Customer loyalty programs use principles of rewards, convenience and appreciation to give their customers lifestyle access not available anyplace else.
Most people think of customer loyalty programs as an airline that gives miles to frequent fliers or a hotel that gives points toward a stay or a restaurant that offers a punch card incentive. But the best customer loyalty programs find function delighting customers in their daily lives.
Successful customer loyalty programs have high revenue yields for brands. That’s because:
- 6X more expensive to win a new customer than retain as existing one (Parature)
- 5% increase in customer retention can lead to a 25-100% increase in profit for your company. (Harvard Business Review)
- 68% of millennials wouldn’t be loyal to a brand that doesn’t have a good loyalty program. (Loyalty Report)
What are the best customer loyalty programs? How to they work? Why to they succeed?
Here are the case studies of 10 best customer loyalty programs.
AMAZON PRIME: Offers selection, convenience and immediate gratification
A list of best customer loyal programs has to Amazon Prime. For $99 a year, Amazon Prime offers not only free shipping, but also other benefits such as live streaming music, movies and TV shows, storage for digital photos and more. Amazon Prime is integrated into its customers life. For the person who takes full advantage of the Amazon Prime membership, the benefits can far exceed the annual fee. And as a result of paying for a membership, the customer will buy more often from Amazon. Amazon also offers apps for its website, music, TV and movies and more. According to a 2015 report from Consumer Intelligence Research Partners, Prime members spend an average of $1,500 per year on Amazon.com, compared with $625 per year spent by Amazon customers who aren’t Prime members.
CVS EXTRACARE: Personalizes offers based on buying behaviors
Generating customer loyalty is crucial to CVS’s business. ExtraCare has more than 80 million active members. One out of every four households in the U.S. uses ExtraCare. CVS is able to mine member purchases and demographic data and pair it with internal research (e.g. online communities, surveys) to deliver personalized offers and marketing communications. Mobile is a good way for CVS to bridge the digital and in-store shopping experiences. Customers can download the CVS app to manage their prescriptions, order photos, and see wait times for CVS’s walk-in clinics. The CVS app has more than 19 million downloads.
M.A.C. SELECT – MAC COSMETICS: Uses tiers to increase engagement
Estée Lauder’s brand, MAC cosmetics, has a loyalty program, M.A.C. Select. The program, for online shoppers, features three tiers. Tier one: Seduced – to join this tier, you don’t need to make a purchase. You just need to sign up. Perks in this tier include early access to limited-edition products. Tier two: Devoted – if you spend $150 or more in a year, you are eligible for this tier. You get early access to select collections, complimentary express makeup application, enhanced product samples online, and complimentary two-day expedited shipping. Tier three: Obsessed – for those who spend more than $500 per year on products. The highest accolade in the rewards system. As a member of this tier, you get to be the first to shop in certain collections, have first access to new products, two complimentary make up applications, complimentary two-day expedited shipping when you spend a minimum of $50. MAC is the world’s leading cosmetic company. M.A.C. Select keeps customers engaged. The tiers have a pricing structure that motivates customer to move us so they get more exclusive treatment.
MARRIOTT REWARDS: Targets key customer segments
Marriott Rewards® wants to increase participation among millennials. Marriott creates the “Year of Surprises”, an ownable event that could easily be duplicated across the U.S. Using a responsive website, advertising, events, video, social media, bloggers and more, Marriott Rewards celebrates its 30th birthday by giving away surprise parties to customers over the course of the year. The results are: 1) 196,909 new Facebook fans (904,000 total), 2) 740 new Marriott Rewards enrollments via social channels, 3) 1,263,710 site visits and 4) 602,334 entries.
MY STARBUCKS REWARDS: Offers exclusivity and convenience with state-of-the-art technology
Starbucks Rewards is often regarded as one of the best customer loyalty programs. What makes their program so great? 1) Outstanding Mobile Experience. Starbuck’s app makes their loyalty program more interactive and more effective. It is easy to see how many “stars” (points) you currently have, as well as make payments or even find a Starbucks location. 2) Rewarding for Grocery Products. Starbucks was able to expand the scope of its loyalty program by introducing points for purchases outside of their retail locations. Starbucks sells many products outside of their retail locations, including: coffee beans, tea, K Cups, and ready to enjoy drinks. 3) Exclusive Gold Card. When a member of the Starbucks program gets 30 Stars in a 12 month period they achieve “Gold Level” status. This comes with some great perks including: free refills on ice or brewed coffee, free refills on tea, free food and drink offers, and most importantly the personalized gold card.
