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5 Key Ingredients Of A Winning Loyalty Program Published-Feb 6, 2015
Retailers and consumers alike are huge fans of loyalty programs, and for good reason. For merchants, loyalty programs drive repeat spending and encourage customers who buy once to return again and again. Shoppers, in turn, get to enjoy savings and score freebies when they continuously participate.

According to the Colloquy Loyalty Census, loyalty program memberships are growing at an annual rate of 26.7 percent and there are over 2.65 billion memberships in the US. But while tons of shoppers are joining loyalty programs, they don’t always participate in them. The study found that even though the number of loyalty program memberships per US household has grown, less than half of those memberships are active (i.e. members have engaged at least once in the previous 12 months).

To help make sure that your loyalty program members don’t fall into that “inactive” category, we took a look at some winning loyalty programs and compiled a list of elements that contribute to their success.

Perks
Bribes Incentives are essential to any loyalty program. They drive membership growth and participation, which is why the most important decisions you’ll make when establishing your program are what types of rewards to give out and how you’re going to offer them.

Some stores run product frequency programs where shoppers get a point for every item they purchase, and receive a freebie once a certain threshold is met. “Buy 10, get 1 free” is a common example of this.
This type of reward works best if you sell products or services that are purchased regularly (like food and drink, or haircuts).
Other merchants choose to offer point-based rewards programs, wherein shoppers accumulate points for every dollar they spend. It’s a bit more complex, but it works great for retailers that sell a variety of products and want to give customers more flexibility with their rewards.

This rewards system can also increase spending amount and frequency, which is why it’s also commonly used by airlines and credit card companies. The more people use a certain airline to travel or a particular card to make purchases, the more points they earn.

Sephora’s Beauty Insider program is a great example of this. Members earn points for every dollar they spend at the store, and can later redeem those points for an item of their choice.

Perks shouldn’t be limited to points or dollars, though. The points-for-purchases format, while effective, is pretty generic and may not be enough to really engage members. Be sure to come up with other unique rewards. Think of benefits that would make members feel like they’re really part of something exclusive.

For instance, Sephora’s rewards program offers birthday gifts, free beauty classes, first dibs on new products, advance access to sales, and more. As you can see, these perks go beyond monetary factors; they also educate customers, give them a sense of exclusivity, and celebrate moments in their lives.

Earned dollars and points can convince people to join and buy from you, but its the thoughtful and exclusive rewards that truly deepen their personal relationship with your brand.

Data
Data can turn a so-so loyalty program into one that keeps people coming back. By collecting customers’ basic information and tracking their shopping activities, you’ll be able to provide more thoughtful benefits (i.e. a little something on their birthday, an item complementing a recent purchase, or tailored advice and recommendations).

Such perks earn you points for being relevant and they strengthen the connection that customers have with your brand.
TheSuperCool, a Melbourne-based retailer, leverages data quite well. With the help of loyalty app Collect, they’re able to identify their best customers and get to know them better. TheSuperCool then makes use of that information by inviting their most loyal patrons to private shopping events where they can enjoy free vouchers and personalized styling advice.

Consider doing something similar in your store. Gather intel on your loyalty program members and then use that information to tailor their rewards and experiences.

Surprise And Delight
Surprising and delighting customers is an effective way to boost spending, engagement, and word of mouth.
Rewards that customers don’t see coming are far more memorable than generic points. Customers won’t recall all of the items they redeemed with their earned dollars, but you can bet that they’ll remember–and talk about–the unexpected gifts or perks you gave them.

Consider the tale of Brad Handler, chairman of Inspirato, who talked about how an airline gave him and his family a surprise upgrade to first class back when he was a 10th grader. The upgrade, he wrote, was “unexpected and appreciated” and it made such a huge impression on him that he continues to talk about his experience decades after it happened.
“Had we not been upgraded, the connecting flight to Orlando would have been exactly as I anticipated and instantly forgotten. Instead, I remember it 30 years later.”

Plenty of merchants have already realized how big of an impact surprises can have on shoppers which is why more and more companies are incorporating the element of surprise into their loyalty programs.

Take Expedia for example. In 2010, the website ran a surprise-and-delight campaign to engage members of its Elite Plus program. According to Colloquy, Expedia sent a $100 coupon to select members and saw transactions by that group increase by almost 10 percent.

And what’s even more interesting is that while just 10 percent of recipients redeemed the coupon, the company found that even those who didn’t use the offer ended up travelling more with them.

Other retailers are putting surprises at the core of their loyalty programs. Panera Bread for example, makes every reward a surprise. Instead of keeping count of points or stars, Panera simply gives customers perks at unexpected times. Members can look forward to anything from free bakery items and exclusive tastings to recipe books and invites to special events.

Take a leaf out of the playbook of the businesses above. Spice up your loyalty programs by giving members unexpected perks like a free cup of coffee or even a handwritten card thanking them for being such a loyal customer.
Convenience

See to it that your loyalty programs are easy to participate in. Make them seamless by eliminating friction points that curb or slow the process of earning or redeeming rewards.

Start by getting rid of physical rewards cards. Not only do they clutter up people’s wallets, they also add time and effort at checkout. As noted on Chain Store Age, “A typical rewards card scenario involves the customer finding their card, taking it out of their wallet, scanning it, and putting it back. And if they happen to forget their card, they miss out on the chance of earning loyalty points. Those barriers add friction and time to the checkout process and can lower customer satisfaction.”
It’s best to opt for a POS-based program instead. Your customers won’t have to carry around rewards cards; they can just give you their name and be all set.

One retailer that’s doing a great job at implementing POS-based loyalty is Rockets and Rascals, a bike emporium in England. They have more than eight hundred members in their loyalty program, and the fact that they don’t require physical cards proved to be a big boon for the retailer and their patrons, who don’t always have their wallets on them.

“It’s a wonderful life saver for a cold, wet cyclist that’s come in without their wallet,” says Steve Toze, marketing director at Rockets & Rascals.

You can also choose to implement your loyalty program through a mobile app. Instead of traditional cards, mobile-based loyalty programs enable you to track rewards and offer perks through peoples’ smartphones. Some solutions even allow you to gather data and personalize rewards for each member.

Mobile-based loyalty programs are also convenient for shoppers. Since they work through people’s smartphones, customers won’t have to add yet another card to their wallet. They can just scan their phones to earn and redeem points.

Marketing
Marketing should be a big part of your loyalty efforts. After all, your program won’t take off unless you put it out there. Common tactics for doing this include instructing associates to mention the loyalty program to customers and putting up posters, counter wobblers, or tent cards around the store.

Also, remember to market your loyalty program to existing members. Don’t just sign people up and send them on their way. Touch base with them regularly and remind them to swing by your store so they can earn or cash in their rewards.

If you’re collecting data on their shopping behavior, send them relevant messages based on their previous purchases. You can also cook up exclusive members-only offers to entice them to come in.

Check out what Starbucks is doing. The coffee company frequently gives members opportunities to earn bonus stars (i.e. points) when they purchase select products or complete certain actions.

Bottom line
Most people assume that rewards programs are all about well, rewards. The fact is though, perks are only the tip of the iceberg. Your program shouldn’t just bribe customers, it should instill genuine loyalty and attract repeat patronage not just because they’re going to get points out of their visit, but because they feel a real connection with your brand.

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