Data Improves Customer Experience: The Overlooked Benefit of a Loyalty Program

Loyalty programs help boost customer retention and increased spend, but also contribute to the bottom line by connecting the dots of customer behavior. Loyalty encourages customers to provide more information, which can then be used to personalize marketing and recommendations, which in turn makes customers happier and increases loyalty. It’s the quintessential symbiotic relationship for innovative retailers and their customers.

Loyalty Programs: a Tried and True Strategy for the New Retailer?

As most retailers know, loyalty programs are systems of incentives that encourage shoppers to return to stores where they frequently make purchases. The incentives can include early access to new products, coupons and discounts, and sometimes free merchandise.

Cosmetics company Shiseido leveraged its online loyalty program to boost personalized messaging and fine-tune personalized product recommendations—netting a 20% increase in in-store revenue per loyalty member after one year.

Companies rely on loyalty programs to cultivate true brand loyalty through experiences that connect a customer to the brand’s product or service. Over time, the customer becomes more comfortable with the consistent experience and develops trust for the company—all while earning points or other alternate currencies. At this point in time, they will continue using the product or service because of points and incentives they are earning.

However, some retailers have ended loyalty programs or don’t want to go through the hassle of setting up a new program because they aren’t sure if they are driving value. Often companies aren’t leveraging the full benefit of a loyalty program. They forget that loyalty programs do two things: They reward customers for brand loyalty, and they share crucial customer data with the company.

Examples of Disruptive Loyalty Programs

As companies look to disrupt their markets with innovative tactics and strategies, loyalty programs are getting a new look. Some examples of innovative loyalty programs include:

  • Amazon Go, available only to Prime members, addresses time-starved urban customers with a more convenient way to shop for groceries. It’s an actual store where shoppers can find the products they want and buy them—no waiting in line, no checkout required.
  • Multiple hotel programs offer benefits beyond points such as skipping the check-in process, choice of floor, and late checkout, which are unlocked through frequency and other customer engagement behaviors.
  • Target recently announced its new loyalty program, “Target Red.” What’s innovative about the new program is its move away from a single payment card to a multi tender loyalty approach. The flexible approach is expected to increase both program engagement and market penetration.

Loyalty Programs Still Provide Their Worth – and Offer More

When properly set up, loyalty programs continue to show traditional benefits:

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Increased Traffic

Two-thirds of customers in a recent KPMG survey admitted to making a special trip in the last six months to shop at a store in order to earn an award in a loyalty program. 74% said they would go out of their way to shop at a store where they earn loyalty points—and 60% said they would do so even if the prices were slightly higher.

Increased Revenue

KPMG found that 85% of company growth came from loyal customers. And the 2018 Bond Brand Loyalty report cited the following statistics: 70% said they were more likely to recommend brands with good loyalty programs; 77% said they were more likely to continue doing business with brands with good loyalty programs; 63% said they actually modified their brand spend to maximize loyalty benefits. Additionally, Capgemini found that ‘fully engaged’ customers deliver a 23% premium over the average customer in share of wallet, profitability and revenue.

Better Connection with the Customer

Loyalty programs open up new channels of communication between the company and the customer. Bond Brand Loyalty found that programs that establish positive emotional connections with members saw 27% more of their membership increasing spend with the brand. KPMG’s study indicated that 80% of loyalty program customers prefer surprise deals or gifts to information on sales, special privileges, time-saving opportunities, or other traditional program benefits. A program that offers frequent surprises will likely see a spike in sales and can be less generous with other benefits.

Linking Brands Across the Enterprise

An example of a parent company that has aligned its diverse brands across a more complete and unified customer experience is Williams-Sonoma Inc. Its Key Rewards Program unlocks rewards every time key holders shop at any of their seven brands, (which include Pottery Barn, West Elm, and William-Sonoma). To continue innovating, they are planning to extend the program to their upcoming West Elm Hotel Brand.

Great loyalty programs are able to achieve these benefits by ensuring that their program offers significant benefits to customers at the same time. If the system is confusing, or if the rewards are unappealing, the program may not succeed. However, if the benefits are attractive, the program can dramatically increase sales and encourage customers to come back for more purchases.

