consumer loyalty programs

Elements of Success in Modern Customer Loyalty Programs

Customer loyalty marketing uses data and research to reveal key drivers of brand loyalty including personalized, relevant experiences to keep customers coming back.

Customer loyalty programs come in many forms. They can be a card-based membership program where swiping provides instant discounts, or a more complex program that gives rewards based on tiers and points stored in a smartphone app.

But no matter what form they take, they all have the same goals of tapping into the substantial value that repeat customers provide. Research shows that 65 percent of a company’s business comes from existing customers. New customers also take 16 times the level of investment required to bring them on par with the profitability of existing customers.

Loyalty programs can therefore have a huge impact on a company’s success, so brands need to make sure they get them right. To do so, they have made their rewards more relevant and personalized than ever while using data and research to inform their decisions at every step of the way.

Earned Rewards and Convenience Motivate Loyal Behaviors

Many companies have determined that earned currency motivates behavior far more than instant discounts available to all. A study of one store compared a coupon that offered an instant discount at the register versus a reward-for-purchase promotion that gave discounts to be used upon the next visit. Customers that were given the reward-for-purchase had 14 percent sales lift, and were much more likely to make one to two repeat store visits within the next 30 to 45 days.

Studies like these show that when individuals feel like they have accrued some type of currency, they are much more motivated to use it, spurring repeat visits and more loyal behaviors. These long-term strategies prove their worth in that customers spend 67% more in year 3 with their favorite businesses than they do in the first 6 months.

Additionally, research conducted in-house confirms that simple convenience matters more than the appearance of technological sophistication. For instance, customers still prefer card-based loyalty systems or the option to enter in a phone number over more modern approaches like apps.

Relevance and Personalization Increasingly Needed for Loyalty Programs to Work

Even though general rewards prove their value time and time again, brands find more success when rewards are relevant to their customers’ needs and preferences.

One major comic book publisher tapped into this insight by providing exclusive experiences through their insider program. Loyal readers can redeem points for merchandise and free comics, receive Twitter mentions from famous writers and artists, and even be drawn into a comic book issue. These rewards are hardly commodities, as they represent a once-in-a-lifetime opportunity with personal meaning to the recipient.

Other companies tailor their loyalty experience around each customer. Wells Fargo’s “Go Far” reward program, for instance, uses a “Where Can I Go?” feature that shows actual destinations the member could reach based on their accrued miles. This option demonstrates true value instead of abstract points or miles. Members can also select “Tailor Your Preferences” and vote “Love It” or “Leave It” to certain rewards categories, filtering out things that they won’t like.

Data Ultimately Fuels Loyalty

Data can play a huge role in the success of modern loyalty programs, emphasizing how customer action can tell a story and provide crucial insight. “Don’t ever let your intuition outweigh the test-and-learn approach,” urges one VP of Loyalty and Personalized Marketing for a major loyalty player, citing an example of a seemingly small creative change that had an unexpectedly large impact.

Data-based approaches, like predictive modeling, can also unveil drivers of customer loyalty as brands move into the future and analyze data from their CRM and loyalty member activity. Data generated through reactions and behaviors from loyalty programs can connect the dots for marketers, helping them tailor rewards to be more effective and personally relevant.

In the end, many marketers rely less on letting their gut drive loyalty decisions and let the customers — and the data they create — reveal the true path to successfully making customers stick.

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