Retail loyalty programs are evolving. They’re no longer just those bar-coded icons of customer loyalty that hang – often unused – from (your mother’s) key chains. Today’s reward initiatives don’t require an actual card, and they increasingly engage with smartphone-wielding shoppers to provide a 360-degree view of regular customers. Rather than simply collecting points toward a free sandwich or hotel room visit, the latest mobile-linked loyalty programs allow members to scan identity codes from a phone or app, rewarding them with instant coupons and sales.

Every month, it seems, there’s word of another company launching a new reward initiative, including, most recently, Express, Crabtree& Evelyn, Target, Groupon and Sports Authority. As Jeffrey Edelman, Director, McGladrey & Pullen, LLP, recently described it:

“Loyal customers must also be leveraged. Successful brands and retailers are sufficiently differentiated, which drives traffic, excitement, conversion and profits. Customer loyalty is rapidly becoming an important part of the value equation and potentially a more profitable one. A satisfied and loyal consumer will tend to purchase more often and in larger quantities than a new customer.”

Of course, at the center of all these loyalty programs is the need to: 1) develop a relationship between you and your customer, and then to 2) keep that conversation going, using a dialogue driven by data.

For example, when Hallmark needed a way for approximately 3,500 independent Hallmark Gold Crown stores to respond to their Loyalty Program members, it empowered these local merchants to personalize customer outreach by building custom local marketing campaigns through a web-based portal. Nanotargeting like this allows big data to be put to use for one-on-one marketing, and in Hallmark’s case, it used Retail Customized Marketing (RCM) to create complex targeting criteria  and allow stores to send branded greeting cards and postcards directly to consumer’s homes. Talk about caring enough to send the very best!

Loyalty programs are evolving as quickly as the digital marketplace –and that’s no surprise because we’re seeing more and more how these individualized interactions with your brand can allow the personalized, relevant messages that truly drive sales.

If it’s time to beef up –or start –your loyalty program, here are five key questions you need to consider:

1. Would your customer base support a tiered membership program? In a tiered membership program, bigger spenders get more perks, and multiple membership levels are long-time staples from retailers such as Macy’s, Starbucks, Best Buy and the Gap. Climbing to different status levels adds spice to membership by offering tiered advantages, increasing the perceived value of membership and improving member retention. However, successful tiered membership program must be simple and engaging, and now with social media tie-ins, many customers want to be rewarded not just for how they spend with the brand, but also how they interact with the brand across social media networks. In addition, although tiered membership programs often occur in an annual timeframe, this may be problematic for some promotions. If your business deals with customers on an infrequent basis, such as an auto repair or landscaper, you may not be able to pull in customer interactions to warrant offering tiered membership programs.

2. What exclusive or fun rewards will best engage your customers? Best Buy’s most-valued customers were pleasantly surprised when the retailer invited a handful of top shoppers and family members to an exclusive movie preview. This “surprise and delight” approach is becoming a regular element in loyalty strategies as a way to standout in a crowded loyalty space – and capture the hearts and minds of customers, essential for true “loyalty.” What perks can you offer to build building relationships and create brand loyalty? Samples, special events, early access to coveted sales, exclusive shopping invites and other offers can get your customer’s time and attention. (Major League Baseball has developed a full range of “insider perks” for fans of various teams.)

3. What are the benefits/disadvantages of offering credit card or debit links? Credit-card linked rewards programs encourage sales by triggering merchant offers. Many retailers such as Express, who used to base their rewards program on a proprietary credit card, are retiring these outdated programs and transitioning account holders into new programs that allow points to be earned for social media interactions and also for purchases –regardless of payment method (although those using the Imagecompany’s credit card receive a 50 percent point bonus.) Use purchase behavior to test and refine strategy and freshen creative approaches.

4. Can you partner with an affiliate so the reward points a customer earns can be used in more than one way? Shopkick, a location-based shopping app, has partnered with ExxonMobile, pumping out rewards to service station users. Other company partnerships allow the points you earn in one program to be used in other stores; Citibank cardholders, for example, can use their reward points at Best Buy stores. Of course, affiliation only makes sense when you partner with a company that enhances or mirrors your core offerings. Figure out what relationships are most important for your brand and design a rewards program that fits the complexities of your customer’s lifestyle.

5. How can you develop social-media tie-ins? It’s a given: Social networks can help you identify and engage customer advocates, so consider integrating loyalty programs with social media interactions (rewards-club members who “like” a brand on Facebook or follow it on Twitter can get extra coupons or deals, e.g.). With the new Express program we mentioned,  launched by the Columbus, Ohio, based apparel retailer, members can earn exclusive rewards for following one of the company’s Twitter accounts, reviewing products (“Love these pants!”) or re-tweeting its tweets (“Have you heard about the 50% off sale?”)

Have I made you feel more loyal to loyalty programs? Remember: Customer reward and loyalty programs can personalize the shopping experience and convey messages that bolster your customer’s affinity with your brand. It’s all about achieving an ongoing dialogue that drives not only purchasing behaviors, but also essential, long-term customer loyalty.


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