up button image
Industry Innovation

Factors Driving Successful Loyalty Programs

Ensuring Your Loyalty Program is Ready for Bear

graphic displaying components of loyalty

he economy currently appears to be experiencing a rough patch. With inflation soaring, supply chains unable to keep up with demand, and the stock market tumbling, c-store operators need to prepare for a market downturn that could drive valuable consumers away.

One of the best hedges is working diligently to ensure customer bases remain strong. Customer loyalty programs can be a powerful tool to ensure customers keep coming back through tough economic times.  One study found that 81 percent of consumers would continue doing business with a brand that has a customer loyalty program. In this article, we’re going to cover the top five attributes of a successful customer loyalty program.

Embrace Personalization

It should come as no surprise that each consumer interacts and responds to brands differently. What works for one consumer, won’t work for another. In the past, companies were stuck with a one-size-fits-all loyalty and rewards programs. Advancements in technology are now permitting brands to personalize loyalty programs for each individual user. This is showing tremendous benefit. Data from an Epsilon study indicated that 80% of consumers preferred companies that offered personalized experiences.

Major brands are embracing personalization. For example, Mastercard saw a 18% spending increase and 75% reduction in churn by offering personalized offers to its customers. For c-store operators, leveraging data to provide personalized reminders, discounts, or rewards can significantly impact customer retention.

“By engineering the program with every asset of a brand's loyalty ecosystem and making adjustments to differentiate the member experience, brands can improve engagement and substantially increase program performance for gains in lift, retention and lowered marketing costs”  Bob Macdonald, President and CEO of Bond Brand Loyalty

Empower Employees Through Training

Many businesses make the mistake of assuming customer loyalty programs are only impacted by the sales and marketing teams. However, this couldn’t be further from the truth. For c-store operators, the frontline workers can have a major impact on the ability to increase signups and eliminate confusion with the loyalty program.

In many cases, customers will direct questions about mobile apps, reward redemption, and issues to c-store workers. For this reason, it’s critical to make sure that your staff is properly trained on how the program works and can provide basic support. At a minimum, your team should understand how the loyalty program benefits the company and how to get people to sign up.

Some brands are even taking this a step further by changing their business operations to increases customer interaction with store employees. For example, Trader Joe’s encourages their team to stock shelves during peak times so that they get more direct interaction with customers allowing them to answer questions and make suggestions.

Customized and Multi-Tier Rewards

In addition to customizing the experience, rewards should also be tailored toward each customer individually. Customers who have been with the company for a while may not feel the same excitement around rewards that are also given to new customers. Long-term loyal customers expect to be treated differently. On average the top 10% of customers generate 2-3 times more per transaction, so you need to provide them with additional incentives.

C-stores can address this by offering a tiered reward system. This not only provides higher rewards for the most loyal customers but creates an exclusivity that new customers will want to achieve. For example, American Airlines rewards program allows higher-tier customers to board early or get complementary upgrades making membership benefits very visible to other customers.

You may also need to create individual reward programs for each category of customer. Uber took this approach by creating a loyalty strategy that approaches new customers, top riders, and inactive customers differently.

Leverage Data and Analytics

Famous management consultant, Peter Drucker once said “If you can’t measure it, you can’t improve it”. This is incredibly accurate when it comes to customer loyalty programs. One of the greatest benefits of a customer loyalty program is the ability to collect massive amounts of data on your customers to help drive decisions and improve the program over time. According to Mckinsey, companies that leverage consumer data to help drive customer interactions see a 126% profit windfall over companies that don’t.

C-stores can benefit from a wide range of data points such as customer demographics, recent purchases, number of visits to certain locations, and days or times when purchases are most common. The good news is that customers expect you to collect and use their data to improve their experience. One study of Australia loyalty programs found that 45% of members expect their data to be used to benefit them.

Constant Innovation

One of the biggest problems with customer loyalty programs is that consumers get bored quickly. This is especially true if it takes too long to earn rewards. One study found that 70% of customers leave loyalty programs because they become inpatient waiting to earn rewards.

While this may seem like a terrible thing, it actually creates opportunity to innovate and try new approaches. Over time, you can discover what features consumers respond to the most and better understand what drives their behavior. HBC Rewards (for Hudson’s Bay department store) missed the mark by failing to change up their program before they lost half of their participants. For this reason, you should plan to introduce new features, rewards, or customizations every 3-6 months.

Fraud Protection

The number of cyberattacks and fraud impacting loyalty and rewards programs has risen significantly in recent years. This can severely damage the reputation and trust that your customers have in the program itself. The last thing they want to do is sign up for a program with a company that can’t secure their data or protect the rewards that they have earned.

C-stores can combat fraud by providing data encryption on their servers, educating consumers on safe digital practices (establishing strong passwords, etc.), and making claim resolution simple. Brand’s like Starbucks are also looking to new technology like NFTs which make fraud extremely difficult.

Select a Strong Customer Loyalty Software

Building a custom platform for your customer loyalty program can be extremely expensive after factoring in the costs of website updates, marketing campaigns, mobile apps, and customer support. For small c-store operators, this can make the entry barriers seem unattainable.

Fortunately, there are several off-the-shelf software solutions to build a successful customer loyalty program. Many of these programs are designed to work with your existing technology platforms and are customizable to fit your needs.

We’ll be discussing customer loyalty software in a future article, so stay tuned for more information.

Getting the Most Out of Your Customer Loyalty Program

It’s important for businesses to understand that not every approach to customer loyalty programs will work for every demographic. Retailers in high-income areas will require a unique approach compared to other areas that have lower incomes. Other factors could include cultural variations or competition with other loyalty programs in your area.

For the best results, be sure to listen to what your customers need and want in a customer loyalty program. At the end of the day, they are the experts who can help guide you.

January 6, 2023