Build loyalty with every scan for increased sales and profit

The Pareto principle states that roughly 80% of outcomes come from 20% of causes * – hence it’s colloquial name of ‘the 80/20 rule’. The principle, brainchild of Italian economist Vilfredo Pareto at the end of the 19^th century,  is why retailers find that roughly 80% of their revenue comes from 20% of their customer base. It’s this rule that is the key to understanding why loyalty programs are so important as a strategy for retail success.

Add this all up and it means that well-designed and executed loyalty programs can boost revenue from members customers by ****.

The benefits of customer loyalty don’t stop at increased revenue – loyalty also helps to generate higher profit margins too. It is estimated that it is up to five times more cost effective to boost sales from existing customers than to win new ones. Loyalty delivers a massive boost to retail