Over a third (34%) of US business leaders want to improve customer loyalty, per a March 2023 WEX and Edelman survey. But loyalty isn’t what it used to be.
, according to June 2022 data from Dynata. As inflation and a tough economy lead consumers to prioritize price over brand, marketers need to rethink their loyalty strategies to align with what matters most to customers.
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Secrets to a successful customer loyalty program
are becoming more important as brands struggle to acquire and retain customers. Loyalty program structures can vary, but there are three foundational elements every program should have:
- A value proposition
Discounts are the top thing that consumers worldwide want from loyalty programs, per a 2024 Merkle report.
Nearly a quarter (23%) of loyalty program professionals worldwide say their, per a February 2023 Eagle Eye survey. Some brands, like due to rising costs.
For brands struggling to provide deep discounts, a points-based rewards system offering upgrades, freebies, exclusive offers, or early product access could be a more cost-effective option to build customer relationships.
by establishing a tiered program. This can include lower-cost or free options for price-conscious customers, and extra perks for those willing to pay for a more exclusive experience.
Another way to enhance the loyalty experience is by partnering with another brand to offer double rewards. This gives customers access to more perks and discounts while helping each brand expand their customer base.
- Ease of use
. Brands need to ensure that redeeming loyalty points or rewards is seamless, whether customers are in-store or online.
Other convenience options to consider for loyalty programs include, free and/or faster shipping, free returns, more generous return windows, and more pick-up or return locations.
- Personalization
Most customers expect a personalized customer experience, but personalization can take many forms.
Over half (53.9%) of consumers in Australia, the UK, and the US say that a brand recommending products based on previous purchases makes them feel known, according to December 2022 data from Yotpo. Other personalization elements that help consumers feel known include:
- Emailing when a product the customer is interested in is back in stock (45.2%)
- Using the customer’s name in emails and texts (37.7%)
- Knowing a customer’s size, dietary preferences, skin type, etc. (36.7%)
- Knowing a customer’s loyalty tier and treating them accordingly (32.8%)
- Sending messages when loyalty points are about to expire (30.2%)
According to PYMNTS Intelligence and AWS, Gen Zers prefer nondiscount loyalty benefits like exclusive product access, tailored recommendations, and personalized bundles. They prefer personalized promotions that utilize discounts to maximize revenues, rewarding engagement like repeat purchases or cumulative spending, per our US Retail Loyalty Programs 2024 report.
How to measure customer loyalty
ĢAV 73% of US consumers find loyalty programs important or critically important in maintaining loyalty to their favorite brands, according to a November 2023 Marigold survey. There’s no one-size-fits-all way to measure happy customers, but brands can focus on one or more metrics in their loyalty programs:
- Customer retention rate
- Repeat business
- Customer lifetime value
- Customer satisfaction
- Customer feedback
- Referrals
- Word of mouth
Brands need to consider what matters most—encouraging repeat purchases, retaining customers, or increasing customer lifetime value.
The role of customer data in loyalty
The key to a relevant, personalized loyalty program is. US consumers are willing to answer surveys or take polls for brand rewards, per an Ebbo survey.
- Mobile apps are helpful in zero- and first-party data collection. Brands can gather information on when customers log in, how they search and pay for items, and which program benefits interest them.
- Surveys, polls, and quizzes help obtain audience data and give customers a chance to provide feedback on a program.
This data has applications beyond enhancing brands’ loyalty programs. It can accurately segment and target consumers and improve retargeting of lapsed customers.
Top customer loyalty programs
Starbucks is recognized for having one of the best loyalty programs in the food service and categories.
- Starbucks Rewards reached 31.4 million US members in Q3 2023, up 15% YoY, according to CEO Laxman Narasimhan from a Q3 2023 earnings call.
- “Rewards members in the US drove 57% of tender for the second consecutive quarter, up 3 percentage points from the prior year,” said Narasimhan during the same call.
In 2022,, allowing Starbucks members to earn Delta miles on eligible Starbucks purchases.
Other best-in-class examples include:
- Ulta Beauty’s Ultamate Rewards program drives 95% of Ulta’s transactions, according to our Retail Loyalty Programs report.
- Target Circle has over 100 million members, according to a Q2 2023 earnings call.
- Nike’s loyalty program offers benefits through its apps, ranging from transactional (e.g., free shipping and returns) to personal engagement, like personal stylists, wellness content, and a social community via its running and training clubs.
E.l.f Cosmetics is a favorite of US teens and encourages its Beauty Squad members to earn rewards regardless of where they purchase products. A receipt-scanning feature in the e.l.f. app facilitates this and promotes repeat usage.
This article has been updated. The original was postedJanuary 10, 2024.
