Loyalty programs are like cars: from an outsider’s perspective, there’s not a big difference between this one and the next. Cars get you from point A to point B, while loyalty programs help you retain customers, right? The truth is, however, that the small details are what make the experience different. While some people prefer a speedy sports car, others need a trusty family car to get the kids to the school. In the same vein, retail loyalty programs differ greatly from brand-focused reward programs.
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Moreover, store culture and customer behavior have changed dramatically in the past years. As a consequence, retailers have had to find solid ground in the new customer reality. One way they’ve done that is to implement a rewards program tailored to the retail business model. A good retail loyalty program can undoubtedly be a powerful differentiator that helps retailers become stronger than ever. Retailers seem to be aware of this: based on Gartner’s analysis, membership programs are extremely popular in retail, with 71% of retail brands using them.
Key Takeaways – TL; DR
- Transforming the underlying tech is more important than ever
- Retail loyalty programs can help survive in a high-stakes market during the recession
- Opportunities include social retail, omnichannel experiences, virtual stores and ethical shopping
- Retailers have to think out of the box and transform the store space too
- In-store treasure hunts, digital passes, and lifestyle rewards are just a few examples of how retail loyalty programs can drive these initiatives
At the heart of current retail challenges is a fundamental shift in people’s day to day needs. Connecting with consumers is a strong way to solve this issue, which can be done with carefully devised shopping loyalty programs that give back and provide real support and well being for workers and families.
Table of Contents
What Is a Retail Loyalty Program?
A retail loyalty program is a type of reward program that’s built from the ground up to answer the industry-specific challenges that most retailers face. This market has the potential for high purchase frequency since customers have access to a large catalog of products from various brands. However, retailers need to recognize that besides brick-and-mortar, an online presence (or rather an omnichannel one) is also a necessity in this day and age. Retail loyalty programs are also special because their technology, strategy and corresponding hardware need to be managed simultaneously in order to get a holistic view of customers.
In an environment of increased competition where deep price discounts have become prevalent, loyalty driven solutions have the potential to become communication and commercial hubs where you can connect with your clients on a deeper level and choose offers that go far beyond generic promotions.
How Are Retail Reward Programs Different from Brand Loyalty Programs?
Retailers see higher purchase frequency and face tougher competition. That’s because retail customers generally work with a larger basket value. Retail loyalty programs are often transaction-focused, too. The rewards in these programs generally help make the buying process easier, for example, free shipping or extended return periods.
Brands, on the other hand, seek to engage customers and drive word-of-mouth. They differentiate themselves by nature, but they need to get their name out. Because of this, they tend to focus more on building advocacy. Brand loyalty programs build long-term engagement. Brands want customers to consume content and engage with them on social media in order to generate hype and positive word-of-mouth.
Learning more about customers helps businesses target them directly. Brands have caught on, and have started to borrow ideas and strategies from retail businesses to further solidify their position on the market. Retail membership programs boost the debut of an online store. The best way to advertise the launch of a new store is to pair it with a loyalty program, ensuring new customers stick around.
How Retail Loyalty Programs Help Surviving in a High-Stakes Market
Imagine a customer in an electronics store. Initially, they intended to purchase a new laptop, but in the process they decided to buy a new headset and a mouse. That’s three products in their basket, from three different brands. But what if that customer had chosen a different retailer? Then the retailer would’ve missed out on an opportunity with a large basket value.
The bottom line: retail membership programs help companies in a high-stakes market where the competition is fierce. After all, retailers are selling the same products as their competitors. Being able to stand out promises a significant increase in revenue — and a loyalty program is one tool that helps retailers distinguish themselves. Retailers that already have a loyalty program should consider switching to a digitized, more next-gen loyalty program that is able to create an omnichannel experience for their customers, covering all — mobile, offline, and online — channels.
What brands can do is to create digital shopping events for their members, make personalized offers & products, and create relevant collaborations with key opinion leaders. A customer loyalty program can generate a lot of information about your customers, which is key to making the right business decisions.
