To keep customers coming back more often, retailers should consider differentiating from the competition with loyalty programs.

Tom Caporaso, CEO of Clarus Commerce

Tom Caporaso, CEO of Clarus Commerce

In September 2020, Walmart launched its premium loyalty program, Walmart+. Members pay an annual fee to get free shipping on orders, free grocery delivery, gas discounts and mobile scan-and-go checkout. This launch from the nation’s largest retailer validated the notion that premium loyalty programs are a marketing strategy that’s here to stay—especially as differentiation becomes more critical for retailers.

With government-mandated lockdowns and social distancing in place, digital shopping is on the rise. This provides countless options for shoppers, making it harder than ever to earn customer loyalty. Both premium and traditional loyalty programs are effective tools for engaging customers and incentivizing repeat purchases when they offer real value to members.

Premium loyalty refers to a loyalty program in which members pay a fee in exchange for exclusive experiences and rewards they can use instantly. By contrast, a traditional loyalty program is a loyalty program where the customer makes purchases to earn points over time, receiving rewards later. The key is finding the right mix of loyalty offerings for your customer base to help them save time and money and offer a unique experience that competitors can’t match.

In January 2021, Clarus Commerce conducted our 2021 loyalty industry study, surveying 300 marketing and loyalty specialists across the U.S. to identify retailers’ current and future loyalty strategies and expectations. The results shine a light on what retailers can expect from loyalty programs in the coming year.

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Four key findings from our 2021 loyalty report

Our report revealed that loyalty is on most retailers’ minds. Respondents unveiled the importance of properly timing loyalty rewards, missed opportunities for marketers, the value of premium loyalty and the importance of working with the right vendor.

1. Instant benefits lead to better result

Shoppers want instant gratification and offering immediate rewards to your loyalty members also results in more consistent shopping. 86% of retailers that offer benefits within the first week say their loyalty program members shop at least once a week. That number goes down to 63% when retailers provide benefits within the first month.

Additionally, retailers that offer discounts sooner experience ROI faster. Among retailers who offer benefits in the first week, 62% see ROI within the first six months. Only 21% of retailers that provide benefits in the first month see ROI within that time frame. Not providing your loyalty members immediate benefits and delaying gratification may cause them to become disengaged or less likely to shop.

2. Loyalty has been overlooked during the holidays

Just 7% of retailers offer holiday discounts through loyalty programs — a missed opportunity. Our 2020 consumer loyalty study found that 73% of millennials joined a loyalty program for holiday shopping discounts. Additionally, 38% of consumers say a holiday discount would motivate them to join a premium loyalty program. This disconnect suggests marketers are missing opportunities for customer acquisition and retention. Without holiday discounts, you risk the loss of your customers’ holiday shopping dollars to a competitor.

3. Premium loyalty is valuable

While traditional loyalty programs are an important part of the marketing mix, premium loyalty programs or tiers take loyalty to another level. More than half (51%) of retailers offering premium loyalty programs consider their members to be at least four times as valuable as regular customers. These programs can transform customers into brand advocates who consistently shop for that brand. Offering programs tailored to your best customers’ wants and needs is beneficial to both you and your customers. In fact, 82% of retailers with a premium loyalty program rate their program’s profitability an eight out of 10.

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4. Retailers working with loyalty vendors see more success

Competing priorities were retailers’ biggest barrier to launching loyalty programs, with over a third (37%) of respondents citing it as an issue. Lack of internal resources (24%) and lack of IT support (19%) were also common problems.

Internal hurdles like these are a major reason why some retailers choose to work with vendors to build and manage their loyalty programs. Vendors have the capabilities to keep programs updated and relevant in the ever-evolving retail industry. Twenty-seven percent of retailers that work with a vendor have updated their programs within the last month, versus only 8% of retailers with in-house managed programs.

Additionally, retailers that use vendors have more frequent shoppers. Forty-four percent of respondents who use a vendor say loyalty members shop with them at least every few days. Only 30% of respondents who manage their own programs have members shop with them at least every few days. Retailers that use vendors also see ROI from their programs faster.

Looking ahead

Customers want relevant benefits and value in their shopping experiences. As retailers go head-to-head for customers’ loyalty, it’s more important than ever to set your business apart. Customer retention is an important focus in 2021, so consider how to differentiate from the competition with your loyalty program to keep your customers coming back even more often.

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

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