3 effective customer loyalty incentive programs used by brands and retailers
Customer loyalty incentive programs will allow brands and retailers to discover which customers are most profitable to their business so they can focus efforts on those most likely to spend (and spend a lot). We all know that it costs less to retain customers than to solicit new ones. By using loyalty programs to entice your customers to buy again, you create habits that drive brand affinity, referrals, and sustainable revenue.
Recognizing the value of customer loyalty incentive programs and effectively implementing them are two very different realities. Whether you’re new to the game or you’re not entirely satisfied with the results of your launched loyalty program, you’ll benefit from considering: What type of programs are most effective? And what lessons can we learn from the enterprises that maintain loyalty the best? There are two approaches working for brands and retailers today—brand- and retailer-specific apps like those from Starbucks and Target, and third-party retail rewards apps like Shopkick.
Examples of Effective Customer Loyalty Incentive Programs
If you have the resources, developing your own proprietary app from the ground-up may seem like a desirable option, as it allows you maximum control and creative direction. You decide what the app will look like and which features you’d like to include—such as in-app purchasing, gamification, or social media integration.
Starbucks is the most-used loyalty rewards app in the restaurant industry. The coffee chain’s internally-developed app has been an evolution over the course of a decade, but today’s offering is an accurate reflection of the convenience and conviviality for which Starbucks is known. Users are invited to place their orders and pay in advance to save time at the counter, create their own Spotify playlists, and automatically earn free food and drinks with every purchase. Starbucks fans receive personalized content and offers based on past purchase history. They can also share the love by sending electronic gift cards to their family and friends directly through the app.
Starbucks’ customer loyalty incentive program succeeds because it features:
A User-Friendly Design:
The Starbucks app is attractive with large photos and intuitive to navigate. Five top-of-the-screen menus provide access to basic functions: Pay, Stores, Gift, Order, and Music. You can gift Starbucks to your loved ones, see what music is playing in the restaurant, and receive personalized food suggestions from the order screen. On a practical level, you can locate the nearest Starbucks stores, pay with your phone, and add a tip for your favorite barista. Rather than turn the app into a “Swiss Army Knife” that does-everything (but nothing well), developers focused on a few core goals like streamlining orders, boosting foot traffic, and increasing lucrative gift card orders.
Easy, Engaging Loyalty:
The best loyalty programs are easy to understand, track, and use. For every dollar spent, you earn two stars. The more you spend, the more stars you earn. You receive free in-store refills, tailored exclusive offers, and a free birthday drink. Going one step further, Starbucks understands that gamification works to get people into a buying mood; Starbucks reward members can complete entertaining “challenges” to earn extra points toward free food and beverages. The stars have a limited shelf life of one year for “Green” tier members and six months for “Gold” tier members, which encourages rewards holders to engage frequently.
Since music has been a central part of the whole Starbucks “experience” since they first opened more than 40 years ago, their partnership with Spotify makes sense. In the earlier days, you could grab a CD with your latte or download a free digital song from an undiscovered artist. Today, app users can discover new songs playing as they wait in line, add the music to a Spotify playlist, or create a custom mix. A partnership with Lyft gives first-time riders extra stars toward a free drink. Integration with Alibaba lets users in China buy gift cards and branded merchandise through the popular shopping platform, as well as order Starbucks-to-go deliveries. Through the co-branded credit card arrangement with JP Morgan Chase, Starbucks lets users earn stars with purchases outside the chain. These integrations make Starbucks more central to people’s lives and part of their everyday consciousness.
Target uses its proprietary app for rewards, payment, coupons, and credit. The retailer was confident enough in their vast, unique set of offerings to offer their own credit and debit cards available to use in their stores only.
It can be viewed as a gamble at a time when people are looking to simplify their wallets, not add to them, but for Target at least, the risk has translated to rewards.
