Consumer loyalty is changing faster than ever, and marketers must shift their strategies to maintain a competitive advantage. One way to do this is to rethink how your brand views and rewards loyalty from your biggest fans.
An easy way to incorporate customer-first thinking involves building loyalty programs. If you currently offer an incentive to your consumer base but are still waiting to see actionable results, it might be time for some fresh loyalty program ideas to kickstart interest in your brand in 2023.
The past three years have represented a historic shift in brand loyalty, with 39% of consumers saying they have changed brands or retailers and 79% saying they intend to explore options in the “new normal.” Modern marketers need to rethink the tools of the past and design new and engaging loyalty strategies.
What is a Customer Loyalty Program, and Why is it Important?
A brand loyalty program is a dedicated marketing strategy designed to incentivize consumers to become repeat purchasers and to develop a positive and lasting relationship with the brand.
A successful loyalty strategy can work wonders in insulating your brand from losing consumers during downturns while increasing purchase frequency and basket size. In addition, they can:
- Drive revenue – Loyalty leaders grow revenues roughly 2.5 times as fast as their industry peers
- Reduce acquisition costs – It can cost five times as much to attract a new customer than to retain an existing one.
- Increase lifetime profits per customer – An increase in loyalty of 5% lifts lifetime profits per customer by as much as 76%.
- Generate brand advocacy and word-of-mouth – 70% of consumers say they are more likely to recommend brands with good loyalty programs.
However, a glaring problem for marketers is developing loyalty program ideas that won’t fail on launch.
Traditional loyalty programs rely heavily on purchase-based incentives, like discounts, gifts, or cash back, which can slowly turn your customers into Transaction Drones who will quickly abandon you when the tap turns off. Research from Capgemini showed that a whopping 77% of loyalty programs that use transactional rewards fail within the first two years.
What Features Should a Good Loyalty Program Have?
Today, winning at loyalty involves emotional engagement, community connection, trust-building, and the ability to engage meaningfully. This is in addition to exceeding customer expectations for your product or service. It’s a tall order, but fostering this kind of brand connection results in a lasting and powerful relationship.
- A good loyalty program will create emotional loyalty.
- Emotional loyalty is when a consumer consistently buys from a brand.
- Emotional loyalty drives purchases even when customers have other options available at a better price.
- Emotional loyalty is built on consumers’ connection with a brand’s values.
Research by Gallup has shown that customers with strong emotional connections to retailers will visit their stores 32% more often and spend 46% more than those without emotional bonds.
A good loyalty program will:
- Deliver emotional benefits that delight, educate, and entertain consumers
- Create community connection and a shared identity that fosters a sense of belonging and facilitates conversation between like-minded consumers
- Showcase brand values to promote lifestyle alignment
- Use personalized engagement that utilizes zero party data and first party data to offer relevant brand interactions
- Be easily shareable and generate positive momentum through word of mouth
- Provide exclusive offers and experiences that promote a high-value exchange for participation
- Have a simple and straightforward user experience that doesn’t require multiple steps or confusing rules or hoops to jump through
- Subtly encourages future purchases in between purchase cycles to motivate consumers to stick with you
- Solicit and encourage ongoing customer feedback to boost innovation and create a positive feedback loop among consumers
Examples of Successful Customer Loyalty Programs in Action
Creating an innovative loyalty strategy can be challenging. Here are eight great ideas from brands with loyalty programs that work to get you started.
The North Face XPLR Pass
As a highly experiential brand, The North Face aims to offer a loyalty program with valuable experiences for its target audience. With its XPLR Pass, customers earn points on every purchase. They can accumulate points in unique ways like attending exclusive events, checking in at specific locations, and downloading The North Face app.
When redeeming points, customers can use points toward unique travel experiences, like a mountain climbing adventure in Nepal, endurance challenge entries, camping packages in national parks, and climbing experiences.
Why does it work so well?
