Key Customer Triggers to Optimize Your Retail Loyalty Program

Retail loyalty program, woman in liquor store | Shopify Retail blog

As a business owner or marketing manager, what percentage of your time and resources is spent on trying to get new customers versus re-engaging existing customers? If you’re like a lot of businesses, you’re spending much of your time trying to acquire new business. After all, more customers equals more money, right?

Not necessarily.

Research shows that gaining a new customer is actually five to 25 times more expensive than keeping an existing one, whereas improving customer retention rates by just 5% can grow profits by 25%-95%.

In fact, a Gartner study found that 80% of a company’s future revenue comes from just 20% of its existing customers, and 61% of small businesses reported that 50%+ of their revenue comes from repeat customers.

Why are returning customers so valuable to your business?

Making the most of your existing customer base can be well worth the effort. There are a few key factors that underscore this concept:

Given this, it might seem simple to tap into this valuable resource of the returning customer. Businesses often assume that if the customer is happy and has a good experience, they’ll come back.

However, the research shows that it’s not that easy. In fact, 87% of a brand’s existing customers don’t stick to that brand when it comes to buying a given product or service. So, how can retailers optimize their offerings and strategies to tap into the value of the return customer?

It’s all about customer engagement and loyalty triggers.

How to optimize for customer loyalty

There are four key areas to focus on when it comes to encouraging customer loyalty:

  • Ease and convenience: Make it easier to buy from you than from a competitor
  • Customer service: Make it more pleasant to buy from you
  • Offers, discounts, promotions: Make it cheaper to buy from you
  • Personalization: Make it more personal to buy from you

These four areas come into play in a passive way when customers visit your physical store or website and find features like one-click checkout, easy returns and refunds, promo codes and free shipping, and friendly salespeople with personalized recommendations.

But passively waiting around for customers to come to you isn’t enough. In a world where around 543,000 new businesses are started each month, you’ll need to be actively connecting and engaging with your customers in order to keep them coming back for more.

This is where the concept of “loyalty triggers” comes in. These are features, benefits, activities, or communications from your brand to existing customers which encourage engagement and return purchases when they otherwise might not be looking to purchase.

Fuel your retention marketing with Shopify

Only Shopify lets you create customer profiles that unify online and in-store order history, preferences, and contact information. Use tags to build segmented mailing lists and increase customer lifetime value, make more relevant product recommendations, and more.

According to a recent report by global IT provider Comarch, the most effective triggers, which maximize the likelihood of return business for retailers, are:

For businesses with a physical location:

  • Proximity of store
  • Opportunity to touch and buy the product on the spot
  • Customer-centric and supportive service provided by in-store associates
  • Accurate, individualized promotions and offers

For online businesses or any brand with an online store:

  • Purchasing anytime (24/7)
  • Next-business-day delivery
  • Flexible return policy
  • Accurate, individualized promotions and offers

These values vary in importance across different retail verticals and depending on whether you have a physical store and/or a website. For example:

  • In the apparel niche, the ability to touch/buy the product (via a physical location) or a generous return policy (online) was significantly more important than for other verticals.
  • Beauty and apparel have the highest overall retailer loyalty scores among consumers (50% of consumers consider themselves loyal to a particular retailer), and jewelry has the lowest (only 32% would say they are loyal to one brand). Home, DIY, and electronics scored in the middle (35-49%).
  • Being able to experience and buy on the spot is most important across the board for any physical location, followed by customer service; whereas, for online shopping, being able to buy any time of day or night is most highly scored, followed by a flexible return policy.

What these features have in common are that they all reflect one or more of those four key areas: convenience, customer service, offers, and personalization. And perhaps more tellingly, regardless of whether you are an online store or a brick and mortar retailer, the common element is “accurate, individualized promotions and offers.”

Given that this is such a powerful trigger in incentivizing a shopper to buy, businesses need to find ways to take advantage of personalization and offers to drive new purchases from existing customers. This is where the concept of a loyalty program comes in.