Target has seen tremendous success in using proprietary apps in their customer loyalty incentive program. In today’s environment, it’s increasingly more important to offer unique products and experiences that differentiate the brand from competitors. Target is able to compete with other retailers like Kohl’s, Walmart, and even Amazon because it offers unique products like its brand Cat & Jack or celebrity-designed apparel available only in their stores.
This philosophy has spilled over into their approach to app development. The Target loyalty program starts with REDcard, which offers shoppers an immediate 5% off everything they buy, plus free two-day shipping for online purchases and perks like longer return times and exclusive gifts.
Taking it a step further, Target’s Cartwheel program helps users save anywhere from 5%-50% on products without paper coupons. Users select the custom offer they’d like to redeem and cashiers simply scan the unique digital barcode at checkout. Those who don’t shop with a smartphone can print the barcodes at home and have their deals scanned at the register. Reward customers especially love that they’re allowed to combine their Cartwheel offers with manufacturer's coupons, Target coupons, Target REDcard benefits, and gift cards.
Other proprietary apps Target has developed are aimed at boosting personalization and convenience—two ingredients for a winning retail customer service formula. For instance, they have an app that allows designers in their pop-up shops to communicate in an “instant feedback loop” with guests, who voted on everything from the shape of collars and the fabrics to the colors and brands they preferred. The Target Pay app lets REDcard users use their Cartwheel deals and pay with a virtual wallet by scanning QR codes.
While many consumers love the individual apps of their favorite brand or retailer, they also love the convenience of all-in-one shopping provided by third-party apps like Amazon, Instacart, or Shopkick. Instead of competing with dozens of other apps, brands and retailers can be woven into a consumer’s routine through an app they already use daily. By partnering with a third-party app, brands and retailers can expand their reach to tap a captive audience that is loyal to the art of shopping, actively engaged, and ready to buy.
Shopkick is one of the most-used customer loyalty rewards apps. The program works by providing “kicks” (rewards points) to shoppers for walking into stores, scanning select items, and making purchases. Users can redeem accrued kicks for gift cards of their choosing.
In many case studies, Shopkick partners saw two to three times the return-on-investment:
During a two-month summer campaign leading up to Independence Day, the red, white, and blue popsicle brand Bomb Pop wanted to drive awareness of the product through a branded lookbook and dynamic kick rewards for purchases made. Nearly half (44%) of shoppers first became aware of Bomb Pop through the Shopkick app, and 68% of buyers had not been planning to purchase Bomb Pops before visiting the store. With more than 23 million impressions, the awareness campaign was viewed as a huge success.
Barilla sought to communicate the unique benefits of Pasta Pronto, a new innovative type of one-pan pasta that didn’t require boiling water or draining. They turned to the Shopkick app to educate with video, drive awareness in-store, incentivize product scans, and drive trials. More than half of the app users (66%) first became aware of Barilla’s Pasta Pronto from Shopkick engagement. Half the people who watched the video purchased the product. There was also a 68% lift in future intent to purchase.
Kellogg’s used Shopkick to engage shoppers shortly after the launch of Nutri-Grain Bakery Delights Crumb Cakes. The snack aisles can be a crowded, competitive place, but Kellogg’s enjoyed a 35% conversion rate, a 55% increased intent to purchase, and 5:1 ROI from their lookbook and reward offers. Best of all, 47% of the consumers who purchased the Nutri-Grain Bakery Delights Crumb Cakes during the campaign hadn’t purchased a Nutri-Grain product within the last 12 months. Truly the promotion inspired customers to give the brand another look, driving consideration, trial, and favor.
Even if you have a fully-functioning proprietary app, you can still become a partner to an effective customer loyalty incentive program like Shopkick. The trend of fusing mobile app use with retail shopping is only continuing to grow. People love a good deal, but with Shopkick, you don’t have to slash the price or dip into your own pockets to entice the consumer to give your products a shot. Shopkick connects brands and retailers with a new audience that is ready to learn, earn, and buy.