The Role of Retail Loyalty Programs During an Economic Recession
For the retail industry, facing a crisis isn’t new. Even after the eCommerce hyperjump that followed the pandemic, retail still remained a force to be reckoned with. But how can a business in the industry not just survive, but thrive in a market environment threatened by another economic downturn? Forbes expressed a positive outlook, pointing out that even in a recession, people will keep buying products that they love, even if it counts as a luxury. McKinsey shared the sentiment, though urged retailers to step up their tech transformation. This process has already started to take shape for loyalty programs: according to Antavo’s Global Customer Loyalty Report 2023, 8 out 10 companies wish to revamp their loyalty program. This is no doubt about a desire to stay on the cutting edge of technology and not dissatisfaction, as the same result proves that successful loyalty programs achieve exceptional ROIs.
The Biggest Customer Retention and Acquisition Opportunities for Retailers
As competition keeps getting more intense, retailers really need to knock it out of the park with their rewards program. With emotional loyalty on the rise, people want to be engaged and have a meaningful relationship with their favorite store instead of just receiving good deals when they spend money.
As retailers continue shifting their business to the online world, loyalty programs can be a great incentive to invite customers into the online space and reactivate old-time brand lovers. Sending an email to members introducing the new features of their webshop, inviting them to a treasure hunt, or offering points for purchasing online will surely encourage them to try the new additions.
Taking Customers for a Virtual Walk – Design an In-Store Adventure
Although more and more people shop online, customers miss “the old way”, the offline experience of walking into a store, being able to look around, touching and trying the items. Retailers have the advantage of engaging customers at every step of their in-store experience, plus they can mix it with an online presence. For instance, inviting loyalty program members for a virtual store tour can create a meaningful experience. Retailers can model their store online where customers can purchase the items with a click, while virtually looking around.
Tommy Hilfiger invites customers for a virtual tour inside its store. This is a great way to bring the offline store experience alive online.
Bridging the Gap – Create an Omnichannel Experience
Omnichannel is officially a necessity. Retailers must blend their mobile, online and offline presence seamlessly. Retail loyalty programs also need to become more digitized in order to serve omnichannel retailers. An omnichannel experience provides an overall view of customers, no matter how they shop, and allows companies to manage their loyalty programs across all three major marketing channels simultaneously.
Signed, Sealed, Delivered – Offering Convenient Delivery
Convenient and fast delivery is still one of the most popular rewards a loyalty program can offer. In regards to delivery, retailers with a network of brick-and-mortar stores have much more to offer than strictly eCommerce companies. Having a regional or nationwide logistics system helps them save costs by transforming their brick-and-mortars into warehouses or dark stores. Also, local retailers can set up the necessary systems to get products to customers faster, leading to more sales. At the same time, eCommerce companies need to rely on transportation companies to do the same. Retailers can offer their loyalty program members extra points for picking up their orders in store, saving even more, or offer delivery service as a benefit in their rewards program.
Playing a Major Role in Driving Loyalty – Personalization
Offering a more personalized experience to customers while shopping in-store highly strengthens the emotional bond with them. According to BCG, redirecting 25% of mass promotion spending to personalized offers would increase ROI by 200%, leading to a top-line growth opportunity of more than $70 billion annually. Providing recommendations based on loyalty program members’ previous purchases, tailored to their likings, is one way to provide a special experience. It’s probably no surprise that, according to Antavo’s Global Customer Loyalty Report 2022, 29.3% of respondents reported that personalization was their most important investment for the coming years.
Offer a Virtual Shopping Experience – Social Retail
Social retail is an emerging trend which retailers should take advantage of. It is the practice of using social media to engage with customers and sell across physical and digital channels. Social retail attempts to use technology to mimic the social interactions found in physical malls and stores. Social selling is made possible by eCommerce tools, helping local retailers reach more customers at a time when people are even more glued to their devices. Using rewards and benefits, customer loyalty programs have the ability to encourage customers to build a habit of using social retail.
Addressing Eco-Conscious Customers – Ethical Shopping
As new and more concerned generations become greater contributors to the economy, pleasing them will only help your business. Generation Z is looking to buy from brands that give back or have little environmental impact because it makes them feel like they are supporting a business that works towards the greater good. Antavo’s Global Customer Loyalty Report 2023 also identified this as a key trend for the coming years, with many loyalty programs seeking to incorporate it. Working with a non-profit or restricting yourself to using renewable resources will attract buyers. It’s hard to deny: sustainability is stylish.
