There are some brands that consistently command my attention, whose websites I can’t stop visiting, and whose Instagram posts I always find delightful. if I look back, these are the brands who also receive most of my discretionary income on a yearly basis. This relationship between my frequent engagement and my actual spend is the power of loyalty. While loyalty can be won through a number of different methods, including really strong email marketing and great press, it’s important to establish a thought-out loyalty program that focuses entirely on retaining current customers and maximizing their lifetime value.
What is a Customer Loyalty Program?
A customer loyalty program is a marketing strategy that reinforces customers’ interest in buying from and engaging with your brand — that strategy typically combines incentives, rewards, and discounts to drive increased customer engagement, loyalty, and repeat purchases.
A customer loyalty program can take many different forms based on the goods and services your company offers. Before you roll out a membership program or point system, though, you first need a rich understanding of what loyalty looks like for your business and the key performance indicators (KPIs) you’ll use to measure it. Only then will you know what sort of loyalty rewards program to implement.
Here’s a run-down of the most successful loyalty programs. Use these as guidance to improve your customer retention rate, customer lifetime value, and overall customer experience.
Starbucks is a leading retailer when it comes to cultivating repeat customers. While I for one can’t go a day without coffee, I also have plenty of choices when it comes to where I buy it. Therefore, Starbucks’s goal is to ensure that I (and everyone else) walk into one of their locations any time I want a cup, and they rely on their loyalty program in order to make that happen.
In 2019, Starbucks revamped their loyalty program to be a revenue-based model, and offered participants “stars” whenever they purchased that they could then exchange for different perks or rewards. However, the Starbucks rewards program is also tailored to attract a specific kind of customer. For example, the program requires that all members have the Starbucks mobile app on their phones in order to provide members with the perk of ordering ahead and paying for purchases through their phones. It’s important to notice that these kinds of perks need to align with at least one segment of customers that Starbucks is going after — those who are in a rush.
Starbucks is able to stand out to these kinds of customers based on the benefits their program offers, and in exchange, they are able to motivate these customers to download the Starbucks app which the company can use in order to further engage them and share new promotions and deals (and thus further increase members’ loyalty). As of 2019, Starbucks’s CMO said that the program makes 40% of the company’s transactions — that’s a lot of loyal, frequent customers!
Beauty retailer Sephora also depends heavily on their loyalty program in order to keep customers shopping, both through their e-commerce site and their stores. Sephora’s Beauty Insider program, which has been around since 2007, has evolved tremendously since then — most recently in April of 2020.
The company’s program is both a tiered and revenue-driven model. A tiered program means that as members collect a higher number of points (points are based on spending), members can cross into different levels, such as VIB and Rouge, and be granted access to increasingly exclusive products, offers, and events. This type of program is also called gamification, because customers are constantly "competing" with themselves and others to reach the next level. While Sephora recently started to offer points in exchange for dollars off purchases, its goal was always to be very community-driven rather than completely rewards-driven with its program. As Sephora’s head of loyalty points out, their program is meant to instill its members with pride and a way to connect with others similarly passionate about beauty, as seen with the company’s launch of their online Beauty Insider Community in 2017. Though members are able to enjoy tangible benefits thanks to their frequent purchasing, Sephora is a great example of a program focused on the emotional side of loyalty rather than being solely transactional.
Luxury e-tailer Net-a-Porter really started it all when it comes to high-end online experience, so it should be no surprise that their loyalty program is also one for the books. Referred to as EIP (a play off VIP that stands for “extremely important person”), the program is largely focused on offering members unique service offerings. Like most loyalty programs on this list, becoming an EIP revolves around your total spend on YNAP’s e-commerce site. As an EIP, you’re granted your own personal shopper, complimentary worldwide delivery, access to global events, and pre-order service. While all these have monetary costs associated, what the company doesn’t offer is discounts on merchandise.
While there are exclusive sales as part of the membership, YNAP understands that their customer base is not price-sensitive, so that’s not what their program should be about. Instead, the objective is to make shopping a fun, easy adventure into what’s new and exciting across the globe, making it easy for customers to find new products and obtain them as quickly as possible.
TOMS, famous for its “one-for-one” model, offers a multi-faceted loyalty program that further stresses its mission to provide everyone in the world with a reliable pair of shoes. While, like other programs, members can redeem points for discounts, exclusive promotions, and free shipping, the program also offers its members the choice to “donate” their points in order to further fund the company’s charitable efforts. Members are also able to earn points not just for spending money, but for showing other signs of approval and brand loyalty, such as simply sharing their emails or connecting with the company over social media.
These types of activities are baby steps toward purchases because the more a company can know about its customers, the more data it has to determine the best way to market products and services to them and increase the likelihood of purchase in other ways.
How to Start a Customer Loyalty Program
Your loyalty program does not have to be as advanced as the retailers named above — in fact, it doesn’t even need its own landing page on your website. A loyalty program just needs to be a set of ways that you encourage and thank your customer base for sticking with you. Thankfully, with today’s technology, it’s never been easier to launch a customer loyalty program. Answer the questions below to help you get started.
1. Who you are trying to reach?
The first step in building a good loyalty program is to analyze your customer data so you can understand what your top customers are already doing. One strength of the programs listed above is that almost all of them take into consideration what customers do both online and offline. In order to understand your customers’ shopping patterns though, you should first equip yourself with a unified CRM. With a unified CRM, you’ll be able to determine trends in your customers’ activities that will help you figure out what kinds of customers to target with your program.
2. What behaviors are you trying to encourage?
As you study your customers, you may notice that your most loyal customers are also the ones who have crossed a certain spending threshold, those who have also signed up for your newsletter, or maybe those who follow you on Instagram. Once you notice these patterns, you can use your loyalty program to encourage other customers to do the same. Another strong behavior to consider is customer referrals — if you notice that some of your top new customers came from someone else, the smart thing to do would be to incentivize current customers to refer others.
3. How should you reward those behaviors?
As you can see from the list above, there are different types of reward programs beyond giving a discount. Like Starbucks, ask yourself what problems your customers have and find a way to make your rewards solutions to those problems. The problem for some may be that they don’t have the money to buy as much of your product as they want, but for others, like Sephora’s customers, the problem is not knowing how to find other people as obsessed with beauty as they are. It’s important to think about your customer profile in order to make sure that your rewards are enticing enough to bring about the behaviors you’re seeking.
4. What tools will you use to monitor and reward these behaviors?
Once you know what activities you want to see from your customers and how you want to reward them, it’s time to execute. Fortunately, there are tons of loyalty apps out there that you can count on to help you launch your new program, but make sure that they support what you’re looking for and the tools your customers may need, like a loyalty card. For example, if you are looking for tiers, make sure that the app has a way to automatically notify you and the member when they’ve reached a new tier; if you’re offering discounts, make sure the app has a simple way to create and track the relevant promo codes.
5. How will you tell your customers about it?
Once everything is in place, it’s time to get customers to join your loyalty program. Of course, a landing page on your website is a good start, but you also want to make sure that you’re constantly informing your customers about your new program. Spreading the word about your loyalty program is a great task for your sales team. If you have salespeople, they likely talk directly to customers more than anyone else at the company.
With Endear, they can share the news about your program with the customers you think are already most likely to join, and continue to guide them through the sign-up process by answering any questions they might have about the program. Better yet, similar to Net-a-Porter, you can even incorporate your salespeople into your loyalty program, ensuring that members will always have a direct line to a local or digital product expert they can text or email whenever they’d like.
To learn more about Endear and how it can help you run your loyalty program, you can visit us on our website or reach out to email@example.com.