NATIONAL CAR RENTAL EMERALD CLUB: Collaborates with consumers to improve customer experience
National maintains a deep, continuous, and real-time connection to customers through Emerald Exchange, a private, online community of loyalty club members. Emerald Exchange members share personal accounts of their car rental experience via photos and videos and serve as an extension of the “on-the-ground” National team. Opinions, ideas, and feedback from community members helps National improve and innovate its programs and services, delivering on the brand’s commitment to providing a superior customer experience. Since launching the Emerald Exchange Community, active Emerald Club membership has increased 27% and National Car Rental company revenue has increased 32%.
PATAGONIA COMMON THREADS: Shares customers’ values
Patagonia, an eco-friendly outdoor apparel company, realizes that its customer needed more than just points and discounts from customer loyalty programs. In conjunction with eBay, it implements the Common Threads Initiative to help customers resell their highly durable Patagonia clothing online via Patagonia’s website. Patagonia customers pledge to buy pre-owned gear whenever they can and sell whatever they no longer want or need. The collaboration marries Patagonia’s “ironclad” guarantee of durability with eBay, one of the world’s largest marketplaces for clothing and apparel, both pre-owned and new. Nearly 70,000 people have taken the Common Threads Pledge to reduce their environmental impact. More than 57,000 Patagonia items have found a second life in the US and UK.
SEPHORA’S BEAUTY INSIDER: Demonstrates personalized exclusivity
With over 10 million Beauty Insider members, Sephora is definitely doing a couple of things right. Here are three of the top reasons Sephora’s loyalty program is so successful. 1) Effective Use of Tiers: Tiered programs are effective when the upper tiers have a minimal amount of members, usually around 10%. You want your most loyal customer to feel like they achieved something that others could not, and get other customers striving to get there. 2) Rewards Match the Brand and Customer Base. Sephora’s Beauty Insider Program is seen as a high end or luxurious program, and they have created a redemption that reflects that. Instead of using points for a discount, Beauty Insider members can use their points to claim more beauty products at the Rewards Bazaar. 3) Personalized Product Recommendations: A shopper simply inputs hair type, hair concerns, skin type, and other information about themselves into the “Beauty Profile” and Sephora generates recommendations specific to your information.
SOUTHWEST RAPID REWARDS: Shows appreciation that’s simple and streamlined
Southwest Airlines prides themselves on their commitment to customer service and equality by offering a streamlined business model with an emphasis on simplicity and efficiency. RAPID REWARDS rewards customers based on value and profitability has better value proposition for both customer and Southwest. Large scale data migration of millions of members along with their existing credits and flight flown history are collected in a Siebel Loyalty application with minimal downtime. Enhanced tier structure and redemption options allow for improved functionality for A-List members and points rules. New and powerful ways to define ad hoc promotions help further capitalize on Rapid Rewards Program. And there is interactivity with a large number of internal and external applications such as Southwest.com, Reservations, Kiosk, IVR and program partners.
WALGREENS BALANCE REWARDS: Creates a level of service that keeps brand top of mind
Walgreens Balance Rewards has more than 150 million registered members and more than 85 million active members, offering both its marketers and its CPG partners a wealth of data. Walgreens has an app that allows customers to refill prescriptions, monitor their orders, pay using their phone, and earn and redeem awards in the Balance Rewards program. Like the Starbucks app, it is a lifestyle app that keeps Walgreens top of mind with its customers. Walgreens’ “Thank You” program is one example of how the brand leverages personalization effectively. Walgreens segments its shoppers into three groups based on their propensity to purchase. Customers with the second highest likelihood to purchase are exposed to placement ads and are given register coupons to help drive awareness. Customers who respond to a targeted campaign have a “much higher” Net Promoter Score than customers who have never seen one or are new to a targeted campaign.
Do these case studies convince you of the value of customer loyalty programs? Are you ready to create a customer loyalty program for your business?