5 Best Retail Loyalty Programs And What They Do Differently
The relationship between brand and customer is changing. Loyalty programs are no longer limited to discounts and free shipping. Nowadays, attention is given to memorable experiences, through which brands hope to build emotional relationships with their audience.
Consumers that form an emotional relationship with a brand have a 3x higher lifetime value and will recommend a brand more often. (Source)
Some companies predicted the trend early enough and invested heavily in the development of personalized loyalty programs. These companies are now seen as the examples that other brands can learn from. In this article, we explore the 5 best retail loyalty programs and how they use experience-based rewards. By getting an overview of the elements that make them unique, you will be able to focus your efforts on the things that matter most.
Learning from the best retail loyalty programs
The following loyalty programs were chosen on the basis of their membership numbers, customer satisfaction, and authenticity.
Boasting more than 100 million members, the e-commerce giant has one of the best retail loyalty programs in the global market. They offer a fee-driven membership program where new users have to pay an upfront amount of $119 annually.
Members benefit from free shipping for certain purchases, large discounts, participation in exclusive shopping events, streaming of movies, TV shows and music, unlimited reading, and more.
It is hard to analyze the success rate of Amazon Prime since the organization does not release its data to the public. According to the 2019 Consumer Intelligence Research Partners report, 93% of members renew their subscription after a quarter and 98% renew after a year. This alone shows how well Amazon understands its customers and adjust to their needs.
What does Amazon Prime do differently?
- Emphasis on instant gratification to improve the customer experience - Membership perks make up for a better shopping experience.
- Non-hierarchical, customer-centric approach - Amazon leverages data to create personalized offers that users actually care about. There are no point systems, redemption platforms, or membership tiers.
- Extremely low price points - Amazon prime users benefit from very high discounts on already low-priced items. These are most often seen on global discount dates (e.g. Black Friday) but also on specific days that are exclusively created for Prime members (e.g. Prime Day).
- Benefits linked to entertainment services like Prime Video and Kindle. This ensures that Amazon stays on top of its users mind.
Main takeaway - Loyalty programs require lots of testing, adjustments, and patience. Not everyone is willing to pay $119 for a loyalty program but 16 years of testing have certainly played a role to Amazon's success.
Less than two years ago, fashion retailer Lululemon released a pilot loyalty program for their Edmonton facility. Priced at $128, the reward program offers a number of different perks, both transactional (discounts, free shipping, etc.) and experiential (attendance of exclusive workout classes and other community events). On top of that, new members also receive a free pair of yoga pants.
After experiencing a large growth in sales during the third quarter of its release, the pilot program was deemed successful and the brand expanded the concept to a total of 3 locations.
What does Lululemon do differently?
- Tapping into customers’ emotions - In a time where the average American is registered to more than a dozen loyalty programs, offering a paid option makes customers feel privileged to be part of it.
- Yoga pants as a sign of status - The free pair of pants that new members receive is seen as a status symbol, and is used for exclusive workouts. Aside from that, yoga pants are a universally relevant gift for all members of their audience.
- Sharing as a sign of trust - Through the experiential activities of their loyalty program, Lululemon has the ability to share user-generated content that attracts more engagement from other users.
Main takeaway - Aside from being great tools for promotion and repeat purchases, experience-based loyalty programs lead to more user-generated content. This content is later used by brands to strengthen their own marketing strategies.
Nordstrom “The Nordy Club”
Two years ago, fashion retailer Nordstrom revamped its loyalty program, creating the new and improved “The Nordy Club.” Members of the program earn points when shopping at Nordstrom and its partner locations, receiving a number of different benefits along the way.
The fashion retailer offers free registration to the loyalty program, but points are collected on the basis of different criteria. According to Scott Meden, Nordstrom’s CMO, members of the loyalty program spend 4 times more money and shop 3 times more frequently than non-members.
What does The Nordy Club do differently?
- Experiential perks - Aside from transactional perks, The Nordy Club rewards its members with beauty and style workshops, and even free tailoring to some of the items they wish to buy. The highest level of membership (Ambassador+) allows users to invite a stylist to their home for a complete wardrobe makeover.
- Implement gamification - Members “unlock” new perks the more they spend, and collect points faster when using the Nordstrom card. This way, even though signing up for the loyalty program is free, members feel compelled to spend more.
Main takeaway - Adding elements of gamification is a great way to update a loyalty program. Not only does it encourage recurring behaviour, but it also gives more insight into how customers engage with specific brands.
Nike Membership (NikePlus)
Nike has one of the best retail loyalty programs. It connects customers to exclusive products and experiences through downloading their free Nike App. Becoming a member is free and perks include:
- Access to exclusive product collections
- Access to Nike experts for styling advice
- Early access to new products
- Free shipping and 30-day returns
- Access to special events and insider content
What does NikePlus do differently?
- No discounts - Nike does not offer member discounts to their products. Instead, they focus on improving the customer experience, through free shipping and a “no questions asked” return policy. It is only on rare occasions that they will send promotional offers to their member list.
- No point system - Nike’s loyalty program doesn't use a point collection system to distribute rewards. Instead, their perks are offered on a basis of interaction with the app and making certain purchases. For example, you can earn points by going for a run or completing a certain number of workouts.
- Exclusive items for members - Product pages showcase exclusive products that are only visible to members, and the brand consistently promotes its loyalty program in most pages of their website.
Main takeaway - Don’t be afraid to create an unconventional loyalty program. Even though Nike is far from being a traditional loyalty program, they still find creative ways to tap into their users’ emotions, creating a sense of pride and exclusivity.
Sephora Beauty Insider
Initially launched in 2007, the Sephora’s Beauty Insider loyalty program counts more than 25 million members. By offering exclusive perks, like birthday gifts, community events, and the ability to engage with other members, they are able to build a loyal fan base and increase repeat purchases.
The Canadian brand utilizes a transaction-based tiered loyalty program that is free to join. Rewards are offered on the basis of annual spendings.
Allegra Stanley, Sephora’s VP of loyalty, recently mentioned that Sephora’s loyalty strategy is betting on the development of opportunities that lead to meaningful experiences.
What does Sephora Beauty Insider do differently?
- Freedom of choice - Members are able to choose their free birthday gift, by selecting one out of three or four different options, depending on your membership tier.
- Point multiplier events - During certain periods, Sephora offers 2x-4x reward points for members that choose to make a purchase, instilling a sense of urgency.
- Exclusive events are reserved for the highest membership tier (Rouge) - This “hierarchical” approach motivates people to spend more in order to collect more reward points.
Main takeaway: Having a choice (for birthday gifts, events, etc.) offers freedom and flexibility. This, in turn, improves the customer experience.
Every successful loyalty program is built on a similar foundation, but each one has its own unique differentiation. These depend heavily on the audience you are trying of a given brand and their values. To conclude, here are the main takeaways from this post:
- Patience and testing are essential when it comes to the success of your loyalty program.
- Understanding your target audience helps you offer better experiential rewards.
- Adding elements of gamification is a great way to increase engagement and make the loyalty program more attractive.
- Don’t be afraid to try out something new. The best loyalty programs started from an idea and were built on the back of a brand’s reputation.
- Having an element of choice does not only offer more freedom but it also offers a more pleasant customer experience.
Fuelled by this new knowledge, you can now improve upon your loyalty program and get a better direction for future research.