- Emotional benefits
- Exclusive experiences
- Community connection
The North Face elevates its loyalty program beyond asking for repeat purchases. They have developed highly curated experiences to build an emotional connection. This also aligns with brand values and promotes its outdoor and exploration lifestyle.
Hero Skin Squad Community
Fast-growing premium beauty brand, Hero Cosmetics, aims to mobilize passionate consumers to strengthen brand relationships while sparking brand advocacy and valuable insights. The brand created the Hero Skin Squad as a home base for consumers to connect with the brand and other like-minded consumers.
Here, community members can earn reward points through interactive brand experiences, including social sampling, promotional offers, surveys & polls, and engaging community discussions.
Why does it work so well?
- Emotional benefits
- Personalization
- Community connection
- Ongoing feedback
- Easily shareable
The Hero Skin Squad is a powerful asset to drive long-term consumer relationships, and this loyalty strategy is anything but transactional.
- The community offers a wide variety of engagement fueled by zero party and first party data to make consumers feel valued.
- They provide unique experiences and co-creation to connect consumers to the brand.
They also facilitate conversation among consumers with dozens of relevant topics and discussions.
Sephora Beauty Insider
Sephora’s Beauty Insider program is often touted as the industry leader in loyalty. As a tiered rewards program, Sephora encourages consumers to spend more to accumulate points and reach new levels of rewards. Every tier has a distinct set of perks and incentives, along with a generic rule that on every dollar a customer spends, they earn one Beauty Insider point.
Sephora’s rewards go beyond monetary incentives. The brand offers “experiences” that can include exclusive one-on-one sessions with the top players in the industry, access to exclusive products, and free entry to master classes conducted by well-known makeup artists from around the world.
Sephora Beauty Insider also has an active online forum where Beauty Insider members can share tips, ask questions, and discuss products.
Why does it work so well?
- Emotional benefits
- Exclusive experiences
- Community connection
- Ongoing feedback
Sephora made a concerted effort to move beyond a transaction-based loyalty program to one that leverages emotional drivers.
In an interview with Allegra Stanely Krishnan, vice president of loyalty at Sephora, she says company-wide collaboration and listening to customer feedback took Sephora’s Beauty Insider from a purely transactional program to an interactive, experiential membership program. As Krishnan puts it, “Loyalty is at the core of everything we do.”
Grubhub Tastemakers Community
Popular food delivery service, Grubhub, needed a home to connect with target diners to boost brand equity, drive loyalty, and spark brand advocacy. The brand created the Grubhub Tastemakers community as a brand-owned asset to cultivate relationships with key audiences such as college students.
Grubhub activates its online community to participate in campaigns like posting photos and videos to Instagram and TikTok, hosting virtual dinner parties with friends, and offering feedback and ideas to drive marketplace delivery on college campuses.
As diners participate in community activities, they earn points to be exchanged for discounts and brand swag. They also use the community to promote its monthly subscription service, Grubhub+.
Why does it work so well?
- Personalization
- Emotional benefits
- Community connection
- Easily shareable
- Subtly encourages future purchases
Grubhub is an excellent example of a modern-day approach to retention that fuses existing loyalty program ideas (like points) with personalized engagement, community connection, advocacy, and insights.
Amanda Albee of Grubhub says:
“We have been able to listen to our most influential consumers and understand how to turn them into brand loyalists. In turn, we were able to leverage the voices and opinions of our advocates to inform and optimize brand strategy. We’ve seen a huge increase in brand loyalty through this program, and we saw an increase in members who consider our brand the preferred choice over competitors.”
REI Co-Op Rewards
REI has the unique ability to concentrate on a very niche group of consumers. For a one-time membership fee of $30, a consumer can become a part of their co-op program and gain access to perks such as discounts, yearly “dividends,” free shipping, discounted “garage sales,” and discounts on experiences like adventure classes.
Why does it work so well?
