As the CEO of a loyalty company, I’ve seen retail change tremendously.
Consumers today have more power than ever before. It’s so easy for them to switch brands based on price, availability, or just seeing an ad on Facebook.
It’s getting harder for retailers to attract and retain loyalty customers.
For the brands that are doing it right, loyalty programs are playing a huge role in helping them offer differentiation.
As many brands continue to rethink customer loyalty, I thought about the programs that my family and I regularly interact with.
What retailers do a great job of keeping me as a loyal customer? Which programs offer relevant and meaningful benefits?
While many brands are starting to rethink loyalty, here are five that I’ve stuck with and why.
1. Amazon Prime Is the Cream of The Crop
Let’s start with the best premium loyalty program in the world: Prime.
For Amazon, the strategy has always been simple. Figure out the pain points and take them away. It began with its ability to truly listen to its customers.
Customers like myself have it all with Prime. And the key word is customers. Prime is highly successful because Amazon officials have addressed consumer pain points since Day 1 and continually optimize the program.
Back in 2005, shipping costs were a huge pain point. As a result, Amazon removed those costs by launching Prime.
Effective listening led to a deep understanding of what truly resonates with its customers.
Amazon continues to truly listen to its customers and has moved into other areas of interest such as content, grocery, pharma, etc.
In April 2018 Amazon eclipsed 100 million global members of the Prime program. Prime serves as the gold standard among all premium loyalty programs.
The value customers find in Prime is clear: Prime members spend more than twice as much as non-Prime members.
Prime provides an unparalleled combination of shopping and entertainment benefits.
It’s a program that Amazon customers, including myself, find continued value in and are willing to pay for.
2. REI Co-op Focuses on Experiences
This program is appealing for many reasons, including a $20 lifetime membership, exclusive events (garage sales) and discounts, and an annual member dividend.
Experiential benefits represent a major theme of this premium loyalty program.
For members of REI Co-op, they can enjoy various adventures offered around the world. Anyone can go on an adventure, but they are heavily discounted for members.
While the program offers transactional benefits, the star attraction is the experiential element. This really allows members to participate in and experience the brand lifestyle, which builds lasting emotional connections.
While transactional benefits like points, discounts, and cashback, transactional benefits still do bring out emotions, experiential benefits are what have deeper, longer term effects and drive emotional loyalty.
Just look at how well Lululemon is doing this with its paid loyalty program market test.
Consumers with an emotional connection to a brand have a 306 percent higher lifetime value, stay with a brand for an average of 5.1 years vs. 3.4 years, and will recommend brands at a much higher rate (71 percent vs. 45 percent).
3. Bed Bath and Beyond Goes Above and Beyond+
Everyone has come across the famous blue coupon. Valid for 20 percent off any single item, many consumers would collect them to use for multiple items.
Coupons like this can encourage consumers to simply wait for discounts and coupons to shop.
Beyond+ is a simple, low price program that provides members 20 percent off and free shipping as well, all the time.
The program steps away from the various discounts that Bed Bath & Beyond has offered in the past. Beyond+ cuts simplifies the thought process for shoppers and offers great value.
Freeing itself from the “loyalty to the discount” mentality has helped company officials create stronger, sustainable relationships with their customers.
Instead of customers stockpiling those blue coupons, now they enjoy the convenience of getting the discounts every time they shop. They don’t need to worry about forgetting the coupon.
Also, receiving the 20 percent off every time they shop, members are more likely to purchase other items as well. With the coupon, you could only use it on one big item at a time. Now, people can buy the day-to-day household goods and know they’re saving.
4. Starbucks gets it Right
Although I am not a member (my wife is), this program is very simple, intuitive, and is driven through mobile engagement.
Starbucks uses technology to highlight the program’s ease of use via mobile.
Three years ago, Starbucks changed its loyalty program from visit-based to spend-based after listening to its customers. Company officials increased their investment in 1-to-1 marketing and personalization to understand our customers better.
That is associated with this program and is an important part of what these changes mean for us.”
The company also has expanded its Mobile Order & Pay platform to give customers more options to order their favorite Starbucks beverage while on the go.
Last month Starbucks restructured its loyalty program that now includes tiers. The updated program will let customers use points to buy packaged coffee and select merchandise for the first time.
Starbucks credit and debit card holders can accrue points forever with no expiration date.
The restructured program will eliminate the elite “Gold” status that customers achieved after spending $150 or earning 300 points.
As of December 2018, Starbucks has 16 million active members of its loyalty program. That figure accounts for about 40 percent of the company’s U.S. transactions.
5. Barnes & Noble Membership Program is for the Whole Family
I have been a member of this program for more than 10 years. With three young avid readers in the family, this program includes great discounts and free shipping.
The program offers 40 percent off the list price of the current hardcover Barnes & Noble Store Bestsellers, and 10 percent off the marked Barnes & Noble sale price of other eligible items.
The program mixes bonus coupons ($60 worth after joining), exclusive member offers, and automatic renewal.
In the past year, Barnes & Noble has tested new offers tied to the program and customers have responded well, as more than 500,000 new members joined, raising the total membership north of 6.5 million.
The program’s transactional benefits inspire the members’ ongoing experience of reading.
The Best Loyalty Programs Contain Common Elements
For me, a successful loyalty program hits on the following:
Brands need to first fully understand customer pain points. A loyalty program is for them, not the brands. Then, brands need to construct simple programs that members understand and value.
Balancing transactional and experiential benefits is critical. There can’t be one without the other. Both bring out emotional responses. Emotional connections build true loyalty.
What are some of your favorite loyalty programs and why?
Tom Caporaso
Tom, our CEO, oversees the strategic direction of the company with over 20 years of experience in the loyalty and subscription space. When he's not leading in the office, he can be found coaching his kids in sports or watching his beloved New York Yankees or Pittsburgh Steelers.