Swipe and Save: Relevancy Rules With Loyalty Programs

Back in the day, supermarket loyalty programs consisted of your local grocer tearing off a row of “you lick” stamps based on your purchase amount to fill a grid sheet. Each filled sheet provided discounts on certain items on your next shopping trip. Remember licking those nasty little guys for your mom? While grocery loyalty programs are a lot less work these days, consumers understand that by joining a loyalty program they are granting the retailer access to their information and they want something of value in return.

These programs are so widespread that nearly all major chains offer them, and people sure don’t mind joining them. Colloquy’s biennial report on the scope of U.S. customer rewards programs shows that American households are active in about 12 loyalty programs on average although they hold memberships in approximately 29 loyalty programs spread among the retail, financial services, travel and various other economic sectors.

However, many of these programs are still only focused on transactions and miss the bigger opportunity to create meaningful, lasting relationships with customers – which may explain the discrepancy in loyalty program activity.  Customers want to establish emotional connections with brands.  The value customers are looking for requires a mix of personalization, exclusivity and engagement across channels and brand touchpoints.

In a recent study we conducted with digital incentive provider Virtual Incentives, we collected data from several hundred U.S. residents who had participated in loyalty programs. Our research found that these programs are effective – in more ways than one. Fifty percent of our respondents reported changing their behavior based on incentives. Consumers will buy more or different items, or even shop a different store based on these programs.

We know that many retailers use the data they collect to help personalize offers to participants. For example, those who consistently buy a product like Ensure might receive a coupon for the store brand of this product to use on their next visit. Our study found that personalized incentives are essential in driving perceptions that the brand cares about the customer and values their loyalty. Consumers want incentives that tie in directly to their purchase and offer them something valuable, such as offers for future discounts or the ability to accumulate larger rewards over time.

Personalized Rewards

At a time when consumers have more options than ever before, the right incentive program can drive consumers to your brand, make them feel like valuable customers, and may even convert them into loyalists. Even though the Center for Retail Management at Northwestern University found that only 12 percent - 15 percent of customers are loyal to a single retailer, this small group of shoppers generate between 55 percent - 70 percent of company sales. The Food Marketing Institute’s research said this number was even higher among food retailers in specific, with as much as 65 percent - 95 percent of their sales going to members of loyalty programs.

Finding the right kind of personalization when it comes to your loyalty program can help make an emotional connection and further the relationship with these important constituents.

And personalization and engagement are essential if you want to capture the spending powerhouse that’s coming into its own – the demographic groups everyone is taking about: Millennials and their younger teen counterparts, often referred to as Gen Z. Rare Consulting says that personalization is a higher priority for driving loyalty for these younger generations, about 4-8 percent higher than Gen X and 14 percent higher than Baby Boomers. Two out of five respondents in our study, which included sample from a range of age groups over age 18, said that a personalized incentive makes them perceive brands as smart, ambitious, and unique.

Our study also covered the gender factor. Retailers know that women are still a powerful force when it comes to consumer purchase decisions. A recent presentation I saw said they make, on average, 85 percent of decisions spanning a number of industries. We found that women are using incentives programs more than men, and incentives are a bigger factor in their brand and purchasing decisions. Ninety percent of women use a grocery loyalty card and 62 percent of women say that an incentive program improves their perception of a brand.

Earning loyal customers comes down to being relevant to each individual shopper’s experience whenever and however they choose to interact with your brand and shouldn’t solely focus on transactions.  Retailers need to ensure that loyalty programs support their overall brand image and are aligned with the brand’s core strategy.  Relevant messages and offers foster trust with customers and will keep the retailer top of mind for when the customer is ready to shop again.