- Emotional benefits
- Showcases brand values
- Community connection
REI says it takes an aggressive commitment to values. This values-based loyalty strategy puts purpose over profits but still delivers business value. Co-op members contribute account for more than 90% of purchases with the retailer.
REI knows its core customers are outdoor enthusiasts who spend a significant amount of their time in natural places. This makes preservation and sustainability a prime core value. Their co-op program is centered around showcasing these values and making consumers feel good about being a part of it.
Nordstrom’s Nordy Club
Nordstrom has always promoted a robust loyalty program, most notably showcased by the retailer’s anniversary sale. They revamped their loyalty strategy with the Nordy Club in 2018. The program’s centerpiece is the “Nordy Portrait,” a unique user profile each customer can create through their mobile app. Customers can customize style profiles and view accumulated points.
Each tier of the loyalty program will also grant access to personalized experiences, such as the option to have Nordstrom’s in-home stylists make a house call. Members can access beauty and style workshops, and higher-tier members get priority access to VIP events.
Why does it work so well?
- Personalization
- High-value exchange
- Exclusive experiences
The Nordy Club was designed to go beyond the model of points and enhance the relationship with existing consumers, focusing on personalized experiences no matter how one chooses to shop.
Vice president of retention and loyalty, Dave Sim, says:
“Our loyalty program is our opportunity to not only thank customers for shopping with us but to serve them in a more personalized way. When thinking about this evolution, a guiding principle was to offer something for everyone, no matter how much they spend or where they interact with us.
The name, The Nordy Club, is directly inspired by how our most loyal customers and even some employees refer to being a ‘Nordy.’ The strong connection our loyalty customers have to our brand drives us to ensure we’re providing the best experience possible.”
Kitty Krew Community Perks
ARM & HAMMER™ Cat Litter aimed to build loyalty among happy customers while activating advocacy and capturing critical insights about their consumers. They created the Kitty Krew online brand community to do just that.
Consumers can earn “purrks” by participating in community activities or purchasing products. Their “pawsome” rewards include cat toys, cat charm bracelets, bag carriers, and much more.
With the Kitty Krew, the brand can also mobilize and activate targeted consumers to share their ARM & HAMMER Cat Litter experience through reviews, UGC photos and videos, and much more. Community members can offer feedback on product innovation through surveys and polls and participate in discussions with other cat owners.
Why does it work so well?
- Personalization
- Community connection
- Exclusive experiences
- Easily shareable
- Ongoing feedback
Most people would think of cat litter as a low engagement category, but ARM & HAMMER knew they could spark a high connection with the right message. ARM & HAMMER Cat Litter designed an online community experience to foster engagement between purchases that ultimately drives long-term loyalty.
A Nielsen360 analysis found that their Kitty Krew members drove 13x more customer lifetime value than any other marketing channel. Brand Manager Shonda Brown said this about Kitty Krew’s effectiveness: “We can actually disrupt the environment and disrupt our competitors. We have these loyalists that we want to get the message out and to speak on our behavior, and in a more organic way than a brand trying to be the voice.”
Apple
Apple is an iconic brand that relies 0% on rewards and is entirely fueled by emotional loyalty. When it comes to loyalty, sometimes the most successful idea is not engaging in a loyalty program at all.
Despite Apple’s premium pricing, it still commands unquestioned loyalty from its dedicated consumer base and is one of the world’s most successful and profitable technology companies.
Apple’s customer satisfaction and loyalty have been growing steadily, reflecting how consumers view the brand. According to NPS Benchmarks, Apple’s NPS score in 2022 is a resounding 72, significantly higher than the average NPS score of the consumer electronics industry.
Why does it work so well?
- Community connection and shared identity
- Emotional benefits
- Easy to use
Apple’s cult-like following is from a fanatical focus on delivering a niche product with emotional placement directly into consumers’ lives.
The Apple brand has become its own form of self-expression, which has helped transform Apple from a company of products into a community of people who identify with those products.
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