Imagine, salons all across the world offered only one hairstyle/cut to everyone irrespective of their gender, age, ethnicity, personal style, or even preference. Won’t work, will it? Just like one shirt won’t fit people of all sizes.
Loyalty programs are somewhat similar in nature. Today almost every industry has some kind of rewards or loyalty program which is designed to suit the specific requirements of that particular sector.
Here, we explore the vast industry of retail loyalty programs, while answering questions like what are loyalty programs in the retail sector like? How did the pandemic affect it? And how can you enhance the effectiveness of loyalty programs?
A loyalty program in retail is designed for the B2C sector. As opposed to loyalty in B2B modules, retail loyalty is focused to address the challenges a retailer faces in retaining customers and boosting loyalty among its customer base. The retail industry is vast and loyalty programs in retail are diverse and subject to change from sector to sector. The retail industry has a high purchase capacity and low customer attention span. To address these two important challenges and to combat the ever-growing competition, retailers rely on loyalty programs.
The impact of the pandemic has been tremendous on the retail sector. A study from Wharton Baker Retailing Center and WisePlum on how and why customer loyalty waned during and after the pandemic shutdowns gave great insights on customer loyalty and retention. Contrary to popular belief, customer loyalty in the retail industry was declining during the first global lockdown, customers weren’t as loyal to the brands, as expected. Retailers faced more problems with loyal customers than with other customers despite their retail loyalty programs. The prime reason for this was the gap between customer expectation and reality. Tall claims made by the brands in the pre-COVID era fell short and customer frustrations increased, especially with the retail rewards programs.
Another huge challenge that retailers faced was the overnight shift in customer preference towards eCommerce. Shopping online suddenly became the norm as it offered safety, convenience, and even better loyalty offerings than loyalty programs in retail marketing. Besides these new challenges retailers also had to tackle the common hurdles of growing competition and the low-attention span of the audience.
So, how do we overcome these challenges? The answer is simple – leverage on your USP, improve your retail loyalty programs and work on building an emotional connection. Let’s delve deeper into how loyalty programs in retail can be your gateway to increased loyalty and improved customer retention.
A 2021 study on the loyalty industry, that surveyed 300 marketing and loyalty specialists across the U.S. to identify retailers’ current and future loyalty strategies and expectations, shed light on what customer really expects from retail loyalty programs and general customer loyalty in the retail industry. The key highlights included customer’s expectations of instant gratification. The customers do not want to wait for months or years to reach a certain tier or level and then redeem their rewards. They want attainable goals and a good frequency of points redemption. Customers are also looking for exclusivity or premium offers. VIP and Premium membership are popular among customers, it allows them to win favors from the brand, get access to special events and earn better and meaningful rewards.
The study also noted that most retailers that partnered with retail loyalty marketing vendors or managers achieved a better ROI and also won the customer’s vote of confidence. Retailers that partnered with vendors saw more frequent customers. 40% of respondents who had a loyalty vendor said that loyalty members shopped with them at least every few days and 30% of retailers that managed their own loyalty program were content with their customer participation rate.
If you are seeking a loyalty partner that understands your brand values and persona and helps you design a program that suits your business aesthetics, Annex Cloud is the answer to all your loyalty questions. Annex Cloud has earned the highest possible scores in 15 criteria in the New Forrester Wave and has catered to well-known brands in the US for years. To learn, how Annex Cloud can help you with dynamic retail loyalty programs, click here.