A New Era in Retail – Redefining the Physical Space
The retail industry is continuously going through a transition. However, every change is an opportunity for those who react quickly and dare to take the lead. A large percentage of customers have now been exposed to the convenience of online or app-based shopping and have had their orders delivered right to their doorstep.
In order to stay relevant, the retail space needs to be reinvented. Brick-and-mortars should embrace the idea of configurable stores: instead of a static shopping area, the stores should be dynamically rearranged and refurbished to respond to the needs of an ever-changing customer base.
Running the Show(room)
It doesn’t matter whether a customer wants to visit their favorite outlet, or wishes to stay at home, physical and digital showrooms can contribute to a memorable in-store experience in the era of touchless retail. The former is about transforming the real estate into a place where customers can test the products.
Physical stores can act as showrooms, where customers can interact with or try out the products. In this case, the value comes from engagement: customers have a fun time, go home, and order the product online. Retailers can offer their loyalty program members privileges like a fast pass, for example, if customers need to make an appointment to visit the showroom. Or they can offer provide tier-specific discounts to customers who order on site.
Supporting Logistics With a Pick-up Point / Dark Store
A dark store is basically a brick-and-mortar that has been shut down and turned into a distribution outlet, giving retailers more space to store inventory and allowing them to quickly and accurately fulfill orders. It provides customers with additional resources and options like online purchase, same-day delivery, or in-store pickup. Transforming physical stores into pick-up points and offering loyalty program members extra points for picking up their purchase instead of having it delivered to their homes can save a great deal of time and money.
Building a Community
Retailers can use their store space for community events if community building is a part of their strategy. Examples include inviting loyalty program members to an in-store fashion show or using a store (or store-like) environment for live stream events. The promise of a great experience, for instance an invitation to an exclusive brand event in the store, is a great way to reward your most loyal customers.
The Best Loyalty Features for Standing Out as a Retailer
A strong trend in retail loyalty programs is incentives geared towards making transactions quicker and easier. Free shipping, extended return periods and vouchers are the staples—and people love them. Still, these are elements that the competition can easily copy, which essentially nullifies the advantage. Here are a few features examples that can make a retail rewards program more diverse:
1. Omnichannel Solutions
Connect online and offline channels by integrating a POS device capable of scanning QR codes and barcodes to identify customers in store. These codes can either be incorporated into a mobile-friendly membership page, or displayed as a mobile pass. Either way, when the cashier scans a member’s barcode, members will be able to earn points for their purchases or redeem points for rewards on the spot.
Mobile Wallet as digital loyalty card
Mobile Wallets are native apps meant to store the various mobile passes customers have. Through passes, customers can identify themselves in-store, and store their retail loyalty cards, reward coupons and event passes. All of this encourages easy enrollment and reward redemption. Focusing on mobile engagement also unlocks additional opportunities for your business, such as push notifications, app-only discounts, digital loyalty cards, as well as mobile check-ins for customer support.
Sending customers push notifications telling them about the latest sales (or even hinting at a reward) is an effective way to increase footfall. Location-based push notifications are viable either by installing and calibrating beacons around the store, or turning on the advanced geolocation module at Antavo’s platform. Similar to beacon technology, NFC enables customers to interact with store-exclusive loyalty features in a fun way. For instance, fit a TV screen with an NFC tag, loop a playful animation on screen, and prompt passersby to tap their phone in a designated area. Once they do it, the NFC tag redirects them to your loyalty program’s enrollment page.
2. Next-Gen Loyalty Logic
A loyalty program based on tiers is often synonymous with status. Customers go crazy for the benefits associated with higher levels. Tiers are also great way to generate long-term investment, preventing top-spending customers from churning. Retailers can even create separate tiers where they can progress independently based on offline and online purchases. This way customers can be inspired to stay active in both. And tiers encourage customers to use the benefits associated with the store-specific tiers when visiting your store.
Giving out membership cards, rewards and tier status might no longer be enough. You need to be where consumers are and talk about things that they are interested in, and sometimes that might not always have direct linkage to your brands or products. As we cautiously anticipate, plan and welcome the progressive recovery of economic and retail activities, the ability to remain relevant and connected to consumers will continue to define a brand’s or a retailer’s right to win.
