What customers expect from loyalty programs

Acquiring a new customer is 5x more expensive than retaining the current ones. So, customer retention has always been important. However, with the current pandemic impacting marketing budgets even further, customer retention has become more important than ever.

“It costs 1/5th the marketing budget to generate a sale from a loyalty program member vs. a new customer”

Driving strong customer retention requires an integrated CRM & loyalty program approach. But before we get to that, let’s understand what customers are expecting from a loyalty program today.

Customers expectations have completely changed in the last 10 years

10 years ago customers suffered from a lack of options and that unavailability of choices by default was a driving factor for customer loyalty. But today, each customer has nearly infinite choices. On top of that customers want instant gratification. Customers want to see that a brand cares about them. 

So the earn & burn programs that worked 10 years ago don’t cut it today with the customer who has infinite choices & wants instant gratification.

That’s why 68% of customers leave a brand today because they believe the business doesn’t care about them.

This clearly points out that most loyalty programs are built today for customers 10 years ago. 

Here’s a simple way to think about building a successful loyalty program, “A customer buys a dress because they need something to wear for a party. The product solves the customer's problem of wearing something for the party. What program does your loyalty program solve for your customer?”

When we start thinking like this, we’ll hit the nail on the loyalty program that’ll solve our customers. A loyalty program that delivers value to the customers of 2021.

Before you get to identifying your own customers' problems to create a WoW loyalty program, here are 5 minimum expectations from loyalty programs that customers expect in 2021.

Loyalty program minimum expectations for 2021

These 5 loyalty program ideas are the minimum expectations customers have from a loyalty program for loyalty to be not just a data collection mechanism but a good program that engages  customers, delights them and thus leads to an increase in sales. 

#1: Not just transactions. Offer exclusive experiences & special benefits.

Customers don’t even wake up from their bed for traditional loyalty programs that just give back 1%, 2% or 3% to customers. Just think, does it really matter to you as a customer.

H&M offers benefits & experiences

But if you love shopping at H&M and they offer you free delivery on every order with no minimum order amount. The capability to buy something for Rs. 100 that’s valuable, if you ever need to. H&M as part of their newly launched loyalty program offers their Plus members the below experiences and benefits:

H&M offers benefits like free delivery and also exclusive experiences plus unique access to special collections. They’re going out of their way to organize events plus build collections that will only be available to their Plus loyalty members. Now that’s something a Plus loyalty member would love to tell their friends about.

Here are few ideas of experiences & benefits you can offer to your customers:

Beauty

• Complimentary spa experience
• Exclusive events with celebrities/ makeup artists

Restaurant

• Complimentary upgrade or dish
• Free delivery with no minimum order

Fashion

• Meet up with the brand ambassador
• Design you own dress/ top
• Free delivery with no minimum order
• One day early access to every new collection/ sale

Crafting experiences & benefits like this gives loyal members the feeling that they’re special and they get access to something that others customers don’t. That special feeling is what drives the new age customers of 2021.

#2: Continuously engage customers with instant gratification & surprises

What makes customers addicted to Snapchat & Instagram? We’re curious to know what our friends have posted or commented. Over time that curiosity converts into a habit loop.

The same principle of the habit loop can be used to increase interest in the loyalty program from customers. Imagine if I placed an order for my 3rd pepperoni pizza from a brand and I got a message recognizing me as a pepperoni lover with a special offer to eat my next pepperoni pizza with my friends. I’d remember that experience & it’ll make me think, what reward will I get on my next order. So just like I’m eager to see the reward on Instagram, I’ll be eager to see the reward after my next order.

Starbucks implements this really well and has used gamification/ instant rewards to build one of the most sought-after loyalty programs. Customers get benefits like free in-store refills and double-star days - these are limited-time promotions during which members earn twice the points for purchases made. Creating experiences like these has enabled Starbucks to attribute 40% of its total sales to the Rewards Program and has seen same-store sales rise by 7%. 

Here are some examples for you to implement instant gratification and surprises for your loyalty club members.

• Unlock a hidden reward on trying a new dish/ product category
• Get a special discount code on eating X pizzas/ buying X dresses
• Earn points by posting on social media, downloading the app
• Get a surprise bonus in points on shopping on a particular day/ store/ time
• Instant complimentary upgrade or offer when the customer is placing their store (Who doesn't love something extra or a discount)

It’s the surprises that keep our mind curious and always make us want to keep coming back for more.

#3: Let customers redeem in-store & online

This one is a no brainer but loyalty programs still don’t offer customers the capability to redeem their points & rewards both in-store and online. Why is this extremely important?

Customers have one relationship with your brand. They don’t think of shopping online or in-store as 2 different experiences.

Post COVID, even more store customers are now shopping online, so the overlap of customers is only increasing.

So the need to have your loyalty program work both in-store and online is a big necessity. If you haven’t done it yet. Please do it yesterday.

#4: Be where the customer is. Run loyalty communications across Whatsapp, Facebook & Instagram too.

Customers are checking their SMS less than ever before. Most phones are now stopping notifications for SMS. I personally haven’t seen a SMS for more than 2 weeks. SMS marketing is dying a slow death in India.

You can see here how SMS notifications are disabled on my phone.

The loyalty program can only be effective if customers see your communications. Customers today don’t remember the loyalty program. In fact, 68% of customers say they tend to forget about their reward, or they see it when they get expired. You obviously don't want that to happen with your loyalty program. Social media can act as your alarm clock here to make the loyalty program effective. In 2021, you have no excuse for not running your loyalty program on Facebook, Instagram & Whatsapp.

#5: Create loyalty journeys for each customer to experience & know the loyalty program

A survey says that 54% of the customers usually don't remember or are not informed about the rewards available to them. I actually believe that’s just positive bias and 90%+ of customers don’t remember a brand’s loyalty program.

According to Time Magazine, you need to repeat something 30 times before you remember it. That’s why it’s not enough to just tell customers about the loyalty program once or just when they make transactions. We need to create journeys for each customer so that they discover the loyalty program over time based on their engagement with your brand.

Here’s an example of a loyalty program journey you can create:

For instance, Mary makes 2 purchases above the minimum spend criteria. You can reward them with loyalty points and a free snack for the next visit. Now you remind them the next week to redeem their points. In the next 20-30 days, you send them persona-based reminders and AI/ML-based recommendations. Between each of these steps some customers are likely to return and purchase from you in order to redeem their points.

Now consider John who visits you for the 2nd time but does not meet the minimum spend criteria. On that particular day you send them a reminder regarding the status of their points and how they can redeem them. As a marketer, you need to keep reminding your customer to redeem their points. Setting deadlines and limited period offers works best to encourage your customers.

By creating a journey like this personalised to each customer, you’re taking the customer from their first purchase to driving their second purchase in a well orchestrated series of communications across channels.

Such journeys not only educate customers about the loyalty program but also enable you to maximize the revenue generated from your loyalty program.

Summary

In summary, if you’re not doing the below 5 things in your loyalty program, you really really need to upgrade your loyalty program right now because these are minimum requirements from customers today.

Here are the 5 minimum requirements again for your loyalty program in 2021:

1. Not just transactions. Offer exclusive experiences & special benefits.
2. Continuously engage customers with instant gratification & surprises
3. Let customers redeem in-store & online
4. Be where the customer is. Run loyalty communications across Whatsapp, Facebook & Instagram too.
5. Create loyalty journeys for each customer to experience & know the loyalty program

In-case you want to upgrade your loyalty program for the customers of today & not the customers of 2010, we’ve just launched the Next Gen loyalty program at Xeno.