A lot of household brands have entered the loyalty program game in the past year or two, and it’s easy to understand why when you learn that it’s anywhere from five to twenty-five times more expensive to acquire a new customer than it is to retain current customers. Loyalty programs also just create higher revenue for businesses, plain and simple; a Bain & Company study found that increasing customer retention by even just 5% increased profits by 25%-95%!
And while the idea of a loyalty program or membership isn’t a new one, it’s taking on a new life for modern consumers. Partly because ecommerce has grown so much over the past two years, brands know it’s easier than ever for customers to abandon their cart and choose another brand. Savvy brands are discovering the power of rewarding customers for coming back and using loyalty programs to hold onto the customers they’ve worked so hard to convert.
And while you’re juggling a lot of priorities around the busiest shopping seasons, the holiday season is no time to slack off on your loyalty programs. In fact, Black Friday and Cyber Monday can be an incredible time of year for building loyalty with customers. Loyalty programs can help you stay top-of-mind with shoppers and create a relationship by offering them perks, access, and discounts they wouldn’t have access to otherwise.
Three Centuries of Loyalty Programs
If you can believe it, loyalty programs go as far back as the late 18th century. American shop owners would give their customers copper tokens that they could use when they came back to shop again, encouraging shoppers to return and buy again. This strategy was popular throughout the 19th century when in the 1890s, coins were replaced with Green Shield stamps. Stamps were given to customers when they shopped at certain retailers and could be used to buy Green Shield catalog products.
Common Loyalty ProgramsPoints
Points Programs: Customers earn points for every dollar spent that they can redeem for discounts, cashback, free products, etc.
Paid Programs: Customers pay a membership fee to gain access to perks like free shipping, early access, or discounts.
Value-based Programs: A business makes a product or monetary donation to a charity or cause with every purchase.
Tiered Programs: Customers can obtain different levels of rewards based on how much they spend or how much they pay for membership.
Credit Programs: Similar to a points program, customers earn credit with every purchase they make that can be used toward purchases.
In 1929, Betty Crocker introduced the box top program, and in 1981 the loyalty program as we know it was born when American Airlines launched its Frequent Flyers program. In the 1990s, card-based loyalty programs became the norm; retailers liked having an easy-to-track, in-store loyalty program — and I bet if you open your wallet you’ll find at least one snazzy, branded plastic punch card in there (even if you haven’t used it in a while).
Today, loyalty programs take many different forms — even some you might not have realized are actually loyalty programs. Points programs, where customers earn points with every purchase they make that can be redeemed for discounts or free products, remain one of the most popular. Value-based programs, such as Tom’s Improving Lives campaign, which donates a pair of shoes to a community in an underdeveloped country with every purchase, are also gaining popularity. Amazon Prime is a hugely successful premium loyalty program; customers are incentivized to shop with Amazon because of the free shipping and other benefits they get from their membership.
Loyalty programs continue to evolve and transform as brands learn more about what customers want and what keeps them coming back, but one thing is for sure: loyalty programs work. If they didn’t, they would have died out with patent medicine and horse-drawn carriages.
How Modern Loyalty Programs Thrive
As you know now, loyalty programs aren’t new, but they have turned out to be an incredible tool for meeting modern consumer wants. In ecommerce, shoppers today expect more than just a “Happy Birthday” email or a 10%-off coupon a few times a year. The topical perks are OK, but today’s shoppers want a better experience, personalization, and premium access to products. Below are a few of the ways that loyalty programs help ecommerce businesses build loyalty with their shoppers.
Shoppers want to feel special: Clarus’ 2020 Premium Loyalty Data Study showed that 88% of consumers are likely to choose a retailer whose premium loyalty program they belong to, even if there is a competitor offering a lower price. Customers want to feel like they’re getting the VIP treatment: free or faster shipping, special discounts, or even a free birthday gift (like the one Sephora’s hugely successful Beauty Insider program gives members every year).