Rewarding the Customer Lifestyle
With the help of modern technology, fashion retailers—selling sport and fitness apparel in particular—are able to encourage customers to lead a more healthy lifestyle. Acknowledge members for doing sport activities and give them points through a sports tracker integration, like Strava. This solution also puts a whole new layer of customer information at the retailers’ fingertips Or encourage more sustainable choices by rewarding members for bringing their own bag when shopping at the store.
In-store games tend to increase time spent at the store location and generate more new and returning customers. Loyalty features like badges or challenges, which can be played on tablets or kiosks placed in the store, are great for driving small but incremental actions. Just like tiers, badges symbolize status, while challenges prompt members to interact more with the loyalty program. For instance, offer loyalty program members a special badge for spending a specific amount of money. Such gamified features help to change customer behavior and incentivize them to interact with the program on a daily basis.
3. In-Store Reward Promotion
In-store Treasure Hunt
Get customers into your stores with the help of a push notification inviting them to a treasure hunt. In a treasure hunt, customers can search for specific products. While they search, they may discover areas of the store they may have otherwise overlooked. Encouraging customers to explore the store increases the likelihood that they’ll encounter something they love. Plus, having them interact directly with products also reduces the chance of them encountering a competitor’s offer.
Sometimes the process of finding the perfect clothing can be overwhelming. Smart mirrors can facilitate the shopping experience, allowing customers to virtually try on different styles of clothing. These mirrors can create simulations of how a given item may look on the user, helping create a more convenient and personalized shopping experience that can be enhanced by offering a discounted price on recommended items, especially for loyalty program members. Smart mirrors can also be used to push offers, discounts and even upsell products. This provides merchants another opportunity to effectively interact with their customers and build loyalty. It’s also an excellent way for small brick-and-mortar retailers to increase their sales and provide a virtually unlimited inventory to prospective customers.
By scanning a QR code on the product, people can enter a photo contest. The contest can be free to enter or require that customers spend points to participate. Members who upload a photo, for example, posing with their purchase or in front of a dedicated photo wall in the store, have the chance to take home the grand prize. Organizing a photo contest is a great way to encourage customers to submit user-generated content and thus drive word-of-mouth.
Augmented reality is another strategy that retailers use to help customers experience products and test them out before adding them to their carts. Also, social networks like Instagram, Snapchat, and Facebook, have AR filters. Giving badges or extra points to loyalty program members when they use an AR feature a given number of times fosters repeated behaviors and generates brand loyalty.
7 Top Retail Rewards and Loyalty Program Examples
Now, it’s time to take a look at some of the best retail loyalty programs and draw inspiration from each one.
1. Sephora – Beauty Insider
Sephora is a French multinational chain of personal care and beauty stores, and is widely known for its loyalty program. The company has created a community among their more than 5 million members, by encouraging them to upload photos, and share beauty advice and recommendations with each other.
- Through seasonal savings, customers receive a discount on their orders, depending on their level
- Members can use their points to redeem for select services
- Rouge tier members can exchange 2,500 points for $100 off when they redeem a Rouge Reward in the Rewards Bazaar
- Free shipping is available with certain conditions, and only members of the highest tier have unlimited access to it
Why it works
- Each tier is associated with distinct new rewards, so it’s worth climbing the ladder.
- A large variety of experiential rewards keeps customers interested.
- Free shipping is a fan favorite reward among retail customers.
2. Urban Outfitters – UO Rewards
Urban Outfitters is a multinational lifestyle retail corporation headquartered in Philadelphia, Pennsylvania. The brand’s loyalty program, which includes points and tiers, lets customers earn points several different ways.
- Customers receive a $5 reward every time they reach 100 points for making a purchase.
- Customers can earn points by submitting reviews, downloading the app or visiting the website
- There are also giveaways, anniversary discounts and early access to upcoming sales
- Gold tier members receive surprise rewards and express shipping offers
Why it works
- For a loyalty program meant for a wider audience, it’s worth making the rules as simple as possible.
- Allowing customers to earn rewards through non-transactional means will increase their engagement.
- Giveaways and anniversary rewards are a great way to keep customers around.
3. EyeBuyDirect – Focus Loyalty Program
An online retailer of prescription glasses, EyeBuyDirect, runs a unique type of loyalty program. Instead of allowing everyone to join, customers have to spend at least $75 to enter Tier 1. In exchange, members receive instant access to valuable rewards. These benefits include:
- Birthday freebies
- A free glasses case
- 15-30% discounts, depending on the type of product
- Early access to new products
Why it works
- Early access perceived as a valuable benefit, yet it doesn’t cost anything for the brand.
