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 Chuck Schaeffer The Future of Retail—Consumer Loyalty


Loyalty Systems Are a Great Place to Begin the Consumer Journey

Loyalty systems are a powerful tool to begin the journey of advancing consumers from browsers to buyers to repeat customers to advocates. Because about two-thirds of retail loyalty programs don’t work, I’ve written a lot about how to create loyalty programs that do work. Fortunately, if you do the right things, it’s been my experience that loyalty programs always achieve their revenue objectives and are therefore something no retailer should be without.

To maximize the business opportunity, loyalty programs should be offered at many points of consumer engagement, such as on the website, social network or in the store. A high conversion technique is to offer the loyalty program, along with a discount or incentive toward a future purchase, at the point of sale (POS). Once the consumer joins the loyalty program a number of technology tasks kick-in.

The POS system feeds the CRM (Customer Relationship Management) consumer database and the loyalty application with the consumer profile information, purchase transaction and any loyalty points associated with the purchase. Some retailers try to accumulate consumer data in the ERP system but that later becomes a bottleneck when you need to engage consumers with precision marketing, over social channels, using mobility or when you get into omni-channel retailing. The CRM application is the customer system of record, enables retailers to leverage consumer data over many channels and programs, and over time becomes the consumer intelligence application that improves decision making and performance with virtually every consumer-related campaign or program.

The CRM and/or loyalty application forwards the consumer a thank you email and inserts the consumer into a high level brand email campaign. The email should include a personalized invite to the brands social properties, and possibly incentives or messaging to induce the consumer to participate. This helps track the consumer’s digital footprints in order to better understand the consumer’s persona and preferences. A prerequisite here is to define consumer personas in your CRM software and link your website and social properties with the consumer record in your CRM system.

Loyalty members generally opt-in to retailer programs and identify themselves when engaging with the retailer over whatever channel. By tracking the consumers digital footprints, loyalty activities, engagement with your brand (digital and physical) properties and additional purchases, the loyalty application advances consumers from broad email marketing campaigns to more highly focused and even contextual nurture campaigns — which results in offer conversions increasing from an average of 3.5-4.5% to about double that.

The Loyalty ROI

Loyalty members are 4 times more likely to be repeat customers than non-loyalty members. But everybody knows that. What you may not know is the financial impact. Returning customers spend on average 67% more than first-time customers (source: Bain and company) and in several retail industries up to 15% of a brands most loyal customers account for 55-70% of the company’s total revenues (source: The Center for Retail Management at Northwestern University).

Successful loyalty programs also increase customer acquisition, retention, Customer Lifetime Value (CLV) and advocacy. For most retailers, improving any one of these four critical success factors by as little as one or two points will deliver a corresponding improvement to top line revenues and an even bigger impact to margins and profits.

Whether they are trying to unlock rewards or engage a brand that they feel connected to, loyalty members incur more visits to retail properties, make more purchases of higher margin goods and promote the brand to their friends and social spheres – and we all know that word of mouth is the most effective form of advertising.

There should be little doubt that the future of retailing includes well designed loyalty programs supported with enabling technologies.

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Returning customers spend on average 67 percent more than first-time customers.


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