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A Guide to Retail Reward Programs

Loyalty programs are like cars: from an outsider’s perspective, there’s not much difference between them. 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 reward programs differ greatly from brand-focused loyalty programs

So if you wish to succeed as a retailer, it’s absolutely pivotal to understand which loyalty features are most effective for driving your company’s KPIs. But first, let’s start with the obvious…

What Is a Retail Reward Program?

A retail reward program is a type of loyalty program that’s built from the ground up to answer the industry-specific challenges that most retailers face. This market has an inherently high purchase frequency since customers have access to a large catalog of products from various brands. 

Imagine a customer going into an electronics store. Initially, they intend 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 decided to choose a different outlet? Then the retailer would’ve missed out on an opportunity with a large basket value.

The bottom line: retail reward programs are meant to help companies in a high-stakes market where the competition is fierce. After all, retailers are selling the same things as their competitors. Being able to stand out promises a significant increase in revenue and a loyalty program is one tool that helps you stand out.

For a more detailed breakdown on the best practices for loyalty programs, check this episode of Customer Loyalty Minutes. In it, Zsuzsa Kecsmar, Co-founder and CMO of Antavo, and Jörn Roegler, VP of Strategy & Insight, discuss how brands and retailers use their loyalty programs.

What is in this video?

Brands and retailers’ priorities:

  • Retailers see higher purchase frequency and face tougher competition. Retail customers are generally working with a larger basket value, which makes the competition between retail companies especially fierce. 
  • Brands seek to engage customers & drive word of mouth. Brands differentiate themselves by nature, but they need to get their name out. Because of this, they tend to focus more on building advocacy.  

How brands and retailers approach loyalty:

  • Retailer loyalty programs are often transaction-focused. Their rewards generally focus on making the buying process easier with free shipping or extended return periods.
  • 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. 

Unique solutions that cater to brands and retailers:

  • Learning more about customers helps businesses target them directly. Brands started to borrow ideas and strategies from retail businesses to further solidify their position on the market. 
  • Loyalty 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. 

Innovating in a Cutthroat Industry

According to RetailMeNot, 51% of U.S. retailers planned to offer loyalty programs in 2018 to lift their sales growth. In other words, the competition is so fierce that simply having a loyalty program isn’t a unique selling point anymore. Therefore you must really knock it out of the park with the reward program in order to stay afloat

Unlike brands, retailers are more likely to focus on transaction-based rewards with their loyalty program. Discount, vouchers, cashback offers, you name it. However, Chain Store Age pointed out that only 22.5% of millennials indicated that price is more important than a loyalty program. So what’s the takeaway? People want to be engaged and have a meaningful relationship with their favorite store instead of just receiving good deals. 

Retail reward programs and brand loyalty programs comparison chart

Contrary to retailer loyalty programs, brand reward programs have a higher focus on customer experience and long-term engagement.

The Winning Formula for Loyalty

This new trend of customers resisting the price war is something savvy retailers can capitalize on. To give you another perspective, think about customer loyalty as friendship. Buyers who are also brand advocates will stick with you even when the competition is offering a bigger discount. 

But what are the factors that play a role in developing friendship? According to the Friendship Formula, there are four aspects: proximity, frequency, duration and intensity. Let’s see these in the context of a loyalty program.

  • Proximity: In order to be easily reachable by members, a loyalty program should be present on all available channels on the website, on social media, on their mobile, in the store and even in the customers’ daily life. Moreover, these channels should be seamlessly tied together with a sound omnichannel strategy.
  • Frequency: One big takeaway from customer lifecycle marketing is that true loyalty cannot be formed if people are only engaged when they buy something. Step beyond transactions and develop touchpoints outside of the buying cycle.
  • Duration: Design your loyalty program with longevity in mind. Launch with a solid MVP, and add some spice later down the line with gamification, customer profiling and holiday campaigns. This is a strategy proven by Antavo’s client case studies, as all of them started out with a more basic loyalty program, which was then expanded. 
  • Intensity: Make sure that the incentives are memorable. Forget the discounts; people want experiences. These can be experiential rewards, VIP perks, special interest groups, etc.
Lifehack friendship formula

The four aspects of the Friendship Formula, displayed by Lifehack. Excelling at each of them helps companies develop an emotional bond with customers.

Best Loyalty Features to Stand Out as a Retailer

Another strong trend in retail reward programs is that incentives are geared towards making transactions quicker and easier. Free shipping, extended return periods and vouchers are the staples, and people love them. Still, the competition can easily copy these features, nullifying your advantage. 

With a more complex approach — like the concept of Recognition Loyalty™ — other companies will find it difficult to offer the same rewards without losing money. On the other hand, you receive value from customers as they are repeating useful actions in order to gain access to the benefits. Here are a few examples:

  • Tiers: A loyalty program based on tiers is often synonymous with status. Customers—especially affluent ones—go crazy for the perks associated with higher levels. 
  • Rewarding hobbies and values: With the help of modern technology, fashion retailers—selling sport and fitness apparel in particular—are able to reward customers who go for a run via Fitbit, or use smart tagging to identify members who actually wear the product. This is one of our strengths and we can help you with that.
  • Personalization: According to Oracle, 56% of consumers value personalized offers in the retail shopping experience. Book stores and home decor companies can really benefit from enhancing their email communication with loyalty data.
  • Badges & Challenges: These loyalty features are great for driving small but incremental actions. Just like tiers, badges symbolize status, while challenges prompt members interact more with the loyalty program.
Antavo Loyalty Management Platform image

Let your customers challenge themselves constantly. Start by setting up easily completable actions and then set higher and higher goals to achieve. This way you can continually motivate your customers and engage them in the long run.

Uncover a Whole New Layer of Customer Loyalty

It doesn’t matter which part of the retail industry you come from, a well-designed loyalty program will no doubt help strengthen your position on the market. At Antavo customer retention in retail is one of our fortes and we are more than happy to share our knowledge with you. For more information on running a successful loyalty program, check out our ebook. We also don’t shy away from proving our aptitude, so feel free to book a demo and we’ll show how our loyalty logic works for your business.

Tamas Oszi
Tamas Oszi
Tamas is a Content Marketing Manager at Antavo who loves to write about all things loyalty and customer retention. He’s also tasked with editing videos for Antavo’s Youtube channel. Tamas is a true gamer at heart and he’s really into cyberpunk books.