Editor’s note: This article was co-written by DEG Art Directors Alison Peterson and David Rappe, and Senior UX Designer Melinda Black.

The ROI of Loyalty Engagement ebook

Retailer loyalty apps are so prevalent we can assume you used one to cash in on the free burrito you’re eating while you read this over lunch.

Uber, Starbucks, Nordstrom, Chipotle…chances are you have at least one loyalty app on your phone. Mintel research indicates 90 percent of U.S. adults have at least one loyalty program membership and 53 percent have three or more.

That sounds like great news for retailers until you dive a little deeper and notice that more than half of these memberships are inactive. That’s right on average—only 40 percent of consumers have used a shopper loyalty program in the past four weeks.

What gives?

In a nutshell: retailers are great at developing loyalty programs, but they aren’t as good at effectively engaging customers with their brand.

If you think a branded loyalty program might be right for your business—or if you’re looking to redesign your current loyalty program—you’re in the right place.

Let’s take a look at five tips from DEG loyalty experts on how to brand and maintain an effective loyalty program.

1. Know what motivates your audience

A loyalty program is an extension of your brand. Customers expect to have a similar experience with the loyalty program as they do with our physical products and services. Study what your audience wants and cater to their expectations. That begins with considering all your brand touchpoints and how they communicate your loyalty program in unique ways.

Pay special attention to how your customers engage with the program away from an app. Web, mobile sites, email, and in-store interactions should all be cohesive.

An important element of cohesion is consistent core functionality. The last thing you want to do is confuse your customers and cause them to stop engaging with the loyalty program, instead opting for old, reliable interactions like clipping coupons.

For example, Nordstrom displays a customer’s progress to a reward differently on the site than on the app. The message, “Get a $10 note” is called out as a button on the loyalty app, but it doesn’t appear on the desktop site. This disconnect confuses customers and can drive them away from using the app.

The last thing you want to do is confuse your customers and cause them to stop engaging with the loyalty program.

Sometimes your audience might be interested in more than rewards or points, and instead seeks achievements. Meditation apps like Headspace allows user to earn badges for continuing a streak of daily engagement.

Unlocking an achievement triggers an email at each milestone, congratulating the user and rewarding them with a coupon to give to a friend to try. The emails are a great example of an unexpected surprise that encourages continued engagement.

2. Drive engagement with personalization

Mintel reports that so-called “swayable consumers”—customers age 18-34 are more likely to be influenced by a loyalty program that offers personalized rewards. The greater the personalization, the higher the engagement. They’re expecting personalized rewards, tailored content, and exclusive access.

Personalize your communications with customers to enhance relevancy and make them feel a closer connection to your brand. Find opportunities in push notifications, emails, or other touchpoints to make their interactions with your brand as one to one as possible.

3. Lead with your brand

Your brand is your company’s personality. Make sure your loyalty program uses the core elements that make your brand unique and compelling to your customers. If your brand is known for being quirky, run with it.

For example, when we developed a loyalty program for Chuck E. Cheese, we needed to encapsulate the brand’s personality in the program. Known for being a fun and family-friendly restaurant, we named the program “More Cheese Rewards” and included elements of the wider Chuck E. Cheese brand customers would recognize.

A rewards program doesn’t need to be overly literal or match the brand exactly, but the two should feel like part of the same family. For instance, Starbucks has a subtle nod to the brand in its loyalty program, allowing customers to earn “stars” to convert to rewards.

Your brand is your company’s personality. Make sure your loyalty program uses the core elements that make your brand unique and compelling to your customers.

Conversely, the outdoor brand Moosejaw missed an opportunity to infuse its brand into a loyalty program. The silly and fun brand with clever copy and a great social presence Moosejaw is known for isn’t present in the loyalty program, which opts instead for a more nuts-and-bolts points-trading experience. This can dilute a customer’s experience. Give customers the experience they’re expecting at every single touchpoint.

Explore opportunities to offer unique rewards that nod to your brand’s values. For example, if you’re a philanthropy-oriented brand, give customers the option to donate points or savings to good causes.

Sporting goods outfitter REI hosts a program called REI Co-op that invests in outdoor nonprofits. Customer can become a lifetime member for $20 and access exclusive items, sales, opportunities to give back, and an annual dividend share of the co-op’s annual profit. Pretty cool, huh?

4. Keep rewards within reach

If rewards are easy to attain, customers are easy to retain. Rewards are a top loyalty driver for 45 percent of consumers, according to Mintel. If rewards seem too far out of reach it can paralyze a customer’s engagement. Set up your rewards so customers are no more than a few purchases or visits away from attaining something desirable.

Another key component to customer engagement is clearly explaining the program and offering worthwhile incentives at each step. Starbucks and Nordstrom both have in-depth explainer pages that clearly define what benefits you receive depending on the tier.

Offer your customers a mix between quick messages about rewards and promotions and more in-depth FAQ information that drills into the details, including clearly stating what incentives are available at each level. Walgreens is a cautionary tale of too little too late with its loyalty program. Customer earn points at such a slow pace that value has little chance to accumulate. Low value for customers leads to low engagement with customers.

5. Rewards vs. loyalty

Keep in mind that these are customers you’re engaging with, not royal subjects. You’re rewarding their loyalty to your business. How you frame the relationship matters. For instance, the customer wants to feel like she’s earning something for participating.

Another key component to customer engagement is clearly explaining the program and offering worthwhile incentives at each step.

What’s in it for her? It might seem obvious but framing the benefits of the program to be customer-first keeps it focused on the customer, not a business goal. If those priorities are reversed it won’t be long before your customer starts to feel taken for granted.

Another way to encourage greater loyalty and engagement is to easily solve problems customers might experience with the loyalty program. No program is perfect, so by making tasks easy for the user and being thoughtful, it will make them feel like they’re part of a worthwhile club—and not being nickeled and dimed. Things like redeeming “lost” points from a receipt, reminding customers when points are about to expire, or encouraging customers to participate in a good cause are simple, personal ways to increase engagement.


Building Loyalty for Your Brand

Loyalty programs are an effective way to engage with customers. But if developed poorly, these programs are quickly abandoned. Following these five key insights we’ve laid out here will help you build an effective brand loyalty program.

Know your audience, personalize the content to their needs, lead with the parts of your brand they love, reward customers regularly, and make it worth their while. If you can deliver all that, you’re well on your way to launching a killer loyalty program!

Keep in touch.

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