There’s still a lot that retailers and brands need to do to get the most bang for their buck when it comes to loyalty programs.
According to the latest detailed eMarketer research on the subject, U.S. consumers held an average of 17.9 loyalty program memberships – a record level and an increase from the 14.8 average recorded in 2019.
Although they actively participated in 50% of them, which was 5% more than in 2019, this means that half of the initiatives people are signed up for are not being utilized.
Is the system broken? Not sure we’d go as far as saying that, but there is undoubtedly so much more retailers and brands could be looking at to embellish what they’ve already served up to their customers.
Deloitte's 2024 retail industry outlook would suggest retail executives are well aware of the task at hand. Strengthening loyalty programs was the highest of four growth priorities they listed as part of the research, which implies recognition from execs that current offerings don’t provide actual value and are often a drain on resources.
Deloitte identifies the following three program features that drive loyalty and engagement. Thinking carefully about these three things is tantamount to getting loyalty correct and squeezing the most out of initial investments.
- Paid membership tiers;
- Brand partnerships;
- Generating and capturing consumer data.
Let’s dive into those for a minute.
Layering up
From Best Buy with its ‘My Best Buy Plus’ and ‘My Best Buy Total’ options to Wayfair with its ‘Wayfair Rewards’ – not to mention the big grocer’s versions – U.S. retailers of all shapes and sizes are adding paid-for layers to their existing loyalty programs. Amazon started all this with Prime, of course, and getting people to buy into loyalty in return for an abundance of additional benefits is now the norm.
In the two aforementioned Best Buy offerings, members pay $49.99 or $179.99 per year, respectively, for ongoing member prices, deals, and – in the case of the pricier one – tech support and extra protection in the event their goods break down.
Meanwhile, for the Wayfair one, launched in October 2024, a $29 a year fee gets customers free shipping on goods they buy, early access to major Wayfair sales events, and 5% back on purchases.
More recently, in March, arts and crafts retailer Michaels launched a subscription service, called Digital Downloads, alongside its loyalty program. For a monthly fee or an upfront annual outlay that saves them 30%, creators gain unlimited access to hundreds of thousands of digital assets including fonts, illustrations, PNGs, 3D paper crafts, laser cutting files, knitting patterns, embroidery patterns, and more to use for their personal projects.
Priced at $9.99 per month or $83.88 for the year, Michaels’ latest offering is another way to keep customers engaged with a relevant proposition.
Huge care must be taken when adding layer upon layer to customer loyalty options; there’s a danger of overcomplicating programs, overdoing it, and making lower-tier shoppers feel like the poorer relations in the community.
Loyalty ecosystem partners
From Walmart recently partnering with Burger King to give members of its Walmart+ paid loyalty program 25% off the fast food restaurant chain’s menu to Nike teaming up with Dick’s Sporting Goods and JD Sports in the U.S. to provide partner loyalty perks to its members, building a loyalty ecosystem is on trend.
JD Sports CEO Régis Schultz said in August 2024 his company wanted “to redefine how brands and retailers work together to set a global standard for customer experience in our stores and across our digital channels – and this means making sure we find new ways to reward loyalty”.
Data rules
First-party data is a strategic advantage to brands and retailers in the modern, digital age – and loyalty programs remain a rich source of customer details behavioral information.
Look at M&Ms, for example – the candy brand made its first official loyalty play in February with the launch of ‘Fun Club’. Due to third-party wholesale relationships forming its key business model, it is difficult for M&Ms, as it is for all FMCG brands such as M&Ms' owner Mars, to gain access to in-depth data about their customer base.
Fun Club changes all that, with the initiative using digital customer receipts to track points, which provide insights into purchasing behavior, transaction frequency, location of where customers bought goods, and product preferences. It’s a veritable gold mine of information for a brand that previously had to rely heavily on data from third parties to gain insight into its customers.
All these focus areas are beneficial for retailers, but in the current challenging landscape for businesses, politically and with sluggish consumer sentiment, it might be too costly to invest in one or any of these areas.
There are other ways to move forward here, at minimal cost – in fact, ways that can actually add recurring revenue streams to their loyalty offering.
SmartCircle provides an aggregation hub that can seamlessly be integrated into retailers’ existing loyalty programs. SmartCircle is effectively a plug-and-play cashback offering, accessible through a simple API connection, from more than 5,000 third-party merchants that retailers can embed into their existing platforms.
No extortionate set-up costs, minimal development required, and a quick solution to boosting brand partnerships and adding a tier to loyalty that will pay back as retailers deploying SmartCircle gain a commission on each successful sales lead they provide.
Retailers opening up a whole raft of new relevant offers to their consumers through this route are not only commercially benefiting through commissions; they are providing a valuable resource to their shoppers – and potentially one they can charge for as part of a paid loyalty tier extension to their existing program.
It’s time to think differently about loyalty, and SmartCircle is a real enabler as that evolution unfolds.
