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Retail Loyalty Programs: A Comprehensive Guide (2020)

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 loyalty programs differ greatly from brand-focused reward programs

Moreover, store culture and customer behavior have changed dramatically due to the COVID-19 pandemic. And as the quarantines are gradually being lifted in more and more countries, retailers have to find solid ground in this new customer reality. A loyalty program tailored to shops and retailers is undoubtedly a powerful differentiator that can help you come out of the crisis stronger than ever.

At the heart of current retail challenges is a fundamental shift in people’s day to day needs, combined with financial and safety anxiety. Connecting with consumers is a strong way to solve this issue, which can be done with carefully devised loyalty programs that give back and provide real support and well being for workers and families.

Angela Farrugia
Founder of Brand x Society

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 an inherently high purchase frequency since customers have access to a large catalog of products from various brands.

We don’t yet know the speed of economic recovery and the degree to which changes in consumer behavior caused by the pandemic will “stick” and become new habits. What we can say for certain is that consumers will be spending less in the majority of categories. In an environment of increased competition where deep price discounts 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 provide arguments for choosing offers that go far beyond generic promotions.

Adam Rusiecki
Senior Manager – Strategy & Operations at PwC

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 loyalty 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 – from the pre-COVID era. In it, Zsuzsa Kecsmar, Co-founder and CCO 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.

In Paris one of the biggest challenges will be the lack of tourists, especially those from Asia, as they drive the majority of luxury consumption. What brands could 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.

Solbritt Andersen
Retail Manager in Fashion

The Biggest Customer Retention Challenges for Retailers

Innovating in a Cutthroat Industry

According to recent statistics, retail penetration has seen a rise once the COVID-19 situation started to ease. This is an incredibly high number, and it means that the competition will be even fiercer in the coming months. Therefore simply having a loyalty program isn’t a unique selling point anymore. To stand out, you really need to knock it out of the park with your reward program.

This chart from the Bank of America shows that COVID-19 wasn’t a turning point, but rather a catalyst for retail sales. 

Unlike brands, retailers are more likely to focus on transaction-based rewards with their loyalty program. Discount, vouchers, cashback offers, you name it. However, iperceptions pointed out that 64% of customers find the customer experience more important than price. 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.

Redefining the Physical Space after COVID-19

Most retailers hope that once the pandemic is over, everything will go back to the way it was before. Sadly, the state of the retail industry may never be the same again. However, every change is an opportunity for those who react quickly and dare to take the lead! A large percentage of consumers 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.

While the future may be even more impossible to predict than usual, there are ways for marketers to better forecast future consumer behaviors. By combining trending values data, generational insights and known life stage circumstances with consumers’ current responses to the COVID-19 crisis, marketers have the best chance of understanding how different generational cohorts of consumers will continue to respond to these challenging times.

Gartner, “Generational Differences in the COVID-19 Consumer Context”,
Tim Barlow, Kate Muhl, 9 April 2020
(Gartner subscription required)

A New Era in Retail

The process has already started during the Coronavirus. Many stores have mounted plastic shields at the counter to prevent the virus from spreading, drawn markers on the floor to help customers keep a secure distance from one another, and set up one-way aisles to manage the lines.

During a lockdown situation like we have seen in recent months, we are continuously looking for new and creative ways to connect with our customers. The switch to digital communication is obvious but it is all about finding the right tone of voice that combines the right mix of inspirational and commercial messages. Our loyalty program is fully omni-channel, so it enables us to quickly redirect our Diamond Club Members to our e-commerce platform. Additionally, in these challenging times, a good loyalty program has allowed us to flexibly set up attractive promotions and reward our customer base for its support in Diamanti Per Tutti.

Floris Foqué
Co-owner and COO of Diamanti Per Tutti

Still, this should be taken to the next level to keep up customer interest. For instance, a store may act as a showroom, where customers can interact with or even try out the products. In this case, the value comes from engagement: customers have a fun time, go home, and order the product online. Other stores may be transformed into fulfillment centers, supporting the brand’s online strategy as a dark store.