Loyalty programs allow brands to create a relationship with shoppers and create loyalty in their minds. Shoppers feel like more than just a customer — they feel like a valued partner. The recent supply chain issues have presented a great opportunity for retailers to provide special treatment to loyalty program members by offering them early access to low-inventory products.
Shoppers want a personalized experience: Shoppers today expect a personalized experience, and when done the right way it can go a long way toward creating loyalty. And with third-party cookies on the road to becoming obsolete, a loyalty program is a great way to gather first-party data about your customers, allowing you to provide a personalized experience and impress your customers with your thoughtful product recommendations and marketing communication. You can ask them to fill out surveys, allow them to create wishlists, and use that information to personalize your recommendations to them and the marketing that they see when they’re not on your site.
Having first-party data from your customers who join loyalty programs even allows you to create special occasions for sales where there are none—college students can get discount codes for back-to-school shopping, parents can get early access to the hottest gifts for their kids, and pet owners can get discounts on that fancy dog food they always thought was too expensive. Personalization creates benefits for you and your customers, and loyalty programs are a great way to build out your personalization practices.
In the same vein, loyalty programs are a great way to target the specific customers that your business knows are the most valuable for your brand. With a thorough knowledge of your customer base, you can use a loyalty program to attract shoppers you know like your products and the specific kinds of perks you offer through your loyalty program.
Shoppers want a better shopping experience: Brands that are committed to creating an amazing customer experience have used loyalty programs in some very creative ways. For example, when Nike members shop in-store, they can unlock special access to features like free workout classes and discounts. REI’s Co-op Membership program provides benefits like 10% back on all purchases, access to “garage sales” where items are deeply discounted, and more. All of these benefits enhance their shoppers’ experiences and make them want to keep coming back for more.
Creating a great experience for customers, especially through a loyalty program, also creates happier customers, who turn into advocates for your brand. A customer that loves your brand and sends their friends and families in your direction is an invaluable resource.
Customer expectations have come a long way since the days of getting a copper token from your local general store — and loyalty programs have evolved to meet them. The pandemic has sped up this evolution significantly and created massive shifts in customer expectations, and the strange new holiday seasons we’re all still figuring out are a great opportunity to create loyalty with your shoppers.
Loyalty Programs, the Holidays, and Online Shopping
The holiday shopping seasons are crucial times of year for building loyalty. Shopping typically sees an uptick around most holidays like Halloween, Valentine’s Day, and even the Super Bowl, but none can compete with the impact of Black Friday and Cyber Monday. Ecommerce retailers might think consumers are just looking for killer deals anywhere they can get them, but that’s not necessarily the case. If you’re smart about the kinds of perks and promotions you offer, you can not only keep loyal customers you already have but also build loyalty with new customers. Here are just a few ways you can use Black Friday and Cyber Monday to your advantage.
Tease special offers and discounts: Most brands are advertising their holiday sales long before the turkey has even thawed. Brands like Walmart and Best Buy offer members of their premium loyalty programs (Walmart+ and My Best Buy) special offers and discounts — and both used the weeks leading up to Thanksgiving to showcase exactly what those members would be getting access to.
Creating a campaign built around the special offers that only members get to take advantage of plays up the benefits of memberships and encourages people looking to stretch their cash as far as possible to consider joining your loyalty program. In fact, 46% of consumers have joined a loyalty program just to get discounts and perks during the holidays!
This tactic doesn’t have to end with your holiday sales — you can use it throughout the year during other big shopping seasons or special events like product releases.
Give members exclusive access to online holiday deals or events: Another way brands spoil their loyalty program members during the holiday season is by giving them early or exclusive access to sales or in-demand products. For example, Walmart+ members got four extra hours of shopping time during Black Friday sales throughout November, giving them an advantage when it came to hard-to-find electronics and consumer goods.
This is an especially smart strategy given the supply chain issues that created shortages in almost every industry. Many shoppers just started to feel the effects of these issues during their holiday shopping, and your loyalty program can be an easy and effective solution for them to continue to dodge the shortages that continue to loom.
