A growing number of customers are willing to pay a fee for access to enhanced loyalty program benefits. But, it's not just the pay-to-play model reshaping the loyalty game -- changing customer expectations are creating a demand for smarter programs with personalized rewards, new loyalty currencies, humanized technology, and more.
In its eighth annual consumer report on loyalty, Bond -- a leading global customer engagement agency -- has released an expanded Loyalty Report, which identifies that consumers say they spend more with, advocate for, and remain loyal to brands with customer loyalty programs with innovative personalized experiences in addition to points and discounts.
With some consumers spending up to 99% more with brands when they're a loyalty program member, the program experience has never been as important as it is today. Operators must understand how to satisfy the evolving needs of their program members to maintain their loyalty in a competitive landscape.
In the changing game of customer loyalty, here's the latest to consider with your customer service team.
1. Increase spend and program satisfaction with paid loyalty program tiers.
37% of customers are willing to pay for access to enhanced benefits, up 7% since 2017. Early technology adopters, Gen Z and millennials are driving this trend, with 69%, 47% and 46% respectively. Brands that implement paid program tiers see higher member spend and advocacy, and longer-term brand loyalty.
Who's doing it right? There are several paid programs using paid loyalty tiers to drive incremental sales, increase program engagement, reduce returns, and produce significant operational benefits:
GameStop offers two paid tiers that give members access to enhanced benefits, such as exclusive sales, expedited shipping, and more points per dollar spent. The results? GameStop reports 3X higher sales among paid versus free members.
Restoration Hardware's paid members' program account for 95% of sales, reduces returns, and increases inventory accuracy. Members pay for perks like 25% off all full-priced merchandise, an additional 20% off sale items, and complimentary interior design services.
Amazon Prime, with an estimated $9B annual revenue stream, has attracted roughly 90 million members and provides them with access to benefits that increase frequency -- like free two-day shipping and free same-day deliveries. According to sources, members shop 2X more often and spend 2X more than non-Prime members.
2. Explore and establish new loyalty currencies and experiences beyond points.
Consider differentiating your loyalty program by identifying customer preferences and experiences, then track and reward your members' behavior with alternative "currencies." This is in line with an evolving customer attitude towards tracking and rewards -- an increasing number of members (87%) now say they're open to having various details of their activity and behavior watched, monitored, and tracked in exchange for access to personalized rewards or engagements. Perhaps surprisingly, openness to being tracked is highest among the affluent (94%), followed by Gen Z (91%), co-branded credit card holders (90%), and households with children (88%).
Points are not the only answer, it seems. When it comes to alternative currencies, 85% of customers find Wi-Fi access, an empty seat next to them on an airplane, express checkout lines for members, and other points-alternatives to be highly valuable. A few notable examples of brands adopting their loyalty currencies include:
Amazon Go is available to Amazon customers, and this innovative retail environment addresses time-starved urban customers with a faster, easier and frictionless grocery shopping and checkout experience.
Hilton Honors, along with other major hotel loyalty programs, offer benefits such as digital check-in, choice of room and late checkout -- perks that are unlocked through frequency and other customer behaviors.
Delta SkyMiles - Clear: Delta Airlines in partnership with Clear, provides biometric technology-powered I.D. checks and automated screening lines to streamline the security process in an effort to ease the travel experience for airline passengers.
3. Technology -- that doesn't sacrifice the human element -- leads to higher member satisfaction and engagement.
Members who have engaged with loyalty technology say it has substantially improved their member experience. Even more compelling is the fact that 95% want to engage with brands through a mix of new, emerging, and growing tech–think augmented reality, virtual reality, card-on-file, etc.
Mobile and location-based tech can improve the customer experience by over 80% and can give brands the ability to offer customers the choice to redeem points for purchases in the moment.
While not a widely adopted technology yet, augmented reality (AR) is beginning to make an impact on the member experience where applied. This, as well as other existing and emerging tech, are becoming differentiators among successful programs. That withstanding, we don't advocate tech for tech's sake. In an increasingly digital world, customers identify moments in their journey made better by the brand's people and are enabled, or complimented, by technology. Your brand's investment in customer service technology should not come at the expense of the program's human element.
4. The future is human -- and critical to the success of the experience.
While technology may create the path, human interactions forge the way forward. Reported by customers themselves as being more critical than ever, human touch points present brands with an existing and cost-effective way to engender loyalty among members.
Effective brand representatives drive 3.9X higher member satisfaction and a 27% increase in spend among members. Yet, for many brands, there appears to be a missed opportunity for their brand representatives to improve results in three key areas of the program. Members report that:
Only 21% were prompted by a brand representative to use the program.
Only 20% get help to make the most out of their membership.
Just 19% say that brand representatives make them feel special and recognized.
Make Your Move
It's time to adopt a new outlook on Loyalty and move beyond your brand's boundaries. The new loyalty landscape demands bold moves from program operators that know and understand their customers' needs. Program success in this new game means removing friction points and avoiding sources of member frustration such as having points expire or making desired rewards unavailable. It's about engaging members with personalized, relevant and memorable experiences -- both human and digital.
This is a unique moment in time. The evolution of customer engagement is shaping a new and exciting landscape full of opportunity, risk and reward.