What Do All Successful Loyalty Programs Have in Common?
Modern retailers know all too well that retaining loyal customers is far simpler and less costly than attracting new ones. Customer loyalty programs are hardly a novel concept, but they can be difficult to master—especially given the amount of choice and information today’s consumers have at their fingertips.
Surprisingly, all successful digital retail loyalty programs can be boiled down to three essential ingredients guaranteed to build long-lasting relationships with your customers. Here’s what you need to know.
The History of Promotions and Loyalty Programs
The question of how to build customer loyalty has been on retailers’ minds for decades—dating back to the 18th century.
In the late 1700s, merchants began handing out copper coins that customers could use to redeem savings on their next purchase. This coin system served as a delayed discount program that encouraged repeat purchases from the same brand.
As the idea took off, retailers replaced copper coins with tokens and stamps to expand their reach. Among the most notable early loyalty programs was General Mills’ Betty Crocker Points Program, which launched in 1929, featuring tokens that customers could cut from the top of products’ boxes, collect over time, and redeem for mail-order kitchenware.
With the rise of the internet, loyalty programs eventually traded paper tokens and loyalty punch cards for mobile app coupons and online points systems. Today, these programs are still gaining traction as a means of driving customer loyalty:
- Loyalty program popularity continues to rise year after year, with 3.3 billion loyalty memberships in the US currently.
- Successful loyalty programs continue to yield impressive results, with 79% of consumers stating they are more likely to continue doing business with a brand that has a good loyalty program.
- Loyalty program members also spend 66% more than non-members.
- While these numbers reveal the reach of a successful loyalty program, not all programs achieve this level of ongoing engagement, higher spend, and long-term loyalty. The average consumer belongs to 14.8 loyalty programs, but is active in 6.7 of them.
What Makes a Successful Loyalty Program?
Loyalty is defined as “a strong feeling of support or allegiance.” For businesses and consumers, this means cultivating a relationship based on trust, consistency, and reliability.
Consumers need to know they can return to your brand time and time again, greeted by the same top-tier quality, service, and support. Today, a loyal customer relies on you to learn about new products, find discounts, and streamline their shopping experience in-store and online.
And yet, research from Winsight Grocery found supermarkets often deliver too little value to consumers, thinking discounts alone will grow their loyalty programs. This certainly isn’t the mark of a successful loyalty program.
Digital Retail Loyalty Programs That Get It Right
Kroger, Starbucks, and Amazon offer an exceptional framework for delivering on consumer needs—by combining personalization, rewards, and a connected, digitally optimized experience in their loyalty programs.
By keeping track of a user’s browsing and order history, each brand is able to recommend products that meet customers’ unique preferences. Each brand takes it a step further, with their own distinct rewards programs that offer customer-relevant savings and perks—at the grocery store and beyond.
For example, retail company Kroger’s loyalty program extends far beyond savings in the grocery store alone to:
- Personalized digital and paper coupons based on previously purchased items
- Access to coupons for free items on select Fridays
- Fuel points in exchange for dollars spent, (with 100 fuel points, you can get 10 cents off each gallon during a single fill-up at Kroger’s gas stations)
- Free airtime on their i-wireless phone when they shop at the Kroger family of stores
According to Kroger executives, these loyal consumers visit the store 4x more often and are 8x more valuable than non-loyal shoppers.
Starbucks’ loyalty program takes a slightly different shape, rewarding customers with “stars” on their mobile app. As customers collect stars from repeat purchases, they earn free coffee perks and savings on orders. Members receive free treats on their birthdays, create custom music playlists, gain double star day bonuses, and engage with the brand through in-app games and sweepstakes.
Amazon’s Prime membership program is among the most successful loyalty programs of all time, offering a wide range of exclusive benefits to members—like one-day or same-day shipping, access to streaming video and music content, 5% cash-back offers, early access to upcoming books, and exclusive members-only shopping days.
Perhaps most importantly, today’s digital retail loyalty programs prioritize an intuitive digital experience that is immediately available to consumers when they want it—on their smartphones. Long gone are the days of carrying around a physical loyalty card, considering 70% of consumers prefer to manage loyalty programs via app.
The payoff of these loyalty programs is in their revenue:
- 30% of the 11 million households that shop at Kroger were considered “loyal,” comprising 70% of the chain’s sales.
- As of October 2021, Starbucks Rewards has nearly 25 million members and Starbucks Rewards now represents 53% of the spend in their stores.
- The average Amazon customer spends roughly $600 per year, while Prime members spend $1400 per year.
The Keys to a Successful Digital Retail Loyalty Program
As other retailers have proven, a perfect blend of personalization, rewards, and digital optimization are the essential elements to creating a successful digital retail loyalty program..
According to McKinsey surveys, 80% of customers want personalization from retailers—and they’re willing to exchange personal data in order to receive more relevant offers matching their interests and purchase habits.
Providing tailored experiences based on unique shopper preferences improves engagement, customer satisfaction, brand perception, conversions, and acquisition.
Best of all, personalization leads to tangible results by reducing customer acquisition costs by up to 50%, lifting revenue 5-15%, and increasing the efficiency of marketing spend by 10-30%. Among millennial shoppers, in particular, brand loyalty increases by 28% on average when personalized marketing communications are delivered.
With retail personalization, it becomes possible to deliver relevant rewards tailored to individual shopping habits and preferences.
By leveraging first-party data, retailers can make product suggestions, offer desirable deals, and serve up informative content—while always respecting their privacy. Unlike third-party data, your shoppers’ privacy is protected because they agreed to provide their information, while you own and control its use.
The end result is a more accurate, comprehensive customer profile that can be used to develop the targeting, execution, marketing, and branding experiences—all while delivering the savings shoppers need at the right moment.
An Effective Retail Mobile App
There are more than 6 billion smartphone users around the world, and this number is projected to increase by several hundred million in the near future. The loyalty programs that prevail need a mobile-first approach to complement their in-store shopping experience. Shoppers regularly use retail mobile apps in-store to look up product descriptions, reviews, comparable items, out-of-stock replacements, and coupons.
Now more than ever, your app is the epicenter of the customer journey, driving purchase decisions, strengthening relationships, and delivering a connected experience. The best loyalty programs know this—and give their customers a mobile experience they can rely on when they’re at home, browsing the aisles in-person, and everywhere in between.
Launch a Successful Loyalty Program with Swiftly
With a Swiftly-powered retail media platform, creating an effective loyalty program that combines all these elements is not only possible—it’s seamless. Our analytics tool uses first-party data to create an omnichannel view of your customers’ shopping habits, empowering you to make strategic decisions that lead to increased loyalty, growth, and revenue.
We provide space for CPG partner advertising that connects shoppers with the latest products and offers, tailored to what they’re browsing or adding to their in-app shopping cart. Even if you already have an app, our platform can integrate your loyalty program content and add engaging retail tools like click-and-collect, scan-and-go, in-store product scanning, digital circulars, and more so your app appeals to modern demands.
Ready to create an effective loyalty program that leverages personalization, rewards, and digital optimization? Contact Swiftly to get started.