- Needing to spend money to reach the first tier might turn down some customers, but those who are determined will have a higher lifetime value.
- Free gifs like a glass case are always more memorable and thus a better motivation that discounts.
4. Boots – Advantage Card
Health and beauty retailer and pharmacy chain Boots serves a global market, including the United Kingdom, Ireland, Norway, the Netherlands and Thailand. The company has an earn & burn style program, with a heavy emphasis on retail loyalty apps and personalized offers.
- Customers earn 4 points for each £1 they spend. Points can be used to pay for products directly
- Students with a student ID automatically receive a 10% discount
- Two insider groups, for parents and customers aged 60+, receive additional benefits
- The membership account displays a constantly updated storefront of targeted offers
Why it works
- Earn & burn programs are very common, but still the easiest to understand and adapt by customers.
- Demographic-centric rewards, like discounts for students, is worth considering if you wish to boost adoption among certain target groups.
- Making the app the go-to platform for targeted discounts and rewards helps you gain more mobile users.
5. Ulta – Ultamate Rewards
Ulta is an American chain of beauty stores. The company has created a store experience that’s in sync with how beauty lovers actually shop. Their special world of “all things beauty, all in one place” immediately connects with their customers. Ulta’s three-tiered loyalty program offers even more benefits when members become Platinum and Diamond in their loyalty program.
- The loyalty program has a free membership tier, and two spend-based tiers
- Members earn points for every dollar they spend on products and beauty services
- Members can opt into the company’s emails and app notifications to receive exclusive bonus point offers
- Platinum and Diamond tier members’ points never expire
Why it works
- Mixing free and paid loyalty program members can turn the loyalty program into a revenue center.
- Paid tiers or benefits should always be more exciting and exclusive than just a bonus on what free members are getting.
- Point expiration is an annoying feature, but those who experienced it at least once will no doubt strive to reach a tier where it’s no longer an issue.
6. Nordstrom – The Nordy Club
Nordstrom is a leading fashion retailer, offering trendy clothing, shoes and accessories for men, women and kids. Members of the earn & burn loyalty program get rewarded for shopping and can enjoy exclusive perks like members-only access to sales, offers and events.
- Customers earn points toward Nordstrom Notes, which they can spend on anything they want
- Ambassador tier members receive priority access to style events and invitation-only events
- The number of points members earn at checkout depends on the way they pay
- Members can redeem their Notes faster with the help of the Nordstrom App
Why it works
- Early access to sales is another highly popular feature, besides early access to new products.
- For a truly outstanding loyalty program, try including benefits with emotional or experiential value, like priority access to stylist events.
- In case you wish to promote certain transaction types, make sure to let customers earn more points for using them.
7. REI – REI Co-op
REI is an American retail and outdoor company selling sports equipment, camping gear, and clothing. The company’s subscription loyalty program offers exciting perks for a one-time flat fee, even for those who don’t consider themselves an avid outdoor person.
- The membership is for a lifetime, it has no expiration date
- Customers receive access to curated selection of gear & clothing, brand collaborations, limited editions and special offers
- Members save 20% on bike & snow shop services, plus free cycle flat tire repair and machine wax
- The company donates $5 to the REI Cooperative Action Fund with the purchase of each lifetime membership
Why it works
- Paid programs with a one-time subscription that offers a lifetime membership generate less revenue, but it’s more enticing for customers.
- Access to members-only curation of products adds a touch of experiential value to the membership.
- Charity donations made in the name of customers is one of the ways a brand can support a right cause and earn the trust of people.
Uncover a Whole New Layer of Customer Loyalty
A well-designed loyalty program will always help to strengthen a retailer’s position on the market. At Antavo, customer retention in retail is our forte. So if you need help, we are more than happy to share our knowledge with you. Feel free to book a demo or invite us to your RFP and we’ll show how our loyalty platform can work for your business.
And don’t forget to download Antavo’s Global Customer Loyalty Report, an in-depth report that showcases dozens of statistics as well as future industry trends to help you navigate the world of next-gen loyalty programs.