Tom Caporaso, CEO, Clarus Commerce
When it comes to holiday shopping, it’s not just the need to buy gifts that gets shoppers in the door. It’s also brand loyalty.
While many retailers offer shoppers some sort of loyalty program, those who offer a premium, tiered or highly differentiated program are most likely to win big during holiday shopping seasons—and preparations for this year’s holiday shopping season start now.
Eighty-six percent of consumers who are satisfied with a retailer’s premium loyalty program are likely to choose that retailer over a competitor, even if that competitor offers lower prices, according to Clarus Commerce data. If retailers aren’t offering a satisfactory program long before Black Friday and pre-Christmas sales, they could lose out on a hefty piece of the holiday profit pie.
It’s not too early to start improving your loyalty program for the 2020 holiday retail season. To get a head start, take a cue from several retailers who reaped the benefits of doing loyalty right last year:
- Lululemon — The clothing retailer for the athleisure-inclined saw impressive numbers this holiday season. Figures rose in part due to the recent premium loyalty program that brought in thousands of enrollees well before the holiday season. The program launched in 2018 and gives members a pair of pants or shorts, fitness classes and free expedited shipping for a $128 annual fee. With most of their pants priced well over $100, the membership quickly pays for itself and the free shipping encourages members to return to the brand during the holiday rush. But it’s the experiential benefits that really pull their weight, offering members niche fitness-meets-fashion experiences that many other brands cannot. In fact, Lululemon saw such strong customer demand that it’s raising its financial forecast for Q1 to $1.38 billion.
- Key Takeaway: Lululemon’s premium loyalty program is very differentiated and offers a successful mix of both transactional and experiential benefits. Lululemon really knows its customers and gives them a niche, fashion-meets-fitness experience that wouldn’t make sense for other brands.
- Walmart — Despite launching its holiday sales early on Nov. 1, Walmart experienced heavy traffic on Black Friday—enough for analysts to consider it an outperformer. After launching its Delivery Unlimited grocery delivery membership (either $98 annually or $12.95 per month) with better than expected results, Walmart successfully positioned itself as a reliable online retailer for customers across its 3,000 participating stores. In the past 12 months, Walmart shares have risen 20% and are set to continue rising as the retail giant gears up to undercut Amazon.
- Key Takeaway: With the Delivery Unlimited program, Walmart encourages its customers to shop frequently year round. By doing so, the brand remains top of mind come the holidays.
- Target — Target was another outperformer on Black Friday, with heavy traffic supported by its reputation as a holiday shopping destination, its new suite of same-day services and the new Target Circle loyalty program that launched during the season. Over 25 million customers enrolled in the first two weeks, earning it the title of the country’s fastest-growing loyalty program. On top of earning 1% cash back on every purchase, Target Circle members received early access to Black Friday doorbusters and exclusive deals throughout the season on “holiday must-haves.” While the program is free, during the 18-month test period, Target customers shopped more often and spent 2-5% more each visit.
- Key Takeaway: Target’s loyalty program offers a unique social corporate responsibility element that not many other programs offer—Target Circle members can vote on which nonprofits should receive donations from Target. At the same time, the program remains focused on personalization and instant benefits.
- Starbucks — With a robust loyalty program of over 16 million members supported by a dynamic, customer-centric app, Starbucks has integrated itself into the daily lives of coffee lovers around the world. Its members engage with the brand frequently and on Black Friday alone, traffic rose 54%. Meanwhile, one close coffee competitor only saw a 7% traffic increase that same day. A strong sense of loyalty, easy ordering from a mobile app and the opportunity to gain “stars” with each purchase may have been the key drivers behind shoppers’ choice to drink Starbucks during the holidays.
- Key Takeaway: Starbucks is all about convenience with its loyalty program. Coffee is a daily activity for millions of people, and Starbucks has made it even more rewarding and easy.
- Sephora — Sephora performs well most holiday seasons thanks to its Sephora Beauty Insider program that successfully uses member data to personalize both its app and offerings. The makeup and beauty retailer’s newly updated program is tiered, with increasing benefits as shoppers earn points. The program offers tiered gifts and experiences, and this year, specific holiday coupons that even the lowest tier can use to take a sizable chunk out of their Christmas beauty bill. And with the global cosmetics industry set to reach $430 billion by 2022, Sephora won’t be slowing down recruitment to the program anytime soon.
- Key Takeaway: Just as makeup and beauty is personal to the user, so too is Sephora’s loyalty program. The high level of personalization and tiered approach make it appealing to a wide range of customer segments.
A successful loyalty program isn’t one-size-fits-all. It requires a deep understanding of what your customers want, care about and the benefits they would actually use. Whether you decide on a free or a premium loyalty program (or a tiered approach), the time to start thinking about holiday 2020 is now.
For the retailers above, a successful program means a careful mix of both experiential and transactional benefits and a clear ROI for the members. By following their example and acquiring a steady stream of loyal customers well ahead of Black Friday, your brand can access similar benefits and experience a more profitable holiday shopping season.
Clarus Commerce specializes in the design, development and implementation of customized premium loyalty programs for retailers.
Favorite