When metrics like repurchase rates, time-on-site, email opens and clicks begin to flatten, it’s a telltale sign that your loyalty program may need an overhaul. Here are four ways to analyze the problem and take steps to reinforce customer loyalty.

Tom Caporaso, CEO, Clarus Commerce

Product differentiation is no longer the name of the game when it comes to customer loyalty in retail. In the age of unlimited choice, where the lowest price is just a click away, securing long-term customers means reexamining loyalty efforts and finding new opportunities to provide a top-notch customer experience.

To gauge when it’s the right time to rethink loyalty efforts, begin with a close examination of your brand’s key performance indicators (KPIs). When metrics like repurchase rates, time-on-site, email opens and clicks begin to flatten, it’s a telltale sign that your loyalty program may need an overhaul.

Sometimes the smallest change can surprise you and deliver big results.

Four ways to improve your loyalty program and boost KPIs

Once you identify declining KPIs, you can use them to begin improving loyalty efforts, turning the trend around and earning committed, long-term customers. Here are some recommendations on how to get started:

1. Use your data

Rather than taking a shot in the dark and attempting to guess which loyalty benefits resonate most with your customers, take a look at the data you have on hand. Many retailers lack required amounts of data due to the older, legacy systems on which their loyalty programs operate, but even limited data pools can offer valuable insights.
Start by aggregating and examining all of your data and look for data points like buyer segments and engagement rates. For example, you may discover that your cart abandonment rate is extraordinarily high due to shipping costs, which would indicate that your customers might respond well to a loyalty program that offers free shipping.

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2. Understand your customer pain points

Customer data is important, but customer insights gathered from the field can also improve your program—when applied intelligently. Keep the lines of communication open and survey customers for opinions on what they like and dislike about your current program.
Develop your loyalty strategies around what customers want more of as well as recurring pain points. For example, customers of the food chain Chipotle often have to wait in long lines. So, as part of its loyalty program, Chipotle lets members order food online and pick it up in the store—all while earning rewards.
Note: While it may be tempting to look at what consumers are saying in a general sense, it’s important that you gather information from your Mimicking another brand’s tactics as it relates to their customer feedback could backfire because at the end of the day, their loyal customers are different than your loyal customers.

3. Create a stop/start list of benefits

Use both customer data and pain points to inform further decision making. List all current loyalty benefits and decide which ones are worth keeping. From your research, you should be able to identify the benefits and features customers use on a regular basis.
Look at the impact these benefits have on the business and determine if they significantly move the needle. With a leaner list, you can then use your customer insights and data to add new benefits or features that customers may have requested or that address recurring pain points.

 

4. Test, test, test

Do not “set and forget” your revamped loyalty program. Continual improvement and optimization relies on testing, or more specifically, A/B testing. Getting a sense of what works on a minute level allows you to engage differently with your customers and play around with KPIs so you can uncover the highest program performance, driving more loyalty and ultimately, higher revenue. Elements like user interface, call-to-action buttons, graphics, colors, program price and core messages should all be tested. Sometimes the smallest change can surprise you and deliver big results.

Ramping up loyalty efforts at every level

If you already have a robust program, take loyalty improvement a step further by segmenting out your top 20% of loyal customers. Use the previous recommendations to target this subset of buyers with a premium loyalty program that offers enhanced benefits and experiences in exchange for a monthly or annual fee. This is a smart long-term strategy that can produce a real payoff: 86% of consumers who are satisfied with a retailer’s paid loyalty program will likely choose that retailer, even over a competitor that is offering a lower price, according to a Clarus Commerce survey.

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For example, Restoration Hardware offers a premium loyalty program to customers for a $100 annual fee. The RH Members Program gives members 25% off full-priced items, 20% off sale items, concierge service on orders and early access to clearance events.

On the flipside, if you don’t have a loyalty program at all, don’t worry. Launching a simple, free program is a great way to gather large amounts of data that can later inform a more comprehensive initiative.

Consumer expectations for brand engagement are at an all-time high. Missing out on an opportunity to meet these expectations and inspire long-term loyalty would be a huge loss for your brand—especially when 88% of consumers agree that retailers could do more to earn their long-term loyalty. Engage your customers meaningfully with a quality program so you can stay ahead of the competition, surpass your KPIs and remain your customers’ top choice.

Clarus Commerce specializes in the design, development and implementation of customized premium loyalty programs for retailers.

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