FURTHER READING: Want some ideas on tailored suggestions for customers? Here are 4 ways to personalize your customer’s shopping experience.

Boosting return customers: Optimize your loyalty program

Retail loyalty program, Get Hooked store | Shopify Retail blogOne of the most common ways in which brands utilize loyalty triggers is via a loyalty program.

According to research by Accenture, 90+% of companies currently have some kind of loyalty program, and members of loyalty programs generate on average 12%-18% greater annual revenue growth than non-members.

By optimizing your loyalty program to reflect key loyalty triggers, you can improve returning customers’ engagement with your brand and increase the likelihood that they’ll continue to choose your business over your competitors’. Comarch’s research discovered that 74% of customers are more likely to return to a brand with a loyalty program (similar to Nielsen’s finding that, all things being equal, 72% of consumers worldwide will buy from a brand with a loyalty program over one without).

However, according to a study by CapGemini, a high percentage of loyalty programs are failing, with 53% of consumers stating that they abandoned at least one loyalty program within the last year. The key reasons for this are lack of reward relevance, flexibility and value (44%); a lack of a seamless multi-channel experience (33%); and/or customer service issues (17%).

In other words, these programs fail to address the four key triggers: relevant offers and personalization (lack of relevance and value), lack of a seamless experience (ease, convenience), and customer service.

For brands that want to get this right, the most important thing you can do is to understand what the customers themselves are saying about what they value in a loyalty program.

What rewards do customers value most?

According to the Comarch report, when asked: “In order to make the loyalty program attractive for you: How important are ….”

  • 86% said offers and promotions were “very important or important”
  • 81% selected quality and quantity of the rewards shop
  • 81% mentioned possibility to collect points

The rest were as follows:

  • 61%: advantages such as previews and pre-selling of products
  • 50%: to be part of the brand’s product development
  • 47%: to be part of competitions and lotteries
  • 43%: engagement: digital achievements and games

This illustrates the preference consumers have for loyalty program incentives that feature high-quality discounts and offers as a function of the program. That being said, Millennials scored competitions and games as important more frequently than older people, showing the importance of asking your specific audience what they prefer.

And across the board, the importance of relevance and flexibility in the offers and promotions is a key trend, again highlighting the importance of personalization to cement consumer loyalty.

How do customers want to receive communications?

Comarch asked consumers how they preferred to receive brand communications in the following areas: general communications, receiving coupons, and identifying themselves as a member of the program.

Overall, customers preferred online communication, with 58% preferring to receive coupons via email/web and either use them digitally or print them out, compared with only 30% who preferred direct mail. They also overwhelmingly favored the use of a physical loyalty card (88%) over other forms of identification (phone number/address or phone app).

How customers feel about privacy

The higher the age of the customer, the more highly they value data privacy when considering whether to sign up for a loyalty program and how to interact with a brand.

Privacy is a key factor for all age groups, however, and the key factors that all customers care about include:

  • Transparency: How does the company use my personal data? (94%)
  • Understandable terms and conditions (94%)
  • To be able to see what kind of personal data the company collects (91%)
  • To be able to easily unsubscribe (91%)
  • To be rewarded when I allow the company to use my personal data for marketing reasons (83%)

Customers need to trust your brand in order to feel safe sharing personal data.

FURTHER READING: Not sure how to forge a deeper connection with customers? Here are 5 high-impact ways you can build trust with shoppers.

And according to an IBM study, brand loyalty is actually a factor in how much data a customer is willing to share:

“For an average company, 38% of consumers are willing to share geographic data while 37% said they would do so with their personally identifiable information. When it came to trusted brands, these numbers spiked dramatically.”

More than two-thirds (72%) of those surveyed would share geographic data with a brand they trust, and 61% would share personally identifiable information.

In other words, trust is a huge factor both in terms of encouraging users to become a part of a loyalty program, and also when it comes to how much data they are willing to share.

