Key Points
  • Retail loyalty programs have not been driving effective customer engagement; in the U.S. only 46 percent members are active users of their retail rewards memberships

  • Shoppers view basic financial rewards as a given in loyalty memberships; true engagement and advocacy can be driven by non-monetary benefits such as personalization and high priority services

  • Existing registration and transaction data on shoppers can yield insights on incorporating personalized reward, redemption and communication strategies in loyalty programs across customer segments

Early this year, when Kayla Watters got a call informing her that she had been selected as a model for a famous clothing line, it would be an understatement to say she was delighted. Watters got this opportunity not because she is a professional model, but owing to her membership in Yes2You, a loyalty program of department store chain Kohl’s.

Re-launched in October 2014, Kohl’s Yes2You has ever since been constantly evolving to deliver on the store’s vision for being America’s most engaging retailer. The loyalty program is helping the company achieve personalized connections with its shoppers by leveraging customer data, to help improve omni-channel sales.

Yes2You is a great example of a personalized loyalty program that is keeping up with changing customer expectations. It goes beyond mere monetary rewards to actually delight the customer into becoming a loyal brand advocate. Integrated seamlessly into the retailer’s mobile app and e-commerce portal, Yes2You not only rewards purchases, but rewards every customer interaction as well, whether a merchandise review or a social media comment, with additional points and offers. By doing so, the loyalty program transcends the conventional transactional nature of reward programs to become an invaluable tool for increasing customer engagement. This has also helped Kohl’s improve its sales performance.

However, not all retailers can boast of similar successes in their loyalty programs. According to the 2017 Loyalty Census report, though retail loyalty memberships grew 15 percent to 3.8 billion in 2016, only 46 percent of members were found to be actively using such programs.

This suggests that undifferentiated loyalty programs, designed with a simple purchase, reward and redeem mechanism just don’t cut it anymore. Today’s customers are more empowered and sophisticated. They now have at their fingertips, comprehensive information on products stocked by different retailers, replete with ready comparison charts. They would rather shop at a brick-and-mortar or online store that offers them a convenient and personalized experience, than return to one for the sake of a mere loyalty card.

There is an urgent need to overhaul loyalty programs and stop viewing them as mere transactional tools. Loyalty programs must achieve the main objective they were created for, which is, boosting customer loyalty. What can be done differently? In a recent WNS DecisionPoint™ Loyalty Engagement Survey, personalized rewards emerged as one of the top three customer redemption preferences. And there, perhaps, lies the clue.

Personalization can become a key differentiator for loyalty programs. Retailers already have a viable mechanism to incorporate personalization into their existing programs. All they need to do is effectively leverage the data collected through loyalty program registrations and subsequent customer transaction histories. They can go one step ahead by categorizing customers into relevant segments to roll out specific, customized offers and communications. Marketers can also use micro-segmentations to considerably improve positive advocacy.  

The WNS DecisionPoint™ survey, which covered over 1,500 respondents, identifies that while basic financial rewards are taken for granted by customers, the actual differentiator for a brand revolves around non-monetary rewards such as higher priority service. The survey also uncovers an important drawback in current loyalty programs. Most of them usually group vastly different customer segments into the same reward tiers and privileges, which can make customized offers difficult to roll out.

Through the survey, we identified six specific archetypes based on parameters such as behavior, generational mix and channel preference among the respondents. Each of these segments assigned significantly varying levels of importance to different attributes of loyalty programs, indicating that each segment would likely prefer differing levels of personalization. And, this is a major cue all retailers must take from, if they want a long list of happy, loyal customers and brand advocates.

To know more about how you can personalize your loyalty programs, read WNS DecisionPoint™ | Enabling Effective Loyalty Engagement in Retail

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