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Beyond points

Five ways retailers can reinvigorate their loyalty programs

For years, retailers have used loyalty programs to award points to regular customers and collect data about purchasing habits. In return for allowing retailers to track their purchases, consumers receive incentives — typically in the form of points they can redeem for discounts or merchandise.

“Loyalty programs tend to go stale over time. If you want to continue engaging customers, you need to continuously reinvent your program.” –Brent Houlden

But the most effective loyalty programs go far beyond rewarding consumers by allocating points. According to Brent Houlden, national leader of Deloitte’s Retail practice, retailers can take steps to get greater value from their programs. They can restructure their offerings, diversify or increase their value proposition, and ultimately reinvigorate their programs to further build their brand and strengthen relationships with consumers. Here are six tips to help businesses boost their loyalty programs:

  • Give customers a reason to participate. “For years, retailers have been introducing programs that encourage customers to collect points to earn discounts or receive free products. But point collecting is losing its lustre,” says Houlden. Younger consumers are disinclined to collect points, while older consumers are experiencing points fatigue. “Ultimately, consumers are only willing to participate in a limited number of programs, which means retailers need to offer a program which will appeal to and fully engage their targeted shopper.”
  • Surprise and delight your customers. As businesses begin to innovate, they may discover that point collecting can fall by the wayside. “We’ve helped retailers design programs that don’t award points at all. Instead, they use loyalty cards to track a customer’s purchasing habits, then use that information to surprise them with targeted offerings.” These may take the form of discounts on new merchandise at the start of the season, or they may be a point-of-sale gift. “An unexpected gift or reward goes a long way toward fostering greater customer loyalty.”
  • Deliver valuable — not costly — rewards. The best rewards carry a high perceived value to customers at a relatively low cost to retailers. “If an airline is flying with empty seats, it doesn’t cost much to offer reward seats to loyal customers,” says Houlden.
  • Loyalty programs don’t need to be costly. Retailers can also redesign their programs to drive incremental purchases. If you know customers are making a specific purchase — like taking a trip, for instance — you could use that information to offer them discounts on maps, suitcases or insurance. “You’re already collecting the data, so why not use it to drive more sales?” Implemented correctly, this kind of innovation may even increase profit.
  • Structure your loyalty program to build your brand. “We’re all familiar with programs that award points for purchases, but offer rewards that don’t reinforce the retailer’s brand. If a bank credit card offers a discount on purchases, how does that strengthen the bank’s brand?” asks Houlden. If businesses take the time to re-evaluate their programs, they may discover that it makes more sense to reward loyal customers with improved service or product offerings that extend their brand, rather than promote a third-party brand.
  • Reinvent your program and re-engage your customers. The challenge with loyalty programs is that they can go stale over time. So you need to continuously reinvent your program to continue engaging customers. Analyze the data to devise targeted offers that compel consumers to act. “Think of ways to change the game — like rewarding consumers for environmentally friendly habits, or allowing them to convert their points into charitable donations,” says Houlden. “The key to an effective and engaging loyalty program is innovation. Otherwise, you run the risk that a competitor will surprise and delight your customers with something creative and compelling, while your program remains static.”