Remember S&H Green Stamps? Our mothers and grandmothers would collect these gummed stamps from supermarkets, gas stations, and other stores, pasting them into booklets that they would then exchange for prizes from Green Stamps catalogs. That pioneering retail loyalty program was extremely popular in the mid-1960s, before the recession of the 1970s reduced its perceived value.
Although recession may have killed Green Stamps in the '70s, the most recent recession has had the reverse effect, as rewards programs gain popularity online. Since 2008, inspiring loyalty among consumers has become much more challenging. Even as the economy bounces back, private labels are holding on to their share of the market. Brands need to creatively find ways to drive loyalty in an already-crowded marketplace.
An online rewards program is a great, cost-effective tool to achieve that goal, partly because they're not aspirational. Consumers can collect enough points to make purchases within weeks or even days—not years, the way some credit card-based programs function. (Does anyone beside the frequent business flyer ever get free airfare to Hawaii?)
But even more important is that rewards programs drive customer loyalty in a way that online coupons do not. Although online coupons are recognized as an excellent way to introduce new products and they are used as part of integrated marketing campaigns, the way they drive sales is by undercutting margins. A national study by the Shopper Technology Institute (STI) found that just 45% of CPGs use online coupons (those that don't, cite the problem of limited scale). Although 61% of those that use them do so to drive sales, users of online coupons are loyal to savings, not to the brand that provides them.
Rewards programs, too, save the consumer money, but they approach that savings in terms of benefits, not just dollars. Loyalty programs encourage repeat visitors, who make known their shopping preferences; accordingly, the program can be personalized for the individual shopper, allowing marketers to put the right offers front and center and providing incentive for the return shopper to continue to buy.
Here are some ways to ensure that your rewards/loyalty program motivates your customers.
Make it simple
Any digital rewards program should be simple to access, at home or on the road. The rewards should be clearly marked and easily redeemable. Newcomers to the program should be able to sign up quickly and easily—with the added ability to use their already existing social networks to further simplify the process.
Partner with great brands
Brand loyalty may be waning, particularly among millennial shoppers, but brand still translates into quality for most shoppers. Combining national brands with newcomers to the marketplace, and mixing that up with local deals, imbues lesser-known businesses with the trustworthiness of the better-known brands. For example, a new entry to the CPG market would be served well by creating exclusive offers with trusted retail brands such as Target or CVS, encouraging consumers to purchase their products at their local retailer for an offer such as double points.
One size does not fit all
A recent comScore report on rewards programs notes that consumers have a wide variety of reasons for joining paid programs, including free shipping, free access to high-value content, and the value of the program versus how much they shop. When considering a program for your brand, look for one that meets the needs of your various customers across profiles, and offers different ways to redeem points—for example, gift cards, cash, donations, travel. (The same report reveals that participants enrolled in Amazon's Prime program are satisfied and more loyal to the online retailer.)
Mobile must be a given
It's crystal clear—with plenty of statistics to prove it—that shopping is moving more and more online. Today's shoppers tend to walk into brick-and-mortar stores armed with a smartphone or tablet, and they don't hesitate to use them to research competitive products on the spot. A mobile app clearly maximizes the value of your rewards program—particularly when you consider that over 40% of shoppers actually look for offers on their mobile devices while they're in the store.
Make it relevant
Use shopper data to learn everything you can about your customer. Points-based programs generate that data, which can help marketers to target audiences better to and create more relevant, resonant, and timely offers. This approach is particularly effective with the "me" generation of millennials, who are more willing to share personal data, especially when they are rewarded with products geared specifically toward their tastes.
Timeliness is another relevant factor. There's nothing new in creating holiday-related incentives; think how physical stores deck themselves in Christmas merchandise soon after Labor Day to capture holiday sales. But with greater insight into the buyer's purchases and information, offers can be expanded to address purchase frequency—as well as personal milestones and significant life changes.
Another takeaway from the current generation is to use gamification as a means to reward participants. Many online rewards programs offer users the opportunity to play games to earn points. Consumers don't just look for sales online, and any rewards program that lets your audience play, and pays them for it, will encourage repeat visits. A great example of this was Expedia's 15-week game, Around the World in 80 Days, which allowed players to earn up to one million points in Expedia Rewards once they selected an avatar and embarked on a virtual journey. Such gamification strategies could be used across any project category.
Use social sharing
Techniques such as social sharing—where additional personal data can be captured—help participants earn points, spread program awareness to their social circles, and give even greater insight into preferences. Users are more and more apt to share shopping experiences: 78% of them already do, and word-of-mouth remains among the best ways to encourage sales. As shown in a recent survey by Vision Critical, about 40% of people who share or mark an item as a favorite on social pages end up purchasing that item.
Points drive larger purchases
Points-based programs are effective at increasing basket size, since larger purchases equate to more points. In addition, points can shift share, giving a competitive advantage over similar products at similar price points. Being part of a rewards-program clearly brings you more customers who see a distinct benefit in buying your products
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The digital age has changed how buyers research and buy products. Savvy marketers recognize that they have to change their marketing tactics to distinguish themselves in a changing marketplace. An online rewards program can be a powerful way to reach buyers over and over again, helping build a new kind of loyalty and connection toward brands old and new.