Features, Next Generation

Traditional Loyalty Programs are Passé, Here’s What’s Next

Card-based customer loyalty programs in the retail industry–LOL. These days most customers that belong to nine additional loyalty programs with different retailers, and few consumers have the wallet room or inclination to cart around 10+ punch cards. Not to mention the irritation customers experience to the checkout line delays when someone is rifling around in their bag for their loyalty card for 30-minutes because they’re just one punch away from a freebie.

There’s really no excuse for retailers to subject their customers to irritating card-based loyalty programs. They’re old-fashioned, unprofessional, and they can wind up alienating the customers they’re meant to recruit. Plus, there are simply too many viable alternatives that are easier to use. Let’s review a few of them.

App-Based Loyalty Programs Are a No-Go

Less than one-third of customers want to access retailers’ loyalty programs via app according to a 2108 Code Broker study. The reason? Customers have a limited amount of space on their smartphones and they don’t want to use all of their storage space on loyalty apps from retailers they may only visit once every few weeks. Plus, similar to card-based loyalty programs, no customer wants to try to find an app and get to the right page to scan their discount when there’s a line of people behind them. At this point, you’re probably making a mental list of major retailers with successful loyalty app functionalities. But successful loyalty apps such as Starbucks and Ulta are the exception, not the rule. Apps that build up a devoted following come from major brands with enough liquid capital to take risks by implementing the latest tech trends. Starbucks and Ulta’s apps provide consumers with a whole lot more than just basic rewards functionalities, including:

  • AR-enabled virtual try-on
  • A streaming social media image gallery
  • Member-only deals
  • In-app pre-ordering
  • A store locator
  • Personalized offers (not everyone is willing to subject their body to a daily Frappuccino)

And the list goes on. So, while it’s true that app-based loyalty programs can become an asset, most won’t. They simply aren’t convenient enough to use to merit a large following, and if a brand’s app only has basic loyalty functions, it isn’t innovative enough to set them apart from the competition.

SMS Messaging Can Start a Dialogue

Phone number and text message-based loyalty programs are another story entirely. The future of marketing is mobile. In fact, 75 percent of customers would engage more with loyalty programs that are mobile-friendly. Text messaging is a great option for mobile marketing and 90 percent of all text messages are read within three seconds. SMS-based loyalty programs actually reach the consumers they’re designed to target, with 47 percent of customers targeted via SMS eventually making a purchase. Retailers that span the gamut – from Nordstrom’s Nordy Club to Walmart’s Jetblack member’s only service – are rolling out loyalty programs that enable customers to order products and to interface with store employees/personal stylists through SMS. Of course, it’s important to give consumers the choice to opt-in (or opt out) of text message marketing since sending a barrage of unsolicited texts to customers’ smartphones will turn them off faster than you can say “Privacy Invasion.” Customers need to feel like the brands they patronize understand their lifestyles – which are highly mobile – to be interested in engaging with that brand beyond the storefront, and customers are most likely to respond to marketing materials when they’re asked for their input.

Text message marketing is also particularly effective for retargeting customers to remind them about their abandoned online shopping carts, and SMS marketing is also a high-response tactic for retailers to generate customer feedback. Once a retailer starts a dialogue with a customer via SMS they can easily send over a text message survey that the customer can fill out for a small discount on merchandise from their store or online catalog.

Influencer Programs Equal User-Generated Content

It’s hard to say the word “influencer” without someone materializing out of left field to disparage the Kardashians. But influencer marketing goes a lot deeper than the (inexplicably) famous family, and retailers can use consumers’ desire for internet fame to create a community of brand advocates from their existing customer base. Forbes suggests thinking of influencer marketing programs as “elevated rewards programs,” and I’d take this a step further to suggest that an influencer marketing program should be a hybrid rewards program/user-generated content campaign. Think about it like this: 40 percent of retail revenue comes from repeat purchasers, and repeat purchasers convert at nine times that of the average customer. Retailers can achieve impressive results by offering this core group of consumers tiered “influencer” discounts and rewards for sharing images of themselves wearing products on social media. Take Barneys New York, which launched an influencer program in April which, in addition to more traditional loyalty services, lets customers spend to earn access to private designer events, complimentary beauty and salon services, and restaurant experiences at Fred’s Restaurants– Barneys’ in-store restaurant.

It all comes down to activating those key customers. On average, firms generate $5.20 for every dollar spent on influencer marketing and no matter what your sentiments may be about the Kardashians, that kind of ROI is nothing to sneeze at. After all, why should retailers pay to have their ads shown to potential consumers on social media page when they can activate their existing customers through an influencer loyalty program to have their products modeled, photographed, and streamed on potential customers’ social media feeds for free?

VR, AR, and 3D Printing Help Retailers Customize Loyalty Programs

Just when it seems like most retailers finally have put some type of personalization initiative in place, consumers are demanding more and suddenly personalization is no longer enough to cut it in today’s retail marketplace. Forrester reports that the biggest challenge retailers face in creating successful loyalty initiatives is personalizing offers, content, and experiences. And customers expect more than just personalization nowadays-they demand customization with advanced capabilities that let them design the products they purchase through methods such as 3D printed shoes and jewelry. Augmented and virtual reality are also informing customer expectations for customized shopping experiences. Macy’s rolled out the largest retail VR program to date just last year. Macy’s “See Your Space IRL” platform uses augmented reality to superimpose scaled images of furniture in customer’s living spaces, reducing return rates to less than two percent and increasing sales by a whopping 60 percent (over non-VR furniture sales.) In addition, AR-enabled try-on apps such as Dressing Room by the Gap will come to be the new standard and they can be a strong asset to fledgling loyalty programs.

Seamless Loyalty

It’s high time for retailers to trade in card-based loyalty programs for phone and SMS messaging. Customers don’t expect to have to do more than just enter their phone number at checkout nowadays… and tracking their purchase and point history falls on retailers’ shoulders. This means that retailers need to partner with different loyalty solution providers than the ones they’ve been using for years in order to provide phone number-based or automatic loyalty tracking programs, or they may need to purchase loyalty add-ons to update their existing software. Admittedly, innovation is never a completely convenient or seamless process, but it’s necessary for retailers who want their loyalty programs to impress customers instead of deterring them. To the innovators go the spoils!

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