Toys “R” Us plans to make a comeback with a new showroom model: all of its stores will become showrooms, which will be rented out to multiple toy brands. In exchange, manufacturers will be able to display their goods in a high-profile environment and access the retailer’s technology, insight and data.

Toys “R” Us plans to make a comeback with a new showroom model: all of its stores will become showrooms, which will be rented out to multiple toy brands. In exchange, manufacturers will be able to display their goods in a high-profile environment and access the retailer’s technology, insight and data.

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

A strong trend in retail loyalty 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:

1. Omnichannel Solutions

POS integration

Connect your online and offline channels by seamlessly integrating a POS device, capable of scanning QR codes and barcodes to identify customers in-store. These codes can be either be incorporated into a mobile-friendly membership page, or elegantly displayed as a mobile pass. Either way, having it scanned by the cashier allows members to earn points for their purchase.

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, store their loyalty cards, reward coupons and event passes, which can be used for easy enrollment and reward redemption.

Through Antavo’s easy-to-use editing interface you can customize the look and feel of your mobile passes to match your brand’s image.

Through Antavo’s easy-to-use editing interface you can customize the look and feel of your mobile passes to match your brand’s image.

Drive footfall with push notifications

Sending customers push notifications telling them about the latest sales (or even hinting on a reward) is an effective method of increasing 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.

NFC Technology

Similar to beacon technology, Near Field Communication enables customers to interact with store-exclusive loyalty features in a fun way. For instance, fit a TV screen with an NFC tag, the screen looped a colorful animation, playfully prompting passersby to touch their phone to the designated area. Once they do it, the NFC tag redirects them to the loyalty program’s enrollment page.

Loyalty Experience Kiosk

Antavo’s unique hardware-software solution offers a more sophisticated way to bridge the gap between offline and online purchases. The kiosk acts as an advanced engagement hub, uses facial recognition, along with Apple- and Google-supported NFC technology to give customers a next-gen store experience.

Learn more about the vast array of in-store capabilities of the Loyalty Experience Kiosk from this video.

2. Next-gen Loyalty Logic

Tiers

A loyalty program based on tiers is often synonymous with status. Customers—especially affluent ones—go crazy for the benefits associated with higher levels. Tiers are also great for generating long-term investment, preventing top-spending customers from churning.

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.

Social distancing has exponentially accelerated the shift in consumer activities towards digital, in ecosystems where CRM programs can’t, and shouldn’t, be localized within the brand’s or retailer’s own platform. 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. But you need to be there when they are talking about and living their lives in the quarantine, or when they are desperately looking for masks or other supplies.

Jacky Lui
Partner at PwC

Store-level offer management

According to RedPointGlobal, 63% of customers expect personalization to be part of the service. This can be easily achieved through an enterprise-grade offer management tool, which allows companies to make good use of their segmentation and send out offers that are specific to certain countries, stores and cities.

Badges & Challenges

These loyalty features 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. Such gamified features are great to change customer behavior and incentivize them to interact with the program on a daily basis.

VIP Clubs & Early Access

Customers love the feeling of special treatment. You can capitalize on this in a cost-effective manner by setting up insider groups that are either invite-only (ensuring that only high-value customers are privy to enter) or restricted to a certain demographic. In exchange, members receive early access to upcoming sales or products.

Luxury fashion giant LuisaViaRoma became an instant hit among customers with its sneakers-focused VIP club. Read more about it in this case study.

Luxury fashion giant LuisaViaRoma became an instant hit among customers with its sneakers-focused VIP club. Read more about it in this case study.

3. In-Store Reward Promotion

Scanning Products’ QR codes

Associate each product with a unique tag that comes in a little attached sachet. Customers can scan the QR code and be redirected to the loyalty program’s landing page. They can even receive a small reward, though you should ensure the reward cannot be redeemed instantly to prevent people from keeping the reward after returning the  product.

