Are Loyalty Programs a Dead-end for Luxury Brands?

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The other day Andy said, “Timi. I want you to write a post about how luxury brands do loyalty programs.”

I’m a hardcore fan of romantic films at heart. So at that very moment I imagined the handsome Richard Gere who brings Julia Roberts to a super-fancy store to buy her new clothes in Pretty Woman (1990). (Disclaimer: I’m still in my twenties and, yes, I love old movies.)

So here’s my question: how many cool Richard Geres and “Mrs. Richard Geres” could be encouraged to join loyalty programs? When they can already afford anything they want. And I really mean ANYTHING.

That kind of spending power means that earning points for discounts will likely have the opposite effect that companies expect from a loyalty program. It “cheapens” the brand in their eyes and doesn’t provide any real value for these shoppers.

So what kind of value a luxury brand can offer customers in higher spending brackets through a loyalty program? Quite a lot, actually. Let me show you, using some great examples.

1. Be simple, transparent and perks-focused

According to Derrick Daye from Branding Strategy Insider, luxury brands’ loyalty programs can increase the number of high-spenders from 10% to 15-20%. I don’t need to explain how such a change could affect revenue.

What’s the main secret to make it happen?

It’s simplicity.

High-end customers don’t want to be involved in complicated “games”. They don’t want to hassle with bonus points events or calculate how many points they earn with each purchase. Actually, if you give them points, they prefer if the number of points is lower, but each point holds greater value. For example, Decor Market gives 10 points after every $100 spend in their loyalty program. However, transparency can be emphasized even more with a nice design. Not to mention that you should represent the feeling of exclusivity in your loyalty program look, too. Paris Gallery Group’s rewards programs is a perfect example of this.

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Paris Gallery Group’s rewards programs clearly explains what the program is, how it works and what kind of benefits members can get their hands on. Not to mention that their design is really appealing and have an exclusive feeling.

One more important tip at this point: never emphasize price breaks too much in a luxury-focused loyalty program. (Remember how high-spenders aren’t affected by discounts? Because it makes your brand’s image look less, well, luxurious!) Instead of advertising how many discounts customers can get, highlight how much more value you’re going to reward them with.

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InCircle is the loyalty program of Neiman Marcus and Bergdorf Goodman luxury department stores. Among the benefits they offer for loyalty members, these are the most enticing ones: personalized travel recommendations and reservations at top restaurants.

2. Instead of loyalty points, focus on pure exclusivity

If you want to stick with the good ‘ol spend X amount of money and then earn Y number of loyalty points, it’s your call, but you can afford to be more creative here. (This is certainly what Decor Market could improve upon in their own loyalty program from the previous example.)

So my advice here is to let customers feel privileged in your loyalty program. High-end customers should feel like you treat them like “A-listers,” invited into a special, small group of customers. This is why names like Luxury Club, VIP club or InnerCircle can help you evoke that feeling.

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Paris Gallery Group name their loyalty program Luxury Club. A really nice way to communicate that their loyalty program holds exclusivity for their top spenders.

3. Name your loyalty currency creatively

Diamonds, sapphires, jewels, emeralds, etc. The name of the currency can help you highlight that it holds great value. Remember when I wrote about how high-end customers prefer small number of points/currencies which have higher value? Well, surprisingly not many luxury brands are addressing this today. However, luxury hotels or consumer finance companies are already using this strategy very well!

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Dubai First is one of the leading consumer finance companies in the UAE. Customers can earn Dubai Mementos in their loyalty program.

4. Reward customers based on the amount they spend

Welcome membership tiers into the picture! Let your members feel that they have a higher status than others by letting shop their way into higher customer levels. Furthermore, actively encourage them to reach the highest status in your loyalty program. Why, you may ask? Because, high-spenders are eager. They want to be the tip top among your top customers. For example, to satisfy this need, Neiman Marcus and Bergdorf Goodman luxury department stores explains in details what kind benefits can be unlocked by customers in each level, after a certain amount of spend. If you would like to read more about tiered loyalty programs, I recommend this article: Why Tiered Programs are Great for Customer Loyalty.

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In Neiman Marcus and Bergdorf Goodman luxury department stores’ loyalty programs they show customers exactly with how much spend a customer is able to unlock at each new level, and what kinds of new benefits they can take advantage of.

Now’s a great time to let your creative side shine, as you name your loyalty program and customer levels. Just see how Swarovski has done it, in it’s Just Because rewards program. Even their rewards program name is fun to read! Not to mention the whole concept behind their loyalty program is centered around a clear value: they want their members to shine/sparkle more with their help. That’s the premise behind their customer levels: Shimmer, Shine, Sparkle and Swarovski Prestige.

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Swarovski is definitely a brand that didn’t waste any creative energy in developing their loyalty program concept. They reward their members to let them shine. The more they earn, the more they can shine.

5. Maximize exclusivity by offering experience-based rewards

High-end customers want to feel that they are truly remarkable. Plus, Derrick Daye from Branding Strategy Insider says that the “top-tier shopper often develops an intimate relationship with her sales associate”. Re-create this intimate relationship and generate a remarkable feeling by offering a personal shopper, haute couture, a VIP invitation to a fashion show, or an exclusive event where customers can taste the master chef’s best meals.

In other words, create an extraordinary way to say “thank you” to your top spenders for being with you.

I would absolutely recommend the haute couture option. Asking the best designers to create a handmade dress exclusively for your top customers – it’s definitely a remarkable memory for them. Personal shoppers are also a great reward option that fulfill the need of a personal, intimate relationship between a customer and the brand.

And one more thing: don’t forget events centered around donations (e.g. VIP dinners) for the causes that your customers care about. Here’s a great example from Bloomingdale’s, an upscale department store owned by Macy’s, Inc.

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For a limited time, Bloomingdale’s lets loyalty members donate to organizations fighting against breast cancer. For that they set up a chart showing how much money you can donate to the cause, according to how much you spend.

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As October is the month of breast cancer awareness, even Ralph Lauren run a campaign centered around this cause.

Conclusion

See? Luxury brand loyalty programs can work beautifully. They just need to give real value for their customers in the form of exclusive customer levels, once-in-a-lifetime events, and memorable gifts or experiences. The main take-away is that high-spenders aren’t worried about saving money in the first place. What they want is private services, to feel remarkable and important. And a loyalty program with the right ingredients can help you satisfy those exact needs.

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