Enhance shoppers’ holiday experience: The beauty of loyalty programs today is that brands are finding so many ways to offer creative perks that go beyond simple discounts or points systems. The brands leading the way in loyalty are the ones that go the extra length to actually enhance the entire shopping experience.
A loyalty program doesn’t have to involve just monetary benefits for the customer—it can include little things that make shopping with your brand more enjoyable than shopping with a less thoughtful competitor. Experiential perks can be just as attractive to customers, especially during the holiday season, when shopping can be stressful and exhausting. A few brands that are creating a great experience for their customers include:
Did you know…
38.8% of businesses experienced supply chain disruptions due to the COVID-19 pandemic—and those issues are not going away any time soon. Using early access to products you have in limited quantities to entice shoppers to join your loyalty program can serve you well now and as supply chain issues continue down the road.
- Starbucks allows customers who use their app to save and order their favorite drinks through the app and pick them up in the drive through, saving them from having to shout their order for a venti half-caff caramel crunch splash-of-soy skinny mocha with extra whip through the speaker more than once.
- Nordstrom offers Level 2 members and above an in-store holiday party, where they get to shop in a calmer environment while being treated to appetizers and champagne. This kind of perk makes shoppers feel like they’re part of an exclusive club and offers an experience they might not get anywhere else. (It’s also a draw to create an enhanced hybrid online-offline experience.)
- Sephora offers its Beauty Insider members access to special events where they’re treated to sales, meet and greets, and swag from their favorite brands. Sephora shoppers get to save money and meet with other makeup lovers, all while creating brand loyalty and excitement around spending money with Sephora.
Customer Loyalty Can Be Earned Year-round
If you don’t already have a loyalty program in place, the time to start planning one is long before the holiday season is in sight. Here are a few steps you can take to start building a successful loyalty program today:
Think about why your customer shops with you (and build on that).
The most successful loyalty programs offer perks to their shoppers that are unique to their industry and product. Think of the Nike example we provided earlier, the offer of free workout classes to in-store shoppers. It’s a benefit that makes sense for someone shopping with Nike, and it provides more than just a discount or some points; it provides an experience that Nike customers are likely to get excited about.
This includes considering your customers’ values. For example, if you’re a brand that heavily markets your environmental sustainability efforts or ethical manufacturing practices, that will affect what kind of rewards you might offer.
Figure out what customer actions you want to reward.
To give customers more opportunities to earn rewards and encourage interaction with your brand outside of purchases, you can reward a variety of activities. Maybe they rack up points every time they use your app instead of your website, or maybe they get a unique discount code for posting about your brand on social media. You can encourage brand loyalty even when your customers aren’t spending money with you!
Get creative and take chances with rewards.
Think about what kind of rewards would make sense for your brand to offer. They might be discounts or points systems, experiences, appeals to your shoppers’ values, or perks that make shopping with you more convenient. Try to think outside the box and dream up rewards that will make your customers excited to shop with you.
Return to your customers’ values when you’re dreaming up rewards: if you’re a sustainable vegan skincare brand you know something about the customers who shop with you and what kind of rewards would be valuable to them. You can use that knowledge to create a more meaningful shopping experience for your customers that translates to increased brand loyalty. And remember, your program doesn’t have to be set in stone.
If your initial strategy doesn’t go as planned, don’t be afraid to make changes based on what you learn (or how customers respond). Imagine you’re a scientist in the lab turning knobs and adding drops of chemicals to a big, bubbling beaker until you strike just the right formula to get the desired reaction.
Earning Brand Fans Lasts Longer than a Season
Loyalty programs can have a huge effect on your attrition rates and your bottom line. If you don’t have one in place already—or if your offering isn’t designed to create a better customer experience—get to work on it today. Your loyalty program not only gives you a dedicated group of customers to market to during the holiday push, but it’s also a great way to attract new customers and retain them beyond the bustle of Black Friday and Cyber Monday.