Think it can’t be done? See how loyalty programs and better personalization can be used to keep your customers coming back. It’s more cost-effective than identifying new audiences and helps maintain your brand image and profit margins which can be eroded by steep discounting. 

In a world marked by a looming recession, unemployment, and financial volatility, businesses must be nimble to maintain their livelihood. More than ever, consumers are placing price among their top factors for making purchase decisions. As the same time, participation in loyalty programs continues to grow. With the immense value a loyal customer base can bring to brands in a time of financial uncertainty, no brand can afford to take a single customer for granted.

Participation in loyalty programs is on the rise

Marigold’s 2023 Consumer Trends Index found that 59% of consumers are prepared to pay more to purchase from their preferred brands. Over two-thirds of consumers cite the loyalty program of their favorite brand as critically important to winning their lasting loyalty.

Currently, 80% of the U.S. population are members of at least one loyalty or rewards program, and the average consumer is a member of 16. A July 2022 study from LendingTree found that 50% of consumers cite loyalty programs as a way to stretch their dollars as prices are rising. This applies to all generations and income levels. 57% of adults who earned more than six figures and 56% of millennials say loyalty programs have become more important, as well as 43% of Gen Z shoppers who say the same.

As consumers increasingly expect personalized experiences, loyalty programs represent one of a brand’s best bets to increase average order value and market share. These are customers that have already demonstrated an interest in communicating with you, and an affinity for your brand.

Strengthening your loyalty program

Studies also show that the most popular loyalty programs offer a variety of rewards. Today, 79% of respondents say discounts are the most sought-after benefit, while 65% value free products.

Yet increasingly loyalty is awarded to the brands that make the customer feel the most like an individual, and offer rewards that the shopper actually values. Discounts are the most obvious kind of reward, but studies show that Gen Z shoppers – more so than millennials, Gen Xers, and Boomers, value more personalized perks like private sale access and free samples based on a shopper’s purchase history. Sephora and Starbucks are two brands that famously award free birthday gifts to loyalty members, the ultimate expression of a personalized reward.

While any loyalty program needs to embody your brand ethos and what your customers value, there are three principles to building a better loyalty program.

1. Offer a value exchange and make it personal
When citing why a loyalty program is a favorite, the two top reasons cited are 1. because the loyalty program “makes me feel special and recognized” and 2. the brand “proactively addresses my needs.”

The majority of consumers want to receive customized content and will readily share personal data in return for it. A well-known DTC fine jewelry brand found that when asked, 52% of shoppers provided their birth date in exchange for agreeing to receive emails and customized content from the brand.

Cheetah Digital’s 2022 consumer trend index found that 41% of consumers cite irrelevant offers as a major turn-off. Retailers who leverage segmentation and automation are better positioned to know what their customers are purchasing and when to push relevant content and purchasing incentives.

2. Make it optimized for mobile
When engaging with a brand’s loyalty program, 72% prefer to use mobile when shopping online, and 64% prefer to use mobile when shopping in-store.

Retailers need to make purchasing as easy as possible, and mobile is an increasingly important part of the omnichannel shopping experience. Mobile will continue to play a larger role in our lives. And this includes all stages of the purchasing lifecycle, including tapping on available rewards via your brand’s mobile app.

3. Build trust and clearly articulate your brand’s data privacy policy
When asked what would cause consumers to leave a loyalty program, the second-most cited reason (after “the rewards aren’t worth it”) was the concern about data breaches.

Shoppers are increasingly concerned about businesses using their information in ways they never approved. More than half (61%) of shoppers disapprove of cookie-fueled ads and an increasing 17% felt frustrated by offers based on data they never shared with the brand.

Loyalty program offers, like all communications with your customers, must involve explicit consent. Brands should never initiate in-app or SMS conversations unless the consumer has given permission. All best-in class businesses need to ensure that their data privacy policies are clearly states and always off the customer the ability to opt out.

Loyalty is the result of a great relationship

No matter the size and scale of your business, consumers want to be recognized as individuals and do not want their time wasted. Customer loyalty is never a given. Consumers have more factors competing for their attention. Retailers, restaurants, hospitality brands and more need to be more responsive to what motivates their audiences and deliver experiences that are more relevant and personal. After all, loyalty is the result of a great relationship.