Loyalty Programs: Are Customer Rewards Worth the Expense?

Loyalty programs have been a popular retail trend for some time now, but as we enter into 2020 the question remains — are customer rewards still relevant?

The answer appears to be yes, at least if current rewards programs are any indication. But traditional methods may be changing.

The Rise of Connection

DSW recently announced plans to step up its loyalty program. According to the National Retail Federation, 29% of DSW’s members have been in the program for 10 years or more and loyalty program members make up 90% of DSW sales.

The new system is three-tiered and centred around “emotional connectivity.” It lets customers earn rewards faster and everyone receives free shipping for online orders. Customers can also donate used shoes and receive rewards points. Other changes include “amped-up” birthday treats and grants some tiers the ability to pass gifts on to friends and family.

Revamped Loyalty

DSW isn’t the only retailer changing its rewards program. Retail Dive reported that other big names, including Macy’s, Nordstrom, Kohl’s, Target, and Lululemon, are all revamping their own.

Beauty retailers, like Sephora and Ulta, have both seen success with their programs, which they also frequently update.

In addition, Retail Dive recently reported how the store-branded credit card program is declining. Retailers such as Nordstrom, Macy’s, and J. Crew have all expanded their programs to include non-card holders in them.

Paid loyalty programs are also growing in popularity. Costco’s exclusive membership program is thriving, and others are doing the same. Amazon Prime had more than 100 million Prime members purchase over 175 million items on Prime Day. Other services, like Wayfair and Fabletics, have also seen success with a subscription model.

Nike also recently launched an entire members-only store.

According to a study by L2 Gartner, across loyalty programs:

  • Birthday perks increased by 7% in 2018.
  • Early product access and early sale access increased by 11%.
  • Free service and service discounts rose by 3%.

PC Optimum and Air Miles

PC Optimum and Air Miles have been two of the longest-running and most popular loyalty programs in Canada. But are they still seeing success?

Loblaw released its revamped loyalty program, PC Optimum, in 2018, but so far the results have been mixed. Q2 2019 saw a slowdown in its grocery division’s same-store sales growth, according to the Financial Post.

This slowdown has led to talks about tweaking the data-based algorithm that Loblaw uses.

In 2018 Air Miles expanded its program to offer more rewards requiring less than 1,000 miles and made it easier to use Air Miles Cash in-store. According to Strategy Online a recent study found that Canadians prefer small rewards over big ticket items, like travel.

Manufacturer-Led Rewards Programs

While retailer-led loyalty programs are the norm, brand-led rewards programs can be just as effective.

There is, of course, the option of a brand-led loyalty program when a manufacturer opens up its own retail store or sells exclusively online, but some also work alongside in-store loyalty programs.

For instance, Huggies offers a rewards program for parents who can submit receipts or gather points using a loyalty card to earn rewards. Customers can also earn rewards by taking surveys, sharing content on Facebook and Twitter, reading articles, and more.

Best Practices for a Winning Loyalty Program

  • Don’t rest on your laurels. Constantly look for improvement and ways to add more value.
  • Ask customers what they want from your rewards program – are they looking for money back, smaller perks, more product, early shopping opportunities, etc.
  • Look at similar programs in your niche or area that are/aren’t doing well.
  • Consider moving away from store-branded credit cards.
  • Think outside the box. If you are a manufacturer, for instance, shoppers could earn points by sharing social media posts or submitting in-store receipts.

Want to design your own loyalty program or improve a current one? Marketsupport Canada can help! Reach out to us today. Call 1-877-421-5081 or visit www.storesupport.ca.

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