It was in my senior high that I had a sprint race coming up. My hard cheese, I didn’t have a cleat then. Trust me, that moment transformed the way I looked at TOMS’ customer loyalty program. A simple race pricked my soles beyond imagination, then envision what life must be without shoes. And really, TOMS’ knows how to build a stellar customer loyalty program.
Its loyalty program of gifting a pair of shoes for every one pair bought had honestly sparked in me a special affinity towards it. In fact, besides buying shoes for me, I’d even go to the extent of recommending my kith and kin to purchase from TOMS.
Yes, I’m captivated by TOMS’ loyalty program.
What about your customers? Are they smitten with your loyalty program?
Answering in the negative? Or worse yet, don’t have a loyalty program in place?
Don’t worry, I’ve got you covered. I’ll show you the ropes of how to build a customer loyalty program to build your kingdom of loyal customers for your retail business.
But before that, a few basics...
What is a Retail Customer Loyalty Program?
A retail customer loyalty program is a ‘rewards program’ created by retailers for customers who make frequent purchases. The retail customer loyalty programs can come in a variety of shapes and sizes.
However, the key differentiating factor is that customers get fringe worthy discounts and perks in exchange for purchasing regularly.
In fact, an interesting finding states that 81% of customers continue to do business with brands when they are engaged in a customer loyalty program. What’s more, 66% of customers would even alter their spending behaviour just to maximize their loyalty benefits.
Having said that, many retailers are on the hunt to constantly churn out offers and rewards to entice their customers. While customer loyalty programs are essential, they must be the icing rather than the cake itself.
So, the name of the game is to get your customers to love your brand for what it truly is. This is how you can earn loyalty. Moving further, when you give your customers more offers, to thereby, spend more time and money with your brand, you are buying their loyalty.
Before I teach you how to build a retail customer loyalty program, you need to consider winning earned loyalty before bought loyalty. Let me walk you through those steps.
How to Build Customer Loyalty in Retail in 2021?
- Strive to align your brand’s value with that of your customers
- Exceed the expectations of your customers
- Give an innovative and novel experience to your customers
- Let your customers enjoy that little extra bit
1. Strive to Align Your Brand’s Value With That of Your Customers | Earned Loyalty Stage 1
At its cornerstone, your brand purpose must resonate and align with that of your prospects. And you must demonstrate your ethos in all you do and say. This will ensure to keep you relevant and favoured among your customers, helping you weave an emotional chord.
When Starbucks avoided its tax, it honestly didn’t do any favours for its brand, rather tarnished it well. For their act was totally against their core values of connecting with transparency, dignity, and respect. Starbucks is still recovering its reputation slump after the massive boycott, and yet many customers haven't returned to its cosy caffeine hub.
The takeaway from Starbucks’ episode is to reflect on your brand position and examine if it’s truly aligned to your target market. This is the first stage of earning customer loyalty.
2. Exceed the Expectations of Your Customers | Earned Loyalty Stage 2
To earn customer loyalty, ensure that your value proposition is spot on. It must join forces with your customers’ desires and needs. If not, no matter what you do, your customers aren’t going to come back to your brand for more.
Yep, that’s the hard truth.
As a case in point, I shall narrate to you an experience of Soho’s customer. He walked into this very reasonably priced all-you-can-eat buffet. The catch, the quality of the food was gruesomely disappointing to the point that he got resentful paying the reasonably priced tag.
The real kicker came at the end when he was handed a half-priced voucher for his next visit.
Do you think he would ever go to Soho to redeem it? You be the judge.
3. Give an Innovative and Novel Experience to Your Customers | Earned Loyalty Stage 3
Now, this is the last phase to earning customer loyalty in retail - giving your customers an innovative experience with your brand, something that they don’t acquaint in their daily routines.
To get your customers regularly interact with your brand, you need to meet their wants and needs and deliver them in a place that’s convenient to them (either e-commerce or brick-and-mortar store) in a way that’s in sync with their tastes.
For illustration, let’s consider a scenario wherein you go shopping with a huge bucket list. And let’s say you can’t find your way in the mall and you get frustrated.
Darn it!
The brand has not only lost a possible purchase that day, but it has also forever lost your loyalty.
To avoid hassles such as these, Target uses beacons to help shoppers find their way through their stores. Target’s application helps customers locate the products on their shopping list in real-time, just like Google Maps.
Sweet!
Now, that's an innovative shopping experience, sure to earn customer loyalty.
