03 Sep
A loyalty program is a system that retailers utilize to reward customers for frequently shopping at their stores. Loyalty programs provide incentives for customers to keep buying from the same retailer again and again rather than going to different stores every time. There are many good reasons why retailers should consider having a loyalty program.
Loyalty Programs Encourage Repeat Business
Loyalty programs give shoppers a reason to return to the same store rather than going elsewhere. The promise of earning rewards, discounts, or other benefits motivates customers to do more of their overall shopping at that retailer. Even if they have to pay a little more, customers might choose the store where they can accumulate points or move up to the next membership tier over another store. This directly translates to more repeat business and consistent sales numbers for the retailer running the program.
Loyalty Programs Allow Retailers to Collect Data
Modern loyalty programs rely heavily on collecting customer data through membership signup and usage tracking. This information can enable retailers to better understand their customers’ preferences and shopping habits. With clearer insights into what shoppers like and dislike, retailers can tailor their offerings, discounts, promotions, and communications to have greater relevancy for reward members.
Loyalty Programs Support Targeted Marketing
In addition to broadly collecting data, loyalty programs allow for targeted communications to different customer segments. Retailers can personalize promotions to best match each member’s demonstrated interests or behaviors. For example, if the data shows a customer frequently buys work clothing, they can receive special coupon codes for dress shirts and slacks rather than sandals and t-shirts. This type of segmented targeting helps ensure marketing dollars go farther because of the higher conversion rates from recipients.
Common Types of Loyalty Program Rewards
There is no one-size-fits-all approach to structuring loyalty program rewards. Retailers use various incentives to keep customers engaged and motivated to keep spending. Some of the most popular options include:
Points Systems
One of the most basic formats is a points-based system. Customers earn one point for every dollar they spend or item they purchase. After reaching certain point plateaus, they unlock corresponding rewards. These might be discounts on future purchases, free items, entries into contests, VIP experiences, and more. Points systems are easy to understand while also allowing lots of flexibility in the privileges different point totals confer.
Tiered Membership Levels
Another approach labels program members with status levels that offer expanded benefits. For example, the baseline level receives special pricing on select items each month. Mid-level members get free shipping on online orders. Top-tier members receive early access to new product launches or invitations to exclusive in-store events. Climbing through these ranks will incentivize customers to keep spending more to access the next level’s superior perks.
Random Rewards
Some loyalty programs surprise and delight shoppers through unexpected rewards distributed at random. Making rewards spontaneous heightens anticipation about what perk might come next. Random rewards also fight against loyalty fatigue in long-time program members who have already earned the most standard rewards. You just need to keep things fun and unpredictable which will certainly boost your ongoing engagement.
Key Components for an Effective Customer Loyalty Programs
Creating and managing a high-performing loyalty program involves several important elements. The components described below help ensure your program sticker in customers’ minds while also driving sales growth:
Immediate Enrollment
You want to make joining your program extremely quick and simple. Get this- complicated multi-page forms will give potential members a chance to bail halfway through signing up. If possible, enroll customers at the time of first purchase or instantly approve applications submitted online or via mobile app. The faster you can start them earning rewards, the more motivated shoppers will be.
Clear Communication
Explicitly spell out what benefits members gain at each status level or point plateau so there is no ambiguity. You can use multiple channels like in-store displays, website explanations, email campaigns, and mailers to outline program details. Know that any confusion over program policies and redemption procedures will dampen engagement. You should also frequently spotlight current promotions and new reward options as well to maintain awareness.
Seamless Tracking
Make reward balances, points earned, and progress toward the next level easily visible each time members interact with your brand. Online dashboards and apps are very popular for allowing self-service reward tracking. Print current point/tier status right on register receipts. This degree of transparency helps shoppers know where they stand, fueling further participation.
Compelling Rewards
The facilities you offer directly correlate to your program’s appeal and effectiveness. Generic discounts will not get customers enthused. You need to come up with rewards you feel best match your brand identity and target audience interests. You can consider rewards like early access to sales or new inventory drops, free gift cards, donations to charity, or experiential prizes. Unique, desirable rewards will definitely excite existing loyalists and entice new members to sign on.
Measuring the Success of Retail Customer Loyalty Programs
While structured thoughtfully around the components above, retailers should continually assess their program’s performance using key metrics:
Enrollment Rates
Look at what percentage of total customers actively participate in your program, including breakdowns by geography and demographics. Growth in member sign-ups over time indicates increasing awareness and interest.
Also Read: Benefits of Switching to ePOS Software
Purchase Frequency
Analyze whether enrolled members shop in your stores more often compared to non-members. This helps determine if the program successfully encourages repeat business. Also, you need to study trends around average annual spending for different member segments to detect where tiers and benefits may need adjustment to optimize spend.
Reward Redemption
Pay close attention to redemption rates for different loyalty rewards- high utilization signals you chose compliant offerings. Likewise, low redemption may indicate unappealing or irrelevant options that warrant replacement.
Sales Contribution
Total the percentage of overall sales and profit dollars attributable to loyalty program members versus non-members. Look at trends by month and year. Know that expanding member contribution suggests your program is positively impacting purchasing activity.
Those are the main components – rewards, easy earning structure, reward levels, and communication – that research shows make for a really good loyalty program that keeps customers dedicated to supporting the store in the long run. Hana Retail gives you efficient checkout capabilities along with robust reporting, inventory management, and customer relationship tools. It offers integrations with major payment gateways and customization options to suit your specific needs. Sign up FREE for the best POS system for your small retail business today!