Don’t underestimate the value of emotional connection

Retail loyalty program, woman in bookstore | Shopify Retail blogWith all of this data, it can be tempting to approach your loyalty program from a place of “cold, hard facts.” But it’s also important to include strong brand values and a customer-centric approach in everything you do. According to a report published by Hiver, 34% of consumers feel that customer service should be more responsive and empathetic.

This isn’t so surprising when you consider what people really want on the most basic level: They want others (brands included) to care about them as individuals. A 2017 study by CustomerThermometer found that the top five reasons customers gave for feeling a connection with a brand were all related to “caring.” Consumers feel a connection with a brand when they feel that the brand:

  1. Cares about me
  2. Cares about the world
  3. Understands me
  4. Has an audience of people like me (my tribe)
  5. Makes me feel special

After all, as researcher Brené Brown states, "Love and belonging are irreducible needs of all women, men, and children."

If you can demonstrate to your customers that you genuinely care: about them, about the world, about your audience, then you’ll earn their ongoing loyalty.

Tips to optimize your loyalty program

  • Research shows 57% of customers sign up for a program to save money, so prioritize money-saving rewards over other types of rewards.
  • Consider using an app (or otherwise ensuring a seamless online-offline-mobile experience). More than half (60%) of consumers say they’re more likely to join a loyalty program that’s tech-savvy. Nielsen’s study shows that 67% of global program members say integration with a global program members say integration with a mobile payment system is important is important, so they can automatically earn and use rewards when they use a mobile wallet, and 69% are more likely to participate in a program with an app available.
  • Consider omnichannel loyalty. Around 80% of loyalty-program participants worldwide say that they value being able to earn rewards regardless of whether a purchase was made in store, on a website, or on a mobile device (81%) and to choose among several types of rewards (79%)
  • Giving your members a “headstart” is shown to improve participation.
    • For example, an offer to ‘get 10 stamps for a free coffee’ followed with, ‘when you sign up today, we’ll automatically give you 2 stamps’ is a more effective approach than simply ‘get 8 stamps for a free coffee’.
  • Ensure that your loyalty program integrates with your point-of-sale system.
  • Regardless of the details of your loyalty program, make sure that it covers the four key areas: ease and convenience, customer service, offers/discounts/promotions, and personalization.

Improving your customer lifetime value

Have you tried running a loyalty program in order to incentivize returning customers?

Fuel your retention marketing with Shopify

Only Shopify lets you create customer profiles that unify online and in-store order history, preferences, and contact information. Use tags to build segmented mailing lists and increase customer lifetime value, make more relevant product recommendations, and more.

Retail loyalty program FAQ

What is a retail loyalty program?

A retail loyalty program is a marketing strategy used by retailers to encourage customers to continue to shop with them. The program rewards customers with points, discounts, and other incentives based on their purchases. Customers can use their points to purchase items in-store or online, or they can redeem them for rewards such as gift cards and discounts.

What are examples of loyalty programs?

  • Airline Miles Programs - These programs reward frequent travelers with points that can be used for free flights, upgrades, and other travel-related rewards.
  • Hotel Loyalty Programs - These programs offer customers points that they can use to get discounts on hotel stays, upgrades, and other rewards.
  • Credit Card Rewards - Many credit cards offer rewards for making purchases with their card. These rewards can be in the form of cash back, points, or discounts.
  • Retail Loyalty Programs - Many retailers offer loyalty programs that allow customers to accumulate points that can be used for discounts or other rewards.
  • Online Shopping Rewards - Many online retailers offer rewards for making purchases on their websites. These rewards can be in the form of discounts, free shipping, and other benefits.

Why do retailers offer loyalty programs?

Retailers offer loyalty programs to reward customers for their loyalty and encourage them to keep coming back. Loyalty programs can also help build customer relationships and provide valuable insight into customer behavior. Retailers can use this information to tailor their product offerings and marketing campaigns to better meet customers' needs.