Do loyalty schemes really make a difference anymore?
- Customer Loyalty Strategy, Benefits and Design
5 mins read
Published on Thursday 8th November 2018
Loyalty programmes have been a permanent fixture on our high street for many years, however consumers are so inundated with options, it’s worth asking do loyalty schemes really make a difference anymore? And what are consumers looking for in a loyalty programme - is it just pounds and points, or is it more? In this document we’ve collated some insights on Customer Loyalty programme strategy and value for organisations. We uncover research that highlights the types of benefits customers are looking for, and how to get started on designing your customer loyalty experience of the future.
Loyalty is evolving
In the 125 years since the launch of the very first loyalty programme, design and technology have increasingly transformed the customer experience. The value proposition for retailers is changing along with customer expectations of service levels. Now, with the digitisation of every transaction, a retailer is able to track and analyse every purchase, building up a far greater understanding of their customer and tailoring offers to appeal to their tastes - and their wallet.
The value of a high-performance loyalty programme
A recent study by Sloan MIT, which surveyed more than 9,000 consumers about their experiences with loyalty programs revealed that the highest performing ones resulted in many desirable consumer behaviours and traits:
- 46% more likely to choose the loyalty brand over competitors
- 40% higher purchase frequency
- 42% more willing to pay higher prices
- 26% recommended the brand to others
The data also shows that having a high performing loyalty programme is also strongly correlated with greater shareholder return - especially in the airline, retail, grocery and pharma sectors.
The Costa Costa Coffee Club loyalty programme is one of the Top 10 loyalty programmes in the UK, with millions of members. One of the reasons the Costa loyalty programme is so successful is that it allows members to quickly accumulate points they can use on free rewards including their usual coffee. Costa also created greater value in its loyalty scheme by enabling members to access their daily coffee more quickly by creating a ‘pay and collect’ feature in-app, and a fast lane in store.
What are consumers looking for?
What do customers really care about in terms of a loyalty experience? The list below contains the top features according to the study:
Highest priority loyalty program features include:
- Allows me to accumulate points over time and save for a big reward (rational)
- Allows me to earn points fast enough to spend on small rewards quickly (rational)
- Offers unexpected gifts or benefits (emotional)
- Allows me to earn/spend points on company partner projects (rational)
- Offers loyalty status with special recognition and benefits (emotional)
- Allows me to spend points on special/exclusive experiences (rational)
- Treats me like a VIP (emotional)
- Allows me to earn points beyond the things I can buy (rational)
- Offers access to new products before they’re publicly available (emotional)
- Allows me to donate my points to a charity I can choose (social)
- Invites me to share views/opinions about new products (social)
- Offers access to a community of others similar to me (social)
Interestingly, the top nine are a mix of rational and emotional, and the last three are community-driven. This would appear to indicate that the personal rewards both emotional and rational are the biggest motivators.
Sephora has designed a loyalty programme which combines both rational and emotional drivers, with high and medium priority rewards delivering a direct impact on their sales and better customer experiences. With over 10 million members, Sephora’s tiered scheme allows special recognition and status to its most loyal members. Points collected are redeemed against products and higher level tier members get exclusive access to events.
How you can get started
We would recommend gaining consensus with your project team about your objectives. Then engage in rapid prototyping and iteration. Through the design process, you can visualise what the customer experience could look like. With a design sprint, you could be testing a prototype with customers in as little as 5 days.
Through this process, you can gather evidence about what works for your customers, and any potential pitfalls; before selecting technology partners to help you deliver the experience.
We can help
Graphite is a digital customer experience agency that has been working with Digital Loyalty programmes for many years. Firstly bringing to life the Costa Coffee loyalty programme and then assisting with design and technology as the digital programme scaled from zero to 4 million customers. More recently we have been retained by Harvey Nichols to help them reinvent their programme and help them accelerate business growth for the next 5 years.
Graphite provides strategy workshops, rapid prototyping and consumer testing capabilities to brands, and would be delighted to assist you in exploring your Loyalty Programme vision.