Unlocking the true power of rewards

As the pandemic has rapidly accelerated structural change within the industry, so has it increased the need for retailers to reinvent their loyalty strategies, looking beyond the points-based plastic cards of yesteryear. Retailers that adapt to the changing consumer behaviour; utilising rewards to meet their customers’ and business needs will achieve a unique commercial advantage. But how do you unlock the true power of rewards?

The opportunity is now

Loyalty programs are going through a period of great change. The shift away from points-only loyalty programs was already well underway when the COVID-19 crisis hit. Changing consumer expectations and improvements in technical capabilities will see loyalty programs giving consumers more choice and power than ever, creating a more emotional bond to build stronger and more profitable customer loyalty. Most UK shoppers want and expect a brand to reward their loyalty. Rewards not only entice more shoppers, encourage repeat visits and increase spend, but can build an emotional connection that drives mass behavioural change. 73% of consumers believe loyalty programs are a great way for brands and businesses to reward their customers. With 69% thinking the rewards and benefits a program offers are the most important factor, as reported by YouGov’s latest loyalty research. But a staggering 95% of UK shoppers want brands to seek new ways to reward their loyalty, which presents huge opportunities for retailers.

“For customers to stay loyal, brands are challenged to rethink their reward strategies as consumers expect their loyalty to be recognised across more metrics than just spend alone.” - Data & Marketing Association (DMA)

How do you create loyalty without a points-based scheme?

While there is a need to focus on the price, especially in times of uncertainty, we also see it as a time for brands to really establish their own values.

“It is about value, but it is also about values,” Conny Braams, Chief Digital and Marketing Officer at Unilever speaks to Marketing Week. “Because what we havealso seen during Covid is people are becoming more conscious in their consumption. Conscious in knowing that we live on one planet and that everything interacts, and that they themselves can play a role in making this a more sustainable place to live.”

We are already seeing new players shaking up the unwritten rules of loyalty programs. Virgin Red uses a gamified experience that allows users to earn points, through spend and the completion of games and competitions each month. Not only does it reward transactions, but rewards interaction. As well as seeing increased participation and retention rates, it has created a brand experience that builds a deeper emotional connection that helps drive specific desired behaviours for the retailer.

Another business harnessing the power of loyalty brand experience is Pets at Home VIP Club. Pets at Home grew its VIP Club by 1.5 million members in one-year. Providing mass personalisation, rewarding the pet not the owner, and forming a community to find lost pets helped achieve Pets at Home four main goals – grow member spend and loyalty; grow membership and motivate members to provide more data about their pets; grow multi-channel and service participation; and drive greater differentiation through expertise and empathy.

Sky VIP has reduced its customer churn amid growing competition from the likes of BT and Netflix by putting the customer front and center of its rewards, rewarding its longest-standing customers rather than how much they spend every year. It also gives Sky more opportunities to talk to its customers more regularly helping to engage with their customers, forming a long-term relationship that helps build a better customer profile

How do retailers retain shoppers won during COVID-19 and win back lost shoppers?

As restrictions ease and there is still some reluctance from consumers to go back out and shop in the physical world, it’s the perfect time to differentiate and create reasons for them to return to your store. Consumers are looking for something more. When it comes to rewards, it’s no longer just about the transaction at the point of purchase; it’s about additional experiences and services that create new touchpoints. Consumers now demand benefits that provide both rational and emotional satisfaction.

Retailers will need to be more consumer-centric than ever and seek to understand the major themes that are driving consumer choices. And while securing loyalty can seem like a challenge, the most successful strategies blend both transactional and emotional incentives. They focus on the things that are most important to shoppers – whether that’s purpose, family, health, experience, or value.

Emotional engagement – the new superpower!

Using emotional engagement delivers a stronger commercial advantage compared with discounts. Shoppers that are emotionally engaged are more likely to change their behaviour resulting in a greater ROI than customers who engage with money-off, which can also just dilute margin. The most fruitful campaigns for retailers are those that harness the power of emotional engagement with relevant, tangible rewards to gain mass behaviour change and deliver commercial value.

“Having a ‘shared social responsibility’ could appeal to those who wouldn’t normally think to donate to such activities and will strengthen the emotional connection between the consumer and the brand,” Tim Bond, head of insight at the DMA explained.

We have recently seen this with Sainsbury's 'Live Well for Less’ being replaced by ‘Helping Everyone Eat Better’ as the supermarket looks to help consumers make healthier choices for themselves and the planet. Lidl Portugal connected with their more environmentally conscious audience by promoting their sustainability agenda through a rewards campaign that grew their awareness to 90%. Leveraging the Natural Powerz range, designed to highlight the importance of protecting our planet’s natural resources. The campaign storytelling was brought to life by 6 different characters promoting 6 specific ways to take better care of the world, each of them connecting with Lidl’s sustainable products and initiatives.

Should these rewards be digital or physical?

Technology can allow greater flexibility, more precisely targeted rewards, and a seamless way of distributing the rewards whilst also gaining customer intelligence and engagement.

Physical rewards have a high perceived value, tangibility, and personal nature that is hard to come by with digital rewards such as gift cards. Physical rewards are also important because they connect the store, the reward, and the shopping experience. The role of the store is more than a building that sells products, it supports the intangible things in our everyday life. It physically supports and showcases the emotional tie that the shopper has and therefore can have a massive influence on their shopping behaviour.

Regardless of digital or physical, the shopper wants the same experience, engagement, and service whether they’re shopping online or offline. Ultimately, a customer-centric, frictionless strategy with one simple sentiment will be the key to success – give customers something they want and make it as easy and straightforward as possible for them to earn it.

How can rewards change shopper behaviour?

Effective loyalty programs are significantly more successful at changing customer behaviour to drive value – resulting in the retailer becoming the preferred destination by customers. These positive changes in shopper behaviour include:

· Choosing a retailer over a competitor.

· Recommending the retailer to others.

· Increased frequency of purchases.

· Viewing the retailer as their favourite.

· Paying higher prices to stay with the retailer.

· Intent to increase spend with that retailer.

To create loyalty propositions that are as dynamic as their consumers, retailers and brands need to develop an underlying consumer-loyalty strategy built around a fluid partnership of products, services, and experiences. What’s more, modern loyalty programs are a contributing source to improved personalisation, helping retailers & brands personalise their loyalty strategies and decision-making more broadly.

Proven loyalty mechanisms and when to use them

Choosing the right mechanism is essential in delivering loyalty, ROI, and brand equity. At tcc, we have three proven strategies that we know get great results.

Instant rewards - keep customers’ interest up and keep them coming back.

· Collection - Lifestyle branded products with high relevancy and perceived value, attract new customers but also grows the retailer’s share of wallet by retaining shoppers in the short and the long run.

· Local - Prosocial benefits and collective spirit drive greater reach and reduce barriers to involvement. It enables the retailer to be hyper-local, benefitting the community in which the shoppers live i.e. helping your local school or sports club.

The future and opportunity of your loyalty strategy are more than a transactional platform. It should be an effective tool for communication and building stronger relationships with your shoppers. With technology and consumer expectations changing at lightning speed, the ability to better understand and quickly respond to customer needs will be paramount this year and the decade ahead. Effective reward campaigns should add value to your brand and your shoppers. Those who are willing to unlock the true power of rewards will not only differentiate their brand but connect deeper with the shopper and drive a larger commercial advantage.