For Premium Loyalty Program Success, Focus On Top 20% Of Customers

Launching a successful premium loyalty program can be a matter of finding the right pitch: 70% of shoppers who don’t belong to a program would join one if the benefits were valuable, according to a study by Clarus Commerce. Getting this aspect right is a worthwhile effort for retailers, as 88% of respondents said they’d shop at a retailer with a premium loyalty program they belong to versus a competitor that is offering a lower price.

Some of the best practices for developing loyalty programs include:

  • Talk to your best customers: Find out what the top 20% of shoppers want to uncover your unique value proposition, such as lululemon membership’s blend of transactional and fitness-focused experiential benefits;
  • Offer immediate value: Premium loyalty programs shouldn’t make shoppers wait for the payoff, a virtue Walmart embraces through the immediate access to free shipping and pharmacy savings with Walmart+;
  • Use traditional loyalty programs for onboarding: Free loyalty programs can offer shoppers their first taste of loyalty benefits, a strategy CVS harnesses with its ExtraCare and CarePass programs; and
  • Evolve with the times: What stands out as unique now may become commonplace later, a challenge Amazon has met by adding perks such as video streaming to Amazon Prime’s baseline of free delivery.

The rapid embrace of omnichannel offerings in recent months has made premium loyalty programs more valuable than ever. Offerings like buy online, pick up in-store (BOPIS) are no longer true differentiators, so retailers need to find new ways to stand out from the competition.

“We’re living in the age of the consumer, and customers have more choices than ever before online,” said Tom Caporaso, CEO of Clarus Commerce in an interview with Retail TouchPoints. “It’s easy for customers to find the best price and availability of the product they’re interested in. As we think about loyalty and specifically traditional loyalty programs, we find that they’re very similar: you transact and earn points over time that can be redeemed, usually in the form of a coupon. I think most brands aren’t differentiating enough.”


Your Best Customers Hold the Key to Your Top Value Proposition

When designing premium loyalty programs, retailers should keep their target audience — the top 20% of shoppers — top of mind. That’s because the right incentives can make these high-value repeat shoppers even more valuable. Clarus found that 94% of premium loyalty members shop with their retailer at least once per month, and most make purchases even more often:

  • Once every few weeks: 25%;
  • Once every week: 22%;
  • Once every few days: 25%; and
  • Once every day: 11%.

A retailer’s top shoppers are the ones getting the most out of premium loyalty offerings, so it makes sense that they should have a say in the program’s design. Surveying them can lay the foundation of a great premium loyalty program by revealing what the most likely users expect in return for their money.

“The first step is to talk to your best customers,” said Caporaso. “What do they want? How can you add value to their everyday lives? Then you have to figure out, and we use this phrase a lot, your unique value proposition. All these programs are not going to be the same, and that’s important. If you listen to your consumers, you can create a program that is different from a lot of programs out there but is unique and responsive to the consumers that you have.”

Customers Want Value Now, Not Later

An important element for any premium loyalty program, no matter the audience, is that it must provide immediate value — 40% of respondents said they expect to receive their premium loyalty benefits immediately. Free shipping was the top perk that would motivate someone to join a premium loyalty program, at 66%. Some of the other major drivers included:

  • Instant discounts that can be used whenever you shop: 60%;
  • Free giveaways: 56%; and
  • Fast shipping: 47%.

Traditional Programs Can be Premium Pipelines

Traditional loyalty schemes still have their place, even if their time as differentiators has passed. These offerings still help get casual customers in the door; more importantly, they can serve as the first step in convincing a shopper to try out a paid loyalty program: 28% of free loyalty program members are very likely to upgrade to the premium version, and 39% are somewhat likely, according to the study.

“With no barrier to entry it’s easy to enroll members in your free program, and once they’re in it also becomes easier to upgrade them to the premium level,” said Caporaso. “Because they’re getting in on the free side they’re continuing to see value and they’re engaging with the retailer and the program —then you put a premium level in front of them and they ultimately get access to additional benefits that the free program really can’t touch.”

Even the Best Premium Programs Can Evolve

Every premium loyalty program should be unique, but one trait shared by the best of them is a willingness to evolve. Unique value propositions aren’t set in stone, as evidenced by the way buy online, pick up in-store (BOPIS) programs have gone from “nice to have” to “essential” in the past year, and a good loyalty program is a constantly changing endeavor.

“You can’t have a set-and-forget mentality — you have to continue to have an open dialogue with consumers,” said Caporaso. “What are they using? What would they like to add? Continue to update the programs over time. If you look at the two key baselines for any loyalty program from the consumer perspective, they want to save money and they want to save time. How do you build those two components into the program? Optimize over time and create benefits that resonate with everybody.”

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