For brands selling through retail: Receipt scanning

Brands can ask customers to take a photo of their purchase receipt from the retailer and upload it at a link to prove their purchase and earn benefits. This process works with image recognition and OCR (optical character recognition), where we “teach” the system the formats retails may use, so it recognizes the purchased brands on the receipt.

For brands selling through retail: Product codes

Add a special note containing a unique product code inside the product packaging. After scanning the code and registering, customers can unlock exclusive benefits. This is a great way to engage customers if you’re selling through partners or retailers, plus it creates a pleasant user experience.

Photo contests

By scanning a QR code that is attached to 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, have the chance to take home the grand prize. This is a cost-efficient way to boost engagement: you only have to pay for one prize, but plenty of people will participate in the contest, generating a lot of buzz.

4 Inspiring Rewards Programs in Retail

1. Sephora – Beauty Insider

Sephora is a French multinational chain of personal care and beauty stores. The company is widely renowned for its loyalty program, which was updated in direct response to the changed customer reality following COVID-19, demonstrating the flexibility these programs give in terms of customer retention.

  • The company has a three-tier system with birthday rewards, early access and access to exclusive events
  • Free shipping is available with certain conditions, with only the highest tier members having unlimited access to it
  • Through seasonal savings, customers receive a discount on their order, depending on their level
Sephora’s reward shop initially featured product samples, but they updated it by enabling members to spend their points on beauty services as well.

Sephora’s reward shop initially featured product samples, but they updated it by enabling members to spend their points on beauty services as well.

2. Urban Outfitters – UO Rewards

Urban Outfitters is a multinational lifestyle retail corporation headquartered in Philadelphia, Pennsylvania. The brand’s loyalty program stands out by engaging customers outside of the buying cycle, giving them multiple ways to earn points.

  • The program combines points and tiers: customers earn 20 points for making a purchase, and there are two tiers (Silver and Gold)
  • Customers can earn points by submitting reviews (up to three times per month), downloading the app, and even visiting the website (up to five points per month)
  • There are also giveaways, anniversary discounts and early access to upcoming sales
Being a tier member gives you the freedom to choose your own sale days and participate in gift card sweepstakes.

Being a tier member gives you the freedom to choose your own sale days and participate in gift card sweepstakes.

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 $99 annually to be invited. In exchange, members receive instant access to valuable rewards, without the need to collect points or rank up tiers. These benefits include:

  • Buy 1, Get 2 offers
  • Free shipping and free glasses cases
  • 15-30% discounts, depending on the type of product
  • Early access to new products
EyeBuyDirect also has a referral system, with a $50 milestone bonus after every fifth person invited.

EyeBuyDirect also has a referral system, with a $50 milestone bonus after every fifth person invited.

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 mobile apps and personalized offers. 

  • Customers earn 4 points for each £1 they spend. Points can be used directly to pay for products 
  • Students who purchase using a student ID automatically receive a 10% discount
  • Two insider groups, for parents and customers aged 60+, receive additional benefits 
  • The membership account is constantly refreshed with targeted offers, e.g. members of the Parents club receive exclusive deals

Downloading the Boots loyalty app gives customers a 200-point bonus, which is a nice non-transactional engagement. Plus, members can use the app to identify themselves in-store.Downloading the Boots loyalty app gives customers a 200-point bonus, which is a nice non-transactional engagement. Plus, members can use the app to identify themselves in-store.

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 our forte 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 sharing our knowledge, so feel free to book a demo and we’ll show how our loyalty platform can work for your business.

The Definitive Guide to Creating a Successful Loyalty Program

Andy Nemes
Andy Nemes
Andy is the CSO and Co-founder of Antavo. He is a natural-born helper who takes the time to understand prospects’ unique business needs and is always ready to pick up the phone. He supports Antavo’s clients in finding a loyalty solution that best fits their business.