001, October 25). https://www.bain.com/insights/prescription-for-cutting-costs-bain-brief/.
  4. The Manifest. (2018, May 15). The Manifest Finds Starbucks is User Favorite in Survey of Restaurant Loyalty Apps [Press Release]. Retrieved from: https://www.prnewswire.com/news/the-manifest/
  5. H, Leah. Harvard Business School. Starbucks: Winning on rewards, loyalty, and data. (2020, February 9). https://digital.hbs.edu/platform-digit/submission/starbucks-winning-on-rewards-loyalty-and-data/.
  6. Miller, Grace. Annex Cloud. 10 Benefits of Implementing a Customer Loyalty Program. (2021). https://www.annexcloud.com/blog/customer-loyalty-programs-10-benefits/.
  7. Saleh, Khalid. Invesp. The Importance of Customer Loyalty Programs – Statistics and Trends. (2021, April 11). https://www.invespcro.com/blog/customer-loyalty-programs/.
  8. Gray, Julia. Morning Brew. Athleta introduces new digital community platform for its rewards members. (2021, July 28). https://www.morningbrew.com/retail/stories/2021/07/28/athleta-introduces-new-digital-community-platform-rewards-members.
  9. Tierney, Jim. Clarus Commerce. How lululemon Is Kicking It Up With Its Experiential Premium Loyalty Program. (2020). https://www.claruscommerce.com/blog/how-lululemon-is-kicking-it-up-with-its-experiential-premium-loyalty-program.
  10. Parcel Pending. How BOPIS Lockers Can Help Retailers Succeed. (2020, April 1). https://www.parcelpending.com/blog/how-bopis-lockers-can-help-retailers-succeed/.