Investing in the Future of Food: How to restore customer loyalty tested during the pandemic
According to a survey of 2,500 US adults conducted by loyalty program provider Clarus Commerce, 68% of consumers agree their loyalty is more difficult to maintain – up from 64% in 2020, and the vast majority want more than points and the promise of future discounts from retailers in exchange for their allegiance.
While this means retailers may have to work harder to attract shoppers, Clarus Commerce also found more people are willing to pay for better benefits – opening the door for stores that offer premium or subscription loyalty programs to forge long-lasting and prosperous relationships with consumers.
Shifting shopping habits create opportunities
While some consumers who tried new channels or stores during the pandemic will go back to their old habits as the threat of COVID-19 eases, Clarus Commerce CEO Tom Caporaso notes that many will not.
“There’s a lot more customers up for grabs than there were two years ago, and I think premium [loyalty programs] is an opportunity and a solution” for retailers and brands to secure their allegiance, Caporaso said.
He explained that unlike traditional loyalty programs that are free but require consumers to collect points or reach certain thresholds to qualify for benefits, premium loyalty programs with a subscription fee typically offer more instant gratification benefits that consumers have come to expect and which they deem more valuable.
“Our data showed that almost 80% of consumers don’t want to accumulate points anymore … they want those benefits now. And when we started to dig deeper into those benefits, free shipping continues to be the No. 1 benefit,” followed closely by instant discounts and fast shipping, he said.
Many of these benefits are more expensive to provide than traditional schemes focused on collecting points and earning discounts, but consumers’ participation fees can help offset these costs as does participants’ increased engagement. According to Clarus’ research, premium loyalty programs helped drive sales and ‘trips’ during the pandemic.
“The interesting thing we found is that over seven out of 10 shoppers actually shopped more during the pandemic at the programs they were attached to from a premium perspective, and that’s the definition of loyalty – to drive them back to your store or your program to interact,” Caporaso said.
He explained that consumers returned to stores with premium programs for several reasons ranging from wanting to get the most value out of a program in which they are invested, liking the benefits or liking VIP treatment that can come with these programs (such as dedicated checkout lanes that streamline shopping).
You don’t have to be Amazon Prime
The broad range of retailers launching premium loyalty benefits in the past few years demonstrates the versatility of the programs and underscores that while Amazon Prime may be a front-runner in the space, its model is not the only viable option.
“This is a trend that is not going away. You start to think about the players that have entered this market over the last two years: Best Buy is one of them, CVS CarePass, Walmart with Walmart+ and obviously Amazon Prime, which has been in the market for 16 or 17 years,” Caporaso said.
He noted that each of these programs are unique and each is successful.
For example, Walmart+ offers a VIP shopping experience and other benefits that are specifically targeted to the retailers core consumer base.
“You don’t need to create Prime, and I think it would be very difficult to do Prime. But think about your consumers and what’s important to them and then build a program that’s specific to those consumers,” Caporaso advises.
He adds that once a program has launched retailers and brands should closely monitor it and see which benefits drive the most engagement and ask consumers what else they would like to see.
“When we think about these programs, we don’t just launch them and cross our fingers and set them and forget them and hope they work. We look at the data, we understand the data and then we either add benefits or we remove benefits… so it is a continual optimization,” he explained.
Three key factors to creating a successful loyalty program
As retailers or brands think through what their premium loyalty program might look like, they should consider where consumers will engage with it, how to reach consumers and how to support members.
Caporaso recommends that premium loyalty programs are offered online and in brick and mortar settings and that they are introduced across all channels in which the retailer, brand or service is offered.
For a program to succeed, it must have a tight back office, including an efficient and easy to use customer service element that will respond to questions and concerns in a timely manner.
Loyalty programs offer insights into consumers
While securing customer allegiance is the primary focus of loyalty programs, it is far from the only benefit that they offer retailers and brands. They also collect a ton of data about customers that can be used to enhance product mix and forge partnerships with other brands and retailers that further drive sales and deepen engagement.
Caporaso explains that loyalty programs will track not only what promotions customers engage with, but also what they are buying across categories, vendors and stores. This data can be used to recommend additional purchases or create partnerships with other stores for services outside of the primary retailer’s area of expertise, but which will deepen engagement and further drive sales.
But again, Caporaso stressed, to reap these benefits, retailers must offer consumers more than discounts on their birthdays or even free shipping – they must offer instant gratification and VIP treatment.