The Customer Data Platform (CDP): Helping Retailers Benefit from Customer Data

A major benefit of loyalty programs is the extent to which they allow companies to better understand customer behavior. This enables innovative loyalty marketers to not only market better to that one loyalty customer, but also to other ‘lookalike’ customers whose attributes and behaviors are similar. A growing number of members (87%) say they are open to having various details of their activity and behavior watched, monitored, and tracked in order to receive access to personalized rewards or engagements. This transaction, the trading of intimacy for relevancy, allows companies to use highly personalized information to forge deeper relationships with their customers.

Members who engage with loyalty technology say it has substantially improved their member experience. Automatic, location-based offers sent while inside a store improved the experience for a reported 83% of members. Instantly redeeming points for purchases at other merchants improved the experience for 84%. And using a card on file improved the experience for 85%.

Loyalty programs provide a key data connection between offline purchase and online activity—and the CDP enables the unification of that data for loyalty programs, connecting the person shopping in the store with the person browsing and shopping online, as well as clicking on all those emails. Without a CDP, most in-store purchases would be completely lost to the customer journey picture. The CDP ties the loyalty programs to the actual customer experience, driving higher member satisfaction and engagement.

And next-generation technology, such as Augmented Reality (AR), Virtual Reality (VR) and Internet of Things (IoT) adds even more data to the customer experience story that can be stored and accessed at any time within your CDP. A full 95% of loyalty members say they want to engage with brands through a mix of new, emerging, and growing tech. And to ingest and connect these new types of leading edge data, programs need to rely on a flexible system such as a CDP.

Loyalty programs themselves need to be nurtured too. CapGemini’s research indicates that 77% of traditional transaction-based loyalty programs (the bulk of programs) fail within the first two years of launch. A CDP will allow you to unify data about the loyalty program customers across all systems, and also segment those customers for targeted campaigns to ensure that the loyalty programs continue to thrive.

How Treasure Data Kick-started Shiseido’s Loyalty Program

Cosmetics company Shiseido was looking to leverage its new online loyalty program for upsell opportunities and revenue growth. Internal data warehousing tools for extraction, transformation and loading of the data were too slow, and the marketing organization couldn’t keep up with the pace of digital insights from the loyalty app—and found themselves guessing at which offers and recommendations to deliver to program members.

After turning to Treasure Data’s enterprise CDP, Shiseido was able to quickly and reliably consolidate their first-party data, including:

  • Website visitors
  • Store POS
  • Mobile POS
  • Loyalty program
  • Sample requests

They were also able to enrich it with third-party data from Data Management Platforms (DMP) to better understand the demographics of their buyers. The result was the ability to deliver personalized messaging as consumers browsed catalogs, ordered products, searched for store locations and received expert advice and product recommendations. The company saw a 20% increase in in-store revenue per loyalty member after one year, as well as an 11% increase in revenue. See all the details in our Shiseido case study.

Understanding Your Customer: the Long-term Benefit of Loyalty

Loyalty programs bring very direct benefits to companies in terms of growth and profits, but their greatest value over time may be the increased visibility into and deeper understanding of individual customer behavior. As we have demonstrated, loyalty programs encourage customers to share more data, which is then used to personalize their customer experience, which in turn makes them more loyal. An enterprise CDP is a key factor in to driving higher member satisfaction and engagement.

Meet us live at eTail East and Shop.org to discuss disruptive customer experiences.

We’ll be in Boston for eTail East next week, August 6-9, to highlight how innovative retailers are leveraging enterprise CDPs. Visit us at Booth #433 or set up a meeting to talk with one of our experts. Also, our own Erik Smith will be speaking on a panel, “Mapping Out Innovative Retail Experiences” with Sabeen Mian from Ipsy and Jules Pieri from The Grommet on Wednesday, Aug 8 at 11:20 EDT. Learn more on our website.

And on September 12 through 14, we’ll be joining hundreds of retailers at the National Retail Federation’s Shop.org in Las Vegas, NV. Stay tuned for more info on our website, and meet us at Booth #402!

Rob Glickman
Rob Glickman
Rob serves as Head of Marketing, Data Business at Arm. Previously, he was VP of audience marketing at SAP where he led a global team of marketers chartered with driving modern marketing demand generation programs. He brings nearly 20 years of marketing experience ranging from lean startups to large enterprises, including running product marketing for Symantec, eBay and PayPal, where he held various marketing leadership roles globally.
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