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Designing effective retail loyalty programs

An interview with Rajasree Cheruvu, an experienced loyalty marketer with over 15 years of experience in the retail industry across multiple international markets like the UK, UAE and India.

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Rajasree Cheruvu
Loyalty Marketer
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In the latest instalment of our "Loyalty Managers at Work" series, we spoke to Rajasree Cheruvu about retail loyalty programs and their key attributes. Based upon her extensive experience, Rajasree also recounts some of the retail loyalty campaigns she has worked on throughout her career, describing exactly what it was that made them successful; in addition to offering a few words of advice to loyalty managers aspiring towards success in the field.

Rajasree is an experienced loyalty marketeer with over 15 years of experience in the retail industry. She has launched and managed many customer loyalty programs in the past, and possesses rich experience across fashion retail, finance, hospitality and real estate, having worked on both ends of the spectrum: value retail and luxury sectors.

Keep reading to learn more!

How can retail stores implement a successful customer loyalty program?

The rewards program success story across industries is common. It's always about driving value effectively, both ways, for both business as well as customers. When it comes to retail, particularly within the same sector, products pricing and quality are fairly similar, making competition high. That’s why investing in loyalty programs on its own is not enough to establish customer loyalty. To create one of the best customer loyalty programs, businesses need to create differentiation and communicate to customers exactly what it is that makes the program special.

As such, brands need to speak the customer’s language and convey the program benefits in a compelling way to secure loyal customers. Rewards value proposition need not always be tangible, tactical and have monetary value. While monetary rewards are attractive, they aren’t unusual and are usually offered by countless other brands and, most definitely, direct competitors.

That’s why it’s important to emphasize how the program impacts the customer’s life in a positive way, for instance, by rewarding loyalty members using non-transactional rewards such as more personalized offers. Examples include sessions on healthy living, fitness education, early access to exclusive events, meet-and-greets with sports personalities etc. The type of rewards offered should alway  be based on customer research.

Making a positive impact, providing great customer experience, and building a connection with consumers can be done through even a simple CRM campaign, so long as it addresses customer needs and concerns. Continuous engagement beyond the transactional is paramount. Even more important is the successful delivery of the value promised by the loyalty program. Many businesses fail at the implementation stage despite having a great reward program strategy in place.

What are the key attributes of a successful retail loyalty program strategy?

To start with, it’s the onboarding of new customers onto the program. Clear communication on the potential value that the program offers will help in achieving higher numbers of loyalty program members.

Registering customers onto the brand’s loyalty program needs to be quick and simple. Similarly, it’s important that the membership program is equally clear and straightforward with regards to how customers earn points and rewards.

Once the program is launched, maintaining a high percentage of repeat customers, ensuring customer retention, less churn, higher basket value and higher frequency compared to customers who are not part of the program, are the key attributes that define the success of the program. Consistent engagement of members will help increase customer lifetime value.

If there is one important metric that can tell us about the adoption rate of the program, it’s the redemption rate. Higher the redemption, higher would be the adoption. Many businesses hesitate to push for redemption thinking it would cost them. But what is overlooked is the impact on activity level and engagement that such a campaign has the potential to create.

In my experience, for one of the value fashion brands that I have worked with in the past, whenever I have done redemption campaigns, I have seen around 5% of the total customers targeted shop more compared to their usual shopping behavior. Data shows that customers who actively redeem their rewards points are more engaged in the program and ultimately get retained by the brand.

What is also extremely important, but often overlooked, is making sure all stakeholders are aligned in their commitment to the loyalty program. Loyalty always needs to be driven from the top. Bottom up approach is not very effective. From the CEO and sales, to marketing and finance, everyone in the organization needs to speak the same language, though it may not always be easy.

Last but not least, adopting a test-and-learn approach is also crucial. Things can get missed in the planning stage, which is why thorough testing needs to be done and then measured before a blanket rollout of the new loyalty program.

What are some key differences between retail loyalty programs and those in other industry segments?

Even though rewarding customers for the desired behavior is similar across all industries, the expected behavior of the customers can vary from industry to industry. To summarize:

  • Retail: total spend, basket size, SOW, and frequency
  • Financial sector: adoption of as many products in the portfolio as possible
  • Real estate: bringing in more members through referrals

How should loyalty managers segment customers in the retail industry?

