Three tips for maximizing the value of loyalty programs

Jennifer Ortner
Vice President, Sales
Jen has decades of experience working with some of the world's largest brands to build and redefine businesses across CPG, Retail and Digital Media & Promotions.

Everyone’s after loyalty, particularly in the race for more first-party data. But as more companies chase the many benefits promised by loyalty programs, more limitations surface. As it turns out, “if you build it, they will come” doesn’t quite ring true when it comes to realizing loyalty’s full potential. Let’s examine how you can tackle some of its challenges and reap more of its benefits.

First, the good news.

There’s plenty of reasons to go all-in on loyalty. Whether you’re inviting your customers to rack up points or redeem discounts, some serious benefits await those who win at nurturing strong brand affinity and fidelity. Why do loyalty programs have such serious marketing appeal? 

Increased basket size

  • 43% of customers spend more money at brands they’re loyal to (Fundera)

Optimized marketing spend

  • Building a long-term business relationship with a new customer is 16x more costly than cultivating the loyalty of an existing customer (Annex Cloud)

Accelerated new customer acquisition 

  • Customers who participate in high-performing loyalty programs are twice as likely to recommend the brand to their friends (3TL

In addition to these well-documented benefits, new changes in privacy laws and the disappearance of the third-party cookie have drastically increased the value of first-party data. Since customers choose to participate in loyalty programs, they’re a source of first-party data, helping brands create a privacy-safe data repository in preparation for the loss of third-party tracking. 

Now, the drawbacks.

For starters, retailers across verticals have made strong investments in loyalty programs, so market saturation makes it difficult to differentiate these programs. And in practice, not everyone participates. The highest penetration rates for loyalty programs hover around 40-47% despite the push for adoption across verticals (Mercator Advisory Group). Most recently, Panera made a triumphant surge past Starbucks with 40 million members—a 50% penetration rate.

As a result, even if you achieve relatively high penetration, you’re still missing about half of your customer base when it comes to leveraging first-party insights for personalized messaging and offers. In other words, despite their tangible impact on sales and the theoretical promise of first-party data, loyalty programs alone can’t power a full-funnel marketing strategy.

Plus, consumers have become more selective with their loyalty since the pandemic. According to a study by Accenture, 77% of all consumers admitted they now retreat their loyalty more quickly than they did three years ago. 

From the consumer perspective, loyalty programs come with two big flaws. Consumers are less and less comfortable volunteering personal information, and they also don’t want to take extra steps to manage rewards. In fact, according to Think With Google, 53% of shoppers surveyed think their shopping experience would be better if a retailer’s loyalty or rewards program activated automatically at checkout.

Keep it simple & reap more rewards

So, how can you minimize the drawbacks and enhance the value of your loyalty program to meet your customer engagement and revenue goals? In short, it’s all about eliminating friction. Take Starbucks, Amazon and Sephora, for example. They have all made loyalty a mobile affair to allow for seamless participation. Amazon Prime, for its part, puts frictionless convenience front and center via one-click checkout. For brick-and-mortar retailers without an ecommerce component, mobile or otherwise, explore these alternatives for eliminating friction and encouraging continued engagement.

Tip #1:  Go beyond points

Focus on capturing easy wins by rewarding online engagement. One way to make participation easier on members is to reward a wider range of behaviors, including those that already fit into their digital habits. Consider behavioral and social incentives – like rewarding members for writing reviews, tagging friends, sharing content, answering questions, etc. And don’t forget to match their efforts as a brand—57% of people would stop using a brand if their negative review is left unanswered (Fundera).

Tip #2: Make redemption seamless

Consider technologies that simplify the redemption process. For example, if you don’t have a POS integration, you can still engage loyalty members directly with receipt scanning. New receipt scanning technologies allow customers to upload photos of their receipts to earn and claim rewards. You gain purchase behavior insights in a process that’s simple for your customers to manage.

Tip #3: Or better yet, turn credit cards into loyalty cards

If you want to reap the benefits of a loyal customer, what you’re after is a strong brand affinity, not necessarily a formal membership (which many consumers dislike anyway). What if you just rewarded customers without making them take any extra step? No signing up, logging in or tracking points. 

Now, you might be wondering if such a proposal even qualifies as a loyalty program at all. Enter stealth loyalty, a process by which you dole out the rewards for targeted behaviors without making anyone formally “join” anything. All the positive customer experiences, none of the hassle. How do you pull it off? By using the data you already have–abbreviated card information–to track and reward their in-store behavior.

Find the full potential of your loyalty program with POS data

We help our clients identify the individual customers behind a transaction leveraging card-related data to build anonymous, privacy-safe profiles with SKU-level purchase history and hundreds of customer attributes that power analytical and marketing purposes. Credit and debit cards become loyalty cards, meaning you can reward purchases without asking anyone to sign up, take extra steps or deal with a redemption process.

Want to learn more about how POS data can help you enrich your loyalty acquisition and penetration efforts? Check out our whitepaper here

Have more questions and would like to talk? Connect with us today!