Operations

3 tips for getting the most out of loyalty programs

Loyalty programs are more intuitive than ever, and the stakes are high for customer data. Here are three tips to get the most out of your loyalty programs from the experts.

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April 7, 2023

Loyalty programs are bigger and badder than ever. They're intuitive and progressive, bringing together a brand and its consumers using modern technology. These loyalty programs encourage customers to repeat their visits and spend more, driving customer engagement. Customers like them, especially when using one means rewards. After all, they're likely not willing to give up personal information without reward.

Loyalty programs aren't all on the same level

Brett Spiegel, co-founder and COO of Koala (a Chowly company) reminds brands that loyalty programs are not one size fits all. He says its important to recognize that guests have different backgrounds, expectations, need and abilities to participate. Loyalty programs don't come in a one-size-fits all package.

Spiegel uses P.F. Chang's rewards program as a good example. The brand recently introduced a paid loyalty tier (platinum), for their most avid fans who are willing to invest in a deeper relationship with the brand.

"This is more interesting than a traditional tiered program (where customers earn status based on spend), because any customer can pay to quickly get to the status level they want," Spiegel said. "Because both tiers (free versus paid) have their own set of discounts and experiences, P. F. Chang's guests are able to determine which has the most value, and immediately begin participating without having to wait for their status, which is naturally part of a spend to earn status program."

Loyalty programs create a positive user experience

Len Covello, CTO of Engage People, recommends putting the customer first and developing the ultimate user experience as the center point of a loyalty program.

"To achieve this, it's crucial to assess the customer journey for your current program from initial interest through to conversion and beyond," he said. "This means understanding how customers interact with your brand, identifying their pain points, and addressing them to enhance the customer experience.

Covello suggests developing an omnichannel approach and consistency in communications across all touchpoints. Customers should be able to access and engage with your loyalty program across different channels, including mobile apps, social media, on your website and in-store. Moreover, it's crucial to make the redemption process easy and convenient for program members. Ensure that program members can easily redeem their rewards for what they want, when they want.

Covello recommends facilitating a program around the customer journey, which is essential for success. "To continuously improve, it's important to get regular feedback from program members, be responsive and listen to their needs," he added. "You can do this by using social media channels and direct interactions to gain insights into how your program can be improved and be made more responsive. Finally, to create the optimal experience, communicate regularly with program members and provide added value such as exclusive offers, personalized rewards, and early access to new products or services to enhance their experience and keep them engaged with your brand."

Measure the reach of your loyalty program and prioritize growth

Zach Goldstein, CEO and founder of Thanx, a loyalty feedback company, says that while check averages and visit frequency have traditionally been the most commonly tracked metrics for loyalty programs, winning brands know that measuring reach, or what percentage of revenue is coming from known customers, is a far more powerful indicator of program success.

Goldstein turns to Starbucks, the zenith of loyalty, a successful example of the power of measuring and prioritizing the growth of capture rate over time.

"In Q4 2022, Starbucks reported 55% of U.S. revenue is attributed to loyalty members in an earnings call," he said. "That means Starbucks has comprehensive data and a direct relationship with over half of their customers to better inform marketing strategy and increase revenue-driving customer behaviors including first-party direct ordering.

"Knowing your brand's loyalty reach is crucial because If you are only able to reach a small percentage of your customers through your loyalty program, then the overall impact of that loyalty program on revenue will be small. Simply put, if you cannot reach your customers, you cannot change their behavior. Without reach, it is much more difficult to change other important metrics that directly impact customer lifetime value such as churn or third purchase conversion."

Goldstein said the higher the capture rate, the greater the amount of revenue that is generated from customers with whom you have a direct relationship via a loyalty program, creating marketing opportunities. Customer data captured through loyalty including spending habits and messaging preferences helps personalize interactions and drive greater ROI. This is a critical advantage because segmented, personalized communications are six times more effective than generic email marketing, he said.

"Brands can improve their capture rate by ensuring their enrollment processes are frictionless and that ongoing participation in loyalty is not painful either," Goldstein added. "Loyalty platforms that offer advancements such as credit card linkage and automatic enrollment on digital purchases ensure that 100% of digital customers enter the customer database while all subsequent purchases, both in-store and online, are tracked without any effort on behalf of customers or staff. Thanx customer Velvet Taco grew their capture rate to above 30% within their first year on Thanx by benefiting from frictionless technology for their program."