Loyalty programs are built on the foundation of rewards. Without rewards, loyalty programs don’t exist. 92% of members believe rewards are a deciding factor in joining loyalty programs.
Loyalty programs have become the most effective marketing strategy for brands. The stats below signify the contribution of loyalty programs to the growth of renowned brands.
- Ulta gets 95% of its revenue through its loyalty program.
- Nordstrom gets 67% of its revenue through its loyalty program members.
- Starbucks loyalty program generates 40% of the brand’s revenue.
The reasons behind the success of the loyalty program are varied. But the bottom line is constant – better customer experience reciprocates customer loyalty.
Innovation in Rewards Program: Need of the Hour
There’s no denying that customer loyalty programs have changed dramatically. Especially the evolution in rewards is significant. Today’s customers don’t crave discounts or cashback but experience beyond monetary benefits. And rewards are the cornerstone of customers’ experience in loyalty programs.
Scene+ has redefined the approach towards any loyalty program by offering rewards across travel, entertainment, pharmacy, and other sectors. By collaborating with Scotia Rewards and Empire, customers have umpteen ways to earn and burn varied rewards.
It’s just one example of brands stepping up to deliver better rewards instead of conventional discount-only rewards. Rewards are the first motivator behind any customer joining a loyalty program. Hence, optimizing rewards can have a significant impact on the overall performance of your loyalty program. Let’s understand what modern-day rewards demand from brands that can produce an appeal for customers.
Innovation in Loyalty Program: 5 Effective Strategies
1. Mix of Conventional + Modern Rewards
The evolution in the loyalty landscape signifies a mix of audiences and varied customer expectations. A specific audience segment still seeks conventional benefits to join a loyalty program. 43% of people participate in loyalty programs for discounts or offers, and 27% participate in earning free offers.
The North Face is a perfect example. It gives loyalty program joiners a conventional $10 discount to end first-time buying resistance. Additionally, it has experiential, gamified & rewards for environment-friendly activities. Creating such a mix of rewards allows the brand to attract different customer segments and extend the scope of the loyalty program.
2. Personalized Rewards Have Become a Necessity
Leaning away from generic messaging & rewards is the first step toward building an innovative loyalty rewards program. 55% of members would use their loyalty programs more if the rewards were personalized to reflect their unique needs. The pace of digitization is influencing customer behavior. Customers are willing to share their data in return for personalized experiences. Through loyalty programs, brands have access to first-party data, which equips marketers to personalize rewards.
Sephora loyalty program excels in using data-driven infrastructure and delivering customer-centric experiences. It collects personal data & allows customers to choose their rewards. Customers can redeem their points for gifts, limited edition products, or even free beauty tutorials.
Furthermore, customers redeem these rewards through mobile apps producing valuable data. Sephora uses it to craft personalized messages, offers, and rewards to boost engagement. The loyalty program results in contributing 80% of their annual revenue.
3. Partner Up to Offer More Rewards
For brands, rewards are opportunities to deliver value. Generally, a hotel brand offers extra hours or stays for its loyalty program members. But, at the same time, offering rewards like spa treatments, adventure sports, or complementary meals at fast food chains can allow members to enjoy vacations more than ever.
Recently, Saudia revamped its Alfurson loyalty program to include enhanced customer rewards. It signed new partnerships with several banks and credit card providers. It allows members to get more miles with the same number of purchases.
Collaboration between brands has the potential to produce higher customer retention. With customers able to access varied rewards at one touchpoint, these brands become part of customers’ lifestyles, creating an ever-lasting connection.
4. Corporate Social Responsibility: Connect Emotionally With Customers
Traditionally, brands started loyalty programs to boost recurring revenue without much investment. But, true loyalty between brand and customers is possible only with an emotional connection. Brand-loyal customers can not be won through monetary rewards. An emotionally connected customer has a 306% higher lifetime value than the average customer.
With over a billion members using its platform, Zinrelo launched an initiative to match 100% charitable contributions. Brands using Zinrelo’s loyalty software, like DefenAge, Life Nutrition, and thousands of others, benefit from strong brand loyalty and emotional connection with customers.
Today, numerous customers connect with brands for their environment & animal-friendly initiatives. Customers expect brands to stand for the right causes and give back to society.
Generic messaging, traditional rewards, and monetary-driven programs inhibit growth in loyalty programs. A report from McKinsey states that nearly 67% of loyalty programs fail to deliver real value. The evolved market landscape of 2023 demands a holistic approach from marketers to meet & exceed customer expectations. The complete customer experience needs an upgrade. The table below has 3 quintessential elements for loyalty programs to succeed.
5. Add Elements That Make Loyalty Programs Market-ready
Throtl – a car parts and gears brand, organizes giveaway contests for its customers. A throtl VIP member pays $10 monthly to access special rewards and offers. Additionally, in these giveaways, the $10 also allows members to join the giveaway contest with the prospect of winning a modified car.
Every marketer seeks capabilities to attract, engage and delight customers. That’s how the brand retains loyal customers. Today, these capabilities can be summarized into 3 key imperatives – deep data analytics, technology platform, and strategic consultation. From making an informed decision about tiers of the loyalty program to crafting a seamless, personalized experience, these imperatives align the loyalty program to achieve goals.
