Merchants may not have figured out how to bottle the formula for a good customer experience, but several are learning how to fold it into a shopping bag. More specialty retailers are entering the loyalty-marketing sphere, and they are doing so with an eye specifically toward recreating the customer experience - and while unexpected rewards and communications have become a key ingredient of accomplishing this, some merchants are taking it further, according to Lisa Biank Fasig, senior editor for Colloquy.
Discounts will always play a role in any marketing programme including a loyalty one, but I do think the experiences, and providing the surprise-and-delight, are gaining much more popularity, not only because of economics but because consumers like to feel like they are getting the "inside track". That is, they feel they are getting something no one else can get.
The need to stand apart is particularly urgent in the specialty retail segment, as indicated by the growth of reward programmes over the past two years: membership among specialty stores rose 20% from 2012 to 2014, to 433.5 million memberships, according to the 2015 Colloquy Loyalty Census.
Unfortunately, consumers are active in fewer than half of the programmes in which they enrol. This may be because consumers have higher expectations. Some 55% of Americans surveyed in August 2014 said they expect improved customer service in exchange for providing personal information, according to research by LoyaltyOne. That compares with 45% in 2013.
The efforts specialty retailers are making underscore the need to for relevant but cost-effective personalisation, and their strategies can be applied across the board. For example:
- PowerUp Rewards
At GameStop's Technology Institute in Austin, Texas, visitors learn about new releases in information hot spots and play games through augmented reality. The result of such initiatives: 71% of sales are tracked to the GameStop PowerUp Rewards programme. "These members spend three times the amount in sales in our stores as the non-members do, and they are five times more profitable," Tony Bartel, president of GameStop Corp., said at the National Retail Federation's Big Show in January.
- Gap, Nordstrom Rewards
Gap offers members an additional 10% off all purchases every Tuesday, traditionally a slow shopping day. Members receive advanced notice of trends and events, and silver members earn free alterations and triple-point days at Banana Republic. At Nordstrom, all members get free alterations (values vary based on tier), triple-point days and invitations to special holiday events.
Though not a formalised loyalty programme, membership with the athletic shoemaker comes with access to complimentary shoe trials, exclusive releases and Nike+ services, including personal trainers and activity trackers that do not require sensors.
- Toms Passport rewards
The philanthropic maker of shoes gives its members chances to meet its CEO, to get special prices on goods, and to travel with the Toms' team on a One for One giving trip - ventures that address needs such as food security, health or gender equality.
Putting experience into practice
Companies in any industry can apply these retail efforts, though some basic principles should apply. The following are four key suggestions:
- Extend beyond spend
"Spend-and-get" loyalty programmes are so pervasive they risk losing value. Instead of focusing on the transaction, the programme should recognise, motivate and reward consumers for their engagement across all channels in the buying cycle.
- Be relevant
To resonate, the experience should answer to particular customer needs, which can be narrowed down through loyalty and other purchase data. Too many companies seem to confuse giving rewards with being relevant but, unless they're relevant in building a relationship, they're just dollars being awarded. Success comes when you connect with customers where they want to be connected, with things that are meaningful to them.
- Suite emotions
To be relevant, the customer experience must connect emotionally. Many programmes attempt this through common soft benefits, such as free shipping or a birthday thank you. These efforts fall short of reinforcing a brand's distinctive qualities. A rewards programme can produce the data to recognise what makes the brand special to its best customers, then develop a touch-map to gauge all customer interactions from which it can build a suite of services to elevate the good and remedy the bad.
- Be practical
While relevance and emotion are essential, the customer experience also should make practical sense, for the brand and the customer. This requires a level of personalisation that can be achieved by mining marketing data. Think of shopping at Nordstrom: when you walk in they know you and what you bought. A US$5 gift card is great but it isn't going to lock anyone into that level of personalisation. Nordstrom's free alterations, for example, are low-cost for the merchant but of high value to the customer. The bonus is that the alterations session introduces an opportunity for the associate to better engage the customer with the brand.