Loyalty program in the retail industry. How to offer a better customer experience

The need for a distinctive and attractive loyalty program among retail companies has grown significantly over the past few years. This has been driven not only by the ever-increasing and intensifying competition in the retail market, but also by the recent economic crisis and the associated growing need for savings among consumers. Gartner reports that already more than 70% of retail brands are using loyalty programs to boost business performance. With personalized loyalty programs, retailers are providing regular customers with the best prices and excellent customer service. What should you go for when creating a consumer loyalty program?

Loyalty program in the retail industry – characteristics

The retail industry has a very high value in the market. It consists of a multitude of entities and millions of customers. Therefore, in this case, loyalty programs usually operate on a very large scale. It is becoming standard in the industry to simultaneously use several channels in which consumers are active. The distinguishing factor in the retail industry is primarily the frequency of customer contact with the brand.  In clothing stores, customers shop several times a month, in grocery stores – even several times a week, and online even more often.

This translates into the ability to better and more accurately tailor content in a loyalty program. The more transactions, the more data from which the retailer can refine its strategy. Consumers are eager for loyalty programs – research shows that the average shopper now has more than 16 loyalty programs on their mobile device.  Retailers are doing a tremendous amount of work every day to enhance the in-store shopping experience and provide loyalty offerings that meet consumer demand. What does this mean in practice?

Key elements of customer loyalty programs in retail industry

Building customer loyalty is a complex process that requires continuous optimization. A loyalty program should be created with the conditions, challenges and requirements specific to a particular industry, in this case retail. An effective loyalty system goes beyond a purely transactional relationship and ensures that the customer includes a particular company in their purchasing decision funnel because of the value it offers. Customers expect flexibility – free shipping, no cancellation fees, extended return periods. These are factors that make shopping with a particular brand or retailer much more convenient. Here are some considerations to take into account when creating a loyalty program:

Personalization

To provide targeted recommendations and personalized promotions, marketers should focus on understanding demographics, purchase history and individual preferences. Tailoring offers to individual needs makes customers feel valued and understood, which strengthens the bond with the brand. 

But don’t forget that customers are increasingly aware of the value that their personal data represents to companies. As a result, they expect companies to protect and use their data responsibly. Retailers must show appreciation to customers for the information they provide and offer them additional value in return.

Point of sale integration for omni-channel capabilities

A loyalty program today is synonymous with automation and omnichannelism. As a result, it is necessary to integrate it with point-of-sale and cash register systems so that it can identify the customer everywhere. The integration allows data to be transferred on an ongoing basis between the POS system and the loyalty program. This ensures that any changes to the loyalty program, such as new offers or changes in terms and conditions, are immediately available in the checkout system. The integration also makes it possible to automatically track customer transactions without having to combine different data from several channels.

Mobile App

The mobile app is now the company’s main channel of contact with customers. It makes it possible to send push notifications about new promotions, sales or special offers, and thus reach the club member beyond the transactions, at essentially no cost. For customers to want to use the available solution on a regular basis, the app must first and foremost provide value to users. In this way, they will feel the need not only to install it to show the virtual card while shopping, but also to use it regularly. The application should include not only basic functionalities such as the aforementioned virtual card or transaction history, but also additional facilities to facilitate participation in the program and improve the customer experience, such as click & collect shopping, mobile payments, an up-to-date promotional newspaper or a price scanner, among others.

Addressing customer expectations for rewards

It is hard to imagine a loyalty program without rewards. A reward does not always have to mean a material object. Modern loyalty programs adapt to customer expectations and increasingly offer rewards in the form of cashback or discounts on subsequent purchases. In this way, the customer feels that he or she is getting the most out of the reward. The more valuable the rewards, the more difficult they are to earn, which can sometimes translate negatively into engagement. There is no one-size-fits-all reward. The most important thing in selecting a rewards catalog is to tailor it to the specifics of a particular industry and to put customers and their individual needs at the center.

Advantages of retail loyalty program

The advantages of running loyalty programs are many, as we wrote about, among others, in the article “Loyalty program from the organizer’s point of view. 5 benefits for the company”. However, it is worth adding that loyalty programs are an effective instrument for supporting sales processes. Thanks to it, the company gains a competitive advantage. It has access to valuable data on its customers. In this way, it can reach out to the recipient, respond in real time to his needs and – with the right mechanics – encourage the desired behavior.

The right loyalty strategy not only ensures an influx of new customers, but allows it to retain those once acquired. In addition, analysis of available data makes it possible to identify typical behaviors of customers at risk of leaving. The use of direct communication models helps find the optimal timing, channel and content of the anti-churn message. The model can also identify a good enough offer for a given customer. In this way, the brand acts proactively and can take antichurn action in a timely manner.

Why do retailers build customer loyalty?

Recently, loyalty programs have become a necessary part of marketing efforts. They are an expected aspect of the customer experience and serve to secure a given company’s market share. A retailer is an intermediary connecting manufacturers with customers. This special position forces him to constantly juggle between the manufacturers’ offerings and customer expectations. With a loyalty program, he can respond to the challenges of suppliers while at the same time aligning himself with the needs of consumers with his offerings. You can read more about the reasons to invest in loyalty in one of our articles.