Changes in The Loyalty Program. How to Make a Club Member Love Again?

With the economic and technological changes we are currently witnessing, consumer needs and expectations are changing.
In order to remain attractive, it is important to keep your loyalty program offerings updated. There is no denying that relationship marketing needs change and faster updates – according to the Loyalty360 report State of Customer Loyalty, 78% of marketers surveyed are leaning toward reworking and improving their loyalty offerings in the near term. The ability to analyze data and understand consumer needs will play an important role in 2023. Only by doing so can brands fine-tune their loyalty program offerings and communications to meet the expectations of their target groups.

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Data Analysis – the Key to Understanding Customer Needs

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Times of crisis prove to be extremely important in building loyalty. Brands that have lost customers are trying to win them back. Brands that have gained new customers want to keep them. For this reason, many companies are wondering what customers really need. Those brands that have already been running a loyalty program for some time have an easier task, as they can base their strategies and planned changes on data analysis and forecasting models, rather than intuition or conjecture. The loyalty program is a source of valuable data for analyzing the situation. Data on changes in the frequency of purchases, the value of shopping baskets, their content is the knowledge that provides the basis for revamping the loyalty program and defining paths of action – from activating the entire base, through its individual segments. This makes it possible to build an engaging relationship, even in times of crisis.

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There is no denying that during inflation, price plays a significant role in the purchasing process. However, the discount is not a factor that ensures brand loyalty, but only a manifestation of momentary customer interest. Tomorrow there will be another, cheaper product or retail chain towards which the consumer will move away. The price offer can easily be outbid by competitors. In order to tie the customer in for the long term, it is important that, if possible, the promotion is written into the loyalty program under the idea of “the clubber always has it better.” Besides, the loyalty program should provide unique, tailored benefits to the club member.

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An interesting example of this type of approach was recently offered by Starbucks. It presented customers with a new conversion rate for exchanging points for specific products in its Starbucks Rewards loyalty program. The cost of a cup of regular hot coffee or tea doubled from 50 stars to 100. At the same time, the number of points needed to purchase iced coffee or tea was reduced from 150 points to 100. The modification of the points conversion rate was not due to chance. Starbucks carefully analyzed the most frequently chosen products by its customers. It turned out that cold drinks account for more than 60% of total sales. This means that for most club members, the change in the program translates into more “generosity” from the brand to club members.

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Preferring Certain Activities

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Analyzing the current health of a loyalty program helps to see the potential for even greater consumer loyalty. Our client, an FMCG company, offered an innovative product whose longevity, as well as user satisfaction, largely depends on the correct operation of the product. The company was struggling with a high number of complaints. Customers did not explore the technique of using the product correctly and did not learn all its functions. Because of this, they repeatedly reported their dissatisfaction to the Customer Care department. The brand tried to build positive relationships with customers by offering them benefits under the loyalty program, but the reward structure for club members was quite scattered. Customers were rewarded for certain activities, often in a way that was inadequate to their activities. Therefore, the change in the loyalty program required the organizer to revamp the existing reward mechanism. It was necessary to link it to the product offered, and to focus on the value of the reward – so that it resulted from the level of involvement of the club member.

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We decided to link education on the correct use of the product directly to the loyalty program. We started rewarding customers for going through the educational path. It turned out that customers who went through the tutorial were not only satisfied with the process of learning about the product and using it, but also recommended the company and the product to their friends. Based on the analysis of the data, we saw that the recommendations of satisfied customers were very qualitative. We decided to incorporate the referral mechanism into the structure of the loyalty program. We kept in mind that the benefit offered should be appropriately valuable to both the recommender and the referrer.

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Expanding the Base Mechanics

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An interesting solution for a certain change in the loyalty program, and additionally bringing an element of freshness, are sub-mechanisms and additional actions. Recently, gamification elements have been gaining popularity, including sweepstakes, in-app scratch cards or “shake and win” mechanisms [so-called shakeomats]. Although on the surface these solutions are very simple, as long as they are properly linked to the loyalty program, they will work well to strengthen indicators such as program registration, card bargainability, or intensify the frequency of store visits or increase the value of the shopping cart. It is important that the gamification mechanism supports specific activities. Among other things, it can inspire what products, when, and with what frequency the club member should purchase in order to collect the reward. Attracting the clubber’s attention with additional actions and offering quick gratification means that even a participant whose participation trend has been down can rediscover the available benefits.

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Another example of an additional action that influences the building of an engaged community is a contest for club members. Recently, one of our retail clients organized an interesting activation as part of its loyalty program. In connection with the expansion of its assortment to include pet supplies, the company held a contest for club members to find the funniest pictures of their pets. The concept was based on the use of empty frames, which are on displays in stores. We awarded the most interesting photographs and also framed them. As a result, the materials from club members became part of the arrangement of selected outlets at the same time. As a result, without discounts or promotions, we managed to encourage customers to visit the stores and promote the new assortment accordingly. In this way, the brand built a strong sense of belonging of its consumers to the brand community. The number of contest entries was more than 30 times higher than during previous similar activations.

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Summary

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Although there has been a lot of talk recently about the need for change, as the examples cited show, changes to a loyalty program do not have to mean radical transformations in loyalty program strategy. The innovations that are being introduced are meant to be additive, and are primarily intended to bring an element of freshness to reinvigorate the club member.

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