4. Let Your Customers Enjoy That Little Extra Bit | Bought Loyalty
We’ve finally reached the funnel wherein we are ready to generate bought loyalty. So, this is the stage wherein you shower your customers with incentives, rewards, and surprises to stimulate repeat purchases.
While there are really good loyalty programs out there, I admire Sephora’s Beauty Insider rewards program (besides TOMS’ that is).
Did you know that Sephora’s loyalty program boasts more than 17 million loyal members? Into the bargain, members contribute as much as 80% of Sephora’s annual sales.
The secret sauce behind Sephora’s successful loyalty program is its structure. Yes, Sephora runs a traditional point system. But what’s interesting is the fact that Sephora allows its customers to choose how to use their rewards.
This is a real demonstration of giving customers that little extra bit, considering that Sephora’s products are over the odds. What’s more, by giving the choice to its customers, Sephora isn’t devaluing its products, rather, it gives its customers an enticing gateway to get what they yearn.
As you’ve read, it’s really a simple equation to build strong customer loyalty. Three facets to generating earned loyalty and one facet to generating the bought loyalty. So, keep this 3:1 ratio in mind when I show you how to build a customer loyalty program for your retail business.
How to Build a Customer Loyalty Program for Your Retail Business in 2021?
- Understand your current customers
- Fix your goal
- Choose an impactful name
- Determine the rewards to give
- Settle on a type of loyalty program
- Allocate a budget
- Offer incentives as starters
- Ramp up a game
- Extend multiple opportunities for customers to opt-in
- Measure. Rinse. Repeat
1. Understand Your Current Customers
Before you commence a loyalty program, you must assess the expectations of your customers. You can do this by conducting surveys, interviews, etc.
So, first, discover what your customers expect and gauge their willingness to join your loyalty program. This step is crucial in estimating whether your campaign would be welcomed by your consumer base or ignored.
2. Fix Your Goal
Determine what you want to achieve with your loyalty program. Layout your purpose and the expected results. It could be anything or something as in the following lines:
‘I look forward to an increase in sales.’
‘I want more traffic to my e-commerce site.’
‘I anticipate endorsing a greater brand reach.’
Irrespective of whatever your expectation is, make it clear and discuss with all the stakeholders involved. Once you are all on the same page with the definitive directions of what you would achieve with the loyalty campaign, you can steer in the right path.
3. Choose an Impactful Name
The name of your loyalty program must be intriguing enough to incite curiosity. This interest must trigger your customers to participate. But mind you, your program must be distinguished from the bunch of other loyalty programs that your customers are probably already a part of.
The bottom line, however, is that your rewards program name must go beyond explaining that your customers would be incentivized. My favourite loyalty rewards program names include Domino’s Pizza’s ‘Piece of the Pie Rewards’, and Baublebear’s ‘The Vault’.
These clever names hint at some exciting benefits but don’t give them away. Thus, customers would be curious to learn more and also join the program.
4. Determine the Rewards to Give
Always remember that your rewards must bring value to your customers. Post the research that you make to understand your customers’ expectations, choose the appropriate rewards.
Only when your incentives are beneficial to your customers, your business would continue to run on profits. To help you get started, you can consider the following options:
- Offer discounts for VIP customers
- With multiple purchases, giveaway freebies
- Reward customer referrals
Identically, to give more value to your customers, offer them different rewards other than mere discounts on products.
To enumerate, let’s take customers who spend at a specific threshold or those who have earned enough loyalty points. You could allow them to turn that in for free tickets to entertainment or a free subscription to additional products, or even consider donations in their name to a charity of their choice.
5. Settle on A Type of Loyalty Program
You need to concur upon a loyalty program type that will help you achieve your goals. For instance, if you want to augment footfalls to your retail store, you can launch a point type that requires check-in and sharing.
On the flip side, let’s say you want to increase the value per order. Then, you might want to consider a spend-based loyalty program with a cashback policy.
Following are the list of loyalty program types that you can leverage for your retail business.
- Point-based loyalty program
- Spend-based loyalty program
- Tier-based loyalty program
- Value-based loyalty program
- Partner-based loyalty program
- Game-based loyalty program
- Premium loyalty programs
By the same token, you’d do well to reward other customer actions that demonstrate brand engagement. Maybe, they could share your social media content or bring in referral customers - you make it a point to reward them for their actions.