Customer segmentation is one of the core elements of loyalty program management. It is important that before we invest in any loyalty campaign, we understand exactly who it is we are targeting. Adopting a spray-and-pray approach where all customers are given the very same offers is not only a waste of money and resources, but it’s also unlikely to inform us as to who is buying what and what works for whom.

That’s why it’s important to invest in micro-level segmentation and look at things such as demographics (gender, age, marital status etc.), ethnicity, lifestyle, as well as purchase behavior and life stage, all of which will allow us to better understand our customer and tailor our offers accordingly.

There is a good reason why hyper-personalization is popular these days - it’s because it works, and consumers want their likes, preferences and needs to be seen. This is the way to keep customers engaged across all segments, and make sure our money is going to bring a return on investment.

What are the most effective types of loyalty marketing campaigns in the retail space?

Redemption push, points statements, and reinstating expired points with an extended but limited period of validity proved to be some of the most successful campaigns in my experience.

For example, for one of the electronics brands that I have worked for in the past, I remember we have done a campaign for churned customers, where we noticed quite a few customers having substantial points balances in their accounts. Rather than tackle this aggressively, we sent out a points statement encouraging customers to redeem points, and a preview of what they could be used on in store.

For those who did not have sufficient points, we have credited bonus points to their accounts to ensure they could redeem something substantial with them. At a very minimal cost, we ran this campaign and saw 5% of total customers targeted respond and spend money in the stores.

We tracked their behavior following the  campaign and saw that we retained 90% of these customers once they were reactivated in the program.

Campaigns that offer exclusive deals to members (creating FOMO syndrome in customers who are not yet part of the program), prove to be very effective in terms of retention and new customer acquisition. Exclusivity needs to be clearly demonstrated. Time and time again, I have seen businesses invest a lot of money into creating attractive offers and rewards programs, but failing at communicating this effectively to customers.

Offers need to be relevant and timely. It has been shown that, when executed correctly, loyalty programs can prove to be an amazing asset to the organization, guaranteeing future purchases, and thus helping the business weather all kinds of crises.

I have also witnessed in my experience the key role storefront-liners play in the success of the rewards program. Their buy-in is super critical, as it is them who interact with the customers daily and convey to them the program benefits.

When I was employed at a lifestyle brand, I was surprised to see that the frontliners were not interested in the loyalty program, nor fully aware of its benefits, which obviously impacted the program’s success.

The way my team and I have solved this was by empowering the frontline staff to offer real-time rewards, i.e. rewards given to customers at point-of-sale. Upon scanning the customer’s loyalty identifier, the cashier would see the customer’s purchase history alongside a suggested benefit they could offer the customer there and then - for example, a surprise gift, an on-the-spot offer, or complimentary service. Not only did this help get the cashiers excited about the program, but it also added a surprise-and-delight element, which in turn benefited the customer and their levels of engagement. The campaign also had a substantial impact on repeat purchases and overall loyalty program KPIs.

How do you see the future of retail loyalty programs?

Loyalty programs are here to stay. There are no two ways about it. More and more organizations are realizing the value of having a successful loyalty program. Loyalty schemes also create a goldmine of customer data, which can then help inform important business decisions and benefit the bottom line.

Having said that, technology, of course, plays a vital role when it comes to successful execution. There are many tech platforms that support the strategic loyalty initiatives. Be it in the space of gamification, e-commerce, digital engagement, social media, reward currencies exchange etc. Cryptocurrency is gradually entering the rewards space, with a few businesses already exploring the option. We’re not far off seeing reward currencies being traded.

To find out about loyalty trends set to dominate 2022, click here.

Any words of advice for loyalty managers getting started in the retail industry?

Always ask questions: what can I do to create more value for the customers? How do I engage customers in a more meaningful way? Instead of what can I do to make customers spend more with me.

No matter how much the word loyalty reflects an emotion, for the CFO, it's all about numbers. Yes, numbers are important, but numbers are the organic result of the emotional connection we build with customers. So first focus on creating impact. Numbers will automatically follow.

The retail industry is very competitive and most of the businesses in retail have loyalty programs in place.

In such a scenario, only loyalty programs who have customers as their brand advocates stand out. To achieve this, it is imperative that every initiative implemented in the program is measured and analyzed. Not just campaigns, but every action and initiative big and small. Data is key to success in the loyalty space.

CX initiatives, CRM, loyalty and brand marketing are all layers to the single brand proposition to the customer. Ensure all these initiatives are aligned.

Last but not the least, keep things simple, straightforward and transparent, and constantly take feedback from your customers to build lasting brand loyalty.


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