Loyalty programs are not a new concept in the world of retail, but, like today’s customer base, they are in a critical state of flux in the current digital era. Both for retailers looking to create loyalty programs from scratch and for those looking to adapt existing programs to appeal to shifting consumers, engaging today’s connected consumer is key, and developing engaging programs was the topic of a session at National Retail Federation’s BIG Show this week in New York.
According to Caroline Papadatos, senior vice president of international corporate marketing at Loyalty One, there has been an “explosion of channels” recently among consumers. She noted during the session that smartphones are often the first thing consumers pick up when they wake up in the morning and the last thing they put down before they go to sleep at night, and it is the responsibility of retailers to make sure that they let that kind of behavior shape their loyalty programs.
“What we’re seeing is that savvy retailers are adapting and they’re getting ahead of the customer,” she said.
Shoppers are increasingly looking for personalization and they are looking to have experiences in everything they do from shopping to ordering pizza, Papadatos said, and loyalty programs are a great way for retailers to not only offer shoppers a unique experience but also to collect the kinds of data they need to create a truly personalized shopping experience.
“To create real personalization you need data,” and the well-positioned retailers are the ones that are using that to fuel their loyalty programs, she said.
For Walgreens, it took longer than other retailers to really get into the loyalty game. In the early 2000s, the retailer relied on stores for growth, but there came appoint where Walgreens reached a saturation point and had to restrategize. So in 2013 the company turned to loyalty programs as a way to figure out how to better leverage its network of stores and get a deeper understanding of customers, with the goal of transforming the retailer’s image from a drugstore to a wellness destination, Walgreens Senior Manager of Loyalty Strategy and Insights David Zychinski said during the session.
In the two years since the chain launched its rewards program, Walgreens has really worked to create an engaging and dynamic program that includes its regular Balanced Rewards, pharmacy rewards and Balance Rewards for healthy choices, Zychinski said. And the retailer’s goal is to focus its loyalty strategy on its best customers.
“It’s not about having a loyalty rewards strategy, it’s about having a customer loyalty strategy,” he said.
For Walgreens, the direct benefits of its loyalty programs are important, but the indirect benefits like gaining insights into product assortment, pricing, promotions and store layout also carry real value for the retailer, Zychinski said. And focusing its loyalty strategy on its best customers creates opportunities for retention, greater access to those customers and a deeper understanding of the “share of mind” of Walgreens customers, he said. And the strategy is paying off. Since its launch, Walgreens’ loyalty program has seen more than 1 million customers download coupons, 120 million registrations, more than 80 million active members and 500 billion loyalty points earned.
All in all, Zychinski said important things to keep in mind when it comes to loyalty programs include aligning loyalty strategies with corporate strategies, focusing loyalty strategies on the best customers, establishing a foundation of insights into and segmentation of those customers and using those insights to drive loyalty and behavior changes among the best customers.
“It’s a really exciting time to be in loyalty,” he said.
The main goals retailers should keep in mind when it comes to loyalty programs are acquiring customers, increasing basket size, drawing shoppers to stores and achieving a status among customers that has them choosing you over your competitors, according to Papadatos.
“It’s not much more complicated than that,” she said.
But it doesn’t end with just establishing a loyalty program.
“Loyalty programs are an important tool, but they’re not the only tool in the tool set,” Papadatos said.
It’s also about knowing what to do with the data collected through loyalty programs and bringing the different aspects of loyalty programs like promotional pricing, points programs and perks together into a single platform. Data can only become a decision-making tool after retailers take the time to prioritize and when they apply the data to other aspects of their businesses like merchandising, Papadatos said.
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