6. Allocate A Budget
Before you put your hand to the plough, consider how much you can roll out for your whole loyalty program. After all, it is meant to increase your profits, not bankrupt you. As a thumb rule, you can separate the budget for retaining existing customers and for targeting newer folks.
In action, however, you need a formula, right, to determine the cost and its net gain?
Well, to evaluate the ROI of your loyalty program, simply, subtract incremental revenues by incremental costs.
The following points illustrate what comes under incremental revenues and costs.
Incremental Revenues
- Ancillary revenue
- Increased purchase volume or frequency
- Low customer churn rates
- Higher customer referral rates
- Greater participation in premiums
Incremental Costs
- Cost of perks and soft benefits
- Rewards redemption
- IT investment and maintenance
- Marketing
- Payroll, staffing, and other business overheads
- Contracts
- Surveys and research
7. Offer Incentives as Starters
In a stance to heat your newly launched loyalty program, you can endorse one-time starter incentives. The goal of running this perk is to motivate customers to opt-in. So, keep these incentives very simple and also very easy to win.
Let me narrate to you an example for illustration.
‘Gain 50 points upon signing up in-store.’
Or...
‘New customers avail 10% discount in-store’
The options are endless. Brainstorm to determine what works best for your brand. But ultimately, keep these starter incentives as supportive steps that engage customers quickly to set off the loyalty program rapidly.
8. Ramp Up A Game
Games and competitions are always thrilling. So, why not use that winning spirit to get your customers interacting with your brand more frequently?
Trust me, you can gamify your customer loyalty programs and earn valuable engagements. You can choose to host these games either within your app or e-commerce site or in your store.
Here’s an idea to give you a leg up. Conduct treasure hunts in-store. Post the COVID-19, as customers are resuming to normalcy, this is one foolproof way of giving your customers a reason to visit your retail shop.
So, your customers can come to your store, and be notified of a product hunt either via digital signages or via the loyalty application. Your customers can complete the challenges given by scanning product barcodes or typing in the offer codes on the product price tags. And whoever comes first, could be announced the winner, with a brownie point!
Be sure to try this out! It’s so much fun and honestly, if you run such a loyalty campaign in your apparel retail, I’d make myself at home at your shop :)
9. Extend Multiple Opportunities for Customers to Opt-In
Hammer it home by relaying multiple opportunities on how to join your customer loyalty program. Take the extra step, and educate your customers about the benefits involved.
As a case in point, let’s imagine that your loyalty program allows customers to get rewards for purchasing from your online store. Here, you could specify the points that your customer could earn, when he makes that purchase, on the price tag.
You see, this is much similar to the loyalty rewards that airlines offer. The air hostess might announce that you might bag 25,000 miles on your next flight if you apply to that airline’s credit card.
Other means of promoting your loyalty program can include social media marketing and on-site push notifications when your customers perform a transaction that earns them points.
10. Measure. Rinse. Repeat.
Once your loyalty program is up and running, you must listen to the feedback of your customers and analyse the data report to assess whether it was successful or otherwise.
Take stock of what works. Learn from your mistakes. And repeat the same when you launch your next loyalty program.
If you are wondering if all this labour is worth it, let me reveal to you the benefits of customer loyalty programs in retail.
What Are the Benefits of Retail Customer Loyalty Programs?
- Say goodbye to competing on price with your competitor
- Retain your existing customers
- Increase the lifetime value of your customers
- Weave an emotional tug
- Welcome brand advocates
1. Say Goodbye to Competing on Price With Your Competitor
In just a few clicks, your customers can compare your price with that of your competitor. If your customers are only coming to you for your products, instead of your brand, then brace yourself for a pricing race to the lower rung.
Really, if you fail to heed the insights on how to build a customer loyalty program, only larger stores like Amazon will win.
That’s why you should embrace your customer loyalty programs. They will urge your customers to look at your brand beyond the price tag. It’s one way to emotionally connect with your customers.
Most compelling evidence is seen from studies that reveal how the purchase decisions of customers are highly emotional.
Halt now, and ask yourself if your customers come to you merely through necessity or desire. If it’s the former, then you need to work on appealing to the emotions of your customers.
At this instance, strive to fabricate customer loyalty programs. They will prove to be an effective means of surprising and delighting your customers - rewarding them for anything that went unnoticed previously.
So, understand that each time you reward your customer, you are appealing to their emotional side, and thereby, you are forging a bond. When this relationship starts to flourish, your customers would look at you like family :)
After all, it’s not without reason that 81% of emotionally connected consumers help spread your brand.
