Customer loyalty programs for retail are part of everyday life for many consumers as, on average, they belong to over 14 programs. This is a mixed blessing for brands and retailers, however. Competition is fierce for customer loyalty, and it’s not enough to get your customer to sign up for your program—especially since it’s been found that consumers are active in only half of the programs to which they belong.
Research shows that consumers join loyalty programs predominantly for transactional purposes: 75% mention free products, 71% include discounts, 67% value free samples, and 56% want free services. For brands and retailers, meeting those demands is only the beginning when it comes to keeping customers engaged. Those same consumers also expressed the desire to choose their benefits and rewards (85%) and to experience more personalization (74%). In other words, consumers want rewards that mean something to them.
Brands and retailers looking to develop effective customer loyalty programs in retail should pay close attention to the following examples.
4 Examples of Effective Customer Loyalty Programs for Retail
1. Amazon Prime
Amazon Prime quickly ascended to the loyalty champion’s circle after its creation in 2005, and in the last 15 years, it has amassed more than 156 million members worldwide, including 112 million in the U.S.—that’s 65% of Amazon’s total customers. In the U.S., members pay $119 a year for membership, or $12.95 per month. Since the monthly payment option was added in 2015 to lower the payment barrier, it has steadily gained popularity and is now used by over half of Prime members.
The Amazon Prime program began with the offer of free two-day shipping, but it has expanded to include a wide assortment of other rewards, such as discounts on streaming services and grocery deliveries, Prime Day special offers, and surprise perks. There is also a special version of Amazon Prime tailored to students. Loyalty program members are typical among a retailer’s best customers, but Amazon Prime members distinguish themselves by spending twice as much as other Amazon shoppers. Other retailers are beginning to follow Amazon’s lead. As of 2019, 76% of loyalty programs did not charge a fee, but more than half of the companies surveyed reported that they are considering implementing fee-based, premium loyalty programs.
Premium loyalty programs encourage spending with attractive offers and the opportunity for customers to recoup their money. This paradigm is similar to the one used by wholesale clubs like Costco, but we often see it in retailers who offer a very specialized product to customers and who already have a high level of loyalty. Gamestop, GNC, and Lululemon are among the retailers with premium loyalty programs because of their niche product offerings.
2. Nordstrom’s Nordy Club
Nordstrom’s revamped loyalty program, Nordy Club, was unveiled in late 2018 and has approximately 12 million members. The program is free and tiered. Like many loyalty programs, it taps into customers’ aspirations, offering rewards that can be applied to any item. This makes the brand more competitive without lowering the value of big-ticket items. In this respect, it is similar to Sephora’s Beauty Insider program. As with other tiered programs, Nordy Club offers greater rewards for greater spending, both in the form of redeemable points and perks like events and services.
The Nordstrom loyalty program relaunch modernized it and emphasized omnichannel sales. Social media channels were leveraged to help create a sense of community, similar to in-store events. The retailer also introduced an app for its loyalty program. The Nordy Club also encourages online purchasing and BOPIS, with curbside pickup. In stores, space is set aside for events, a café, and makeover areas.
The Nordy Club has four tiers based on annual spending. Benefits at the beginning level include exclusive “First to Shop” launches, basic alterations and workshops, in addition to points for purchases. Points are easier to earn and other benefits improve as the customer rises through the ranks. Benefits include a visit from a home stylist at the highest level.
A Key Part of the Brand
“Our loyalty program is a key part of our brand,” Nordstrom’s co-president and director Erik Nordstrom said, speaking to investors in 2019. “And it’s something that’s been vital to us for quite some time. Five years ago, 35% of our business was done through our loyalty program. It is now at 55% and growing rapidly.”
3. REI Co-op Membership
REI takes community building to a new level with its co-op membership. The company offers a real consumer-owned co-op, and lifetime membership that can be obtained by paying a $20 fee. Members can recoup their membership fee very quickly. REI rewards spending with a 10% rebate on all purchases at the end of the year, referred to as the co-op member’s dividend. (Co-op members also vote for board members.) REI Co-op members get discounts on equipment rentals and used equipment and are invited to special members’ sales events. In addition, they discount their extensive lineup of classes and events.
The REI Co-op membership provides customers rewards for spending and an all-encompassing community experience. In many places, they offer dozens of classes and events to attend at a discount, creating communities of highly focused, like-minded individuals similar to how Nike offers sponsored fitness classes. But that’s not the limit of its community building. REI has a strong stance on environmentalism that it incorporates into its own operations and in the contributions it has made to nonprofit organizations. Identification with these causes leads to strong brand affinity by consumers. This loyalty strategy has been used by other organizations, such as The Body Shop and Target. Does environmentally committed outdoor sportsmen sound like a narrow target audience to you? Definitely not; REI has over 18 million co-op members.
Shopkick is a third-party customer loyalty rewards app that works fundamentally differently from brand- or retail-specific loyalty programs. It is a gamified app that users are motivated to download for the rewards and entertainment that it provides. When a brand or retailer partners with Shopkick, they enjoy the benefits of connecting with already-loyal users, without asking them to join a new program, download a separate app, or pay for anything.
Easy to Use
Users can check the Shopkick app to see which brands or retailers offer “kicks,” or rewards points, which incentivize shoppers to visit a store or browse online. In-store, Shopkick utilizes an engaging gamification strategy that drives shoppers to products at-shelf and encourages physical product interaction in exchange for kicks. This allows brands to boost product awareness when it truly matters most—in aisle, with the product in hand. By offering users an additional kick incentive for making a purchase, Shopkick closes the loop and drives sales. Eventually, Shopkick users redeem their kicks for free gift cards, which builds a positive affinity and loyalty for the brands and retailers that awarded them.
Combats Loyalty Fatigue
Shopkick partners won’t become the forgotten victims of loyalty fatigue because Shopkick is enjoyable and undemanding. Consumers don't have to download so many different loyalty apps when using Shopkick to earn rewards for shopping with their favorite brands and retailers. Shopkick allows consumers access to earn rewards with multiple brands and retailers, as it doesn’t confine them to one specific loyalty program. In many cases, Shopkick can be used in conjunction with other customer loyalty programs; shoppers can earn kicks with Shopkick and rewards through their favorite brand or retailer’s program.
Advantages for Partners
Shopkick is one of the leading apps of its type. It attracts a broad audience that may be hard to reach otherwise. Like an in-house loyalty program, Shopkick both influences buying behavior and tracks it, providing valuable analytics. Consider how Shopkick helped drive incremental purchases for Georgia-Pacific. When the brand launched its Dixie Ultra Deep Dish Plates, they partnered with Shopkick to build awareness and drive trial and consideration for the new product. The campaign received over 16M impressions and was highly successful in educating consumers before their trip to the store, boasting a 99% branded video completion rate. Nearly 50% of purchasers were not initially planning to buy Dixie products before their visit to the store.
Customers expect loyalty programs to meet their wants and needs. They want their rewards to come fast (45%), easy (34%), and personalized. That’s a tall order in a crowded environment where it’s hard to distinguish oneself. Shopkick provides an opportunity to bring those rewards to consumers in a way that is convenient and beneficial—for brands and retailers, too.