2. Retain Your Existing Customers
You can’t ignore the fact that loyal customers spend 67% more on average than new ones. And what’s more, acquiring new customers can cost you at least five times more than retaining your existing customers.
These data points show how important a customer retention strategy is for your retail business. So, leverage customer loyalty programs and give your customers a reason to keep coming back to you and spend more.
In the long term, as you transform your existing customers into loyal ones, you will see your loyalty program soaring high.
3. Increase the Lifetime of Your Customers
Put simply, customer lifetime value is the net profit that is attributed to the overall relationship you maintain with your customer. This is the metric that helps you track how valuable your customers are to you and how much this ongoing relationship is worth in the fortune.
We have a blog on ‘How to measure CLTV?’, where we cover all the basics.
In fact, with our customer engagement platform, Ingage, you get deep insights based on their shopping behaviour. You might wonder how to actually collect and store and garner insights with customer data. That’s where your loyalty programs can assist you.
It helps you collect data on a customer’s unique buying habits. You can store all of this on Ingage, and with all the stats and AI-driven algorithms we run, you can take a call on where your customers are in their lifetime value with your brand.
Making sense of this colossal data can help you translate the knowledge into rewards for each step of your customers’ journey. Thereby, you can increase the lifetime value of your customers too.
4. Weave an Emotional Tug
Show how much you value your customers to create this emotional bond. How do you do that?
Data.
Order history, visits, and referrals are all crucial metrics of customer-brand engagement. Having an insight into who shops with you is a huge boon from loyalty programs. This is because this strategy helps you better tailor your service to their needs.
Oftentimes than not, retailers make the mistake of segmenting customers into one or two categories. As a result, your customers can greatly feel under-valued.
I’m sure you know the various segments of customers beyond the generic ones. In case, you need additional insights, please refer to our blog on customer segmentation.
You will understand that there exists a segment of customers who are constantly on the go, to form a genuine bond with your brand. A point often overlooked, 66% of people will join your loyalty program only when it builds upon an ongoing rapport.
So, use the opportunity that loyalty programs give you and forge an emotional bond.
5. Welcome Brand Advocates
I’ll be honest.
Your most valuable customers aren’t only the folks who roll out more cash on your products. They’re also the ones who generate it, actually.
I fondly call them, brand advocates or brand ambassadors or brand evangelists. Believe me, they are the ones who’ll refer your brand to their friends and family.
Wondering how a loyalty program fits into this context?
Well, loyalty programs do the trick of building a web of these brand advocates. This verily works like a two-way reward system. On one side of the spectrum, you reward your customers for their repeat purchases, while on the other end of the spectrum, your customers do you a greater favour by advocating your brand.
Did you know that 86% of loyal customers engage with your brand by spreading the word?
So, here’s how you can savvily turn the odds in your favour. When your customer refers their kin, you can give your ambassador points, and the referral a discount off his first purchase. Both these incentives are naturally different, but they both work synchronously to bring in new customers and keep existing ones loyal to you.
That’s what I address as a win-win situation.
Retail Customer Loyalty Program - Case Study
When you launch your retail loyalty program, you are sure to run into hassles. But don’t lose heart.
I’m going to share crisply how Al-Ghurair, one of our customers, using Ingage, overcame all its hurdles to establish its loyalty program.
Our customer, Al-Ghurair Retail, is at the forefront of some of the world’s exquisite apparel and personal care brands. The venture boasts footprints in UAE, Qatar, and Kuwait, with over 40 stores, 3 growing markets across GCC, and two leading retail brands – Springfield and The Face Shop.
Al-Ghurair already had its loyalty program, Hadiya, in place. But unfortunately, the retail loyalty program was such a complicated one that customers found it hard to redeem their points. Into the bargain, Al-Ghurair had limited insights on its customer behaviour wth minimal capability for launching targeted customer campaigns.
That was when Al-Ghurair reached out to us and onboarded our AI-driven, easy to use customer engagement platform - Ingage.
The results?
- 50 basis points increase in the monthly redemption ratio
- 16.4% product recommendation campaign response rate
- 20 basis points increase in loyalty sales in a year
- 13x increase in results for app downloads
Honestly, even I was blown!
Irrespective of how big or how small your retail business is, customer loyalty programs are the building blocks of sturdy customer loyalty.
Follow the steps above. I’m optimistic that it will help you develop an effective retail loyalty program for your brand.
Ready to create your own customer loyalty program in a matter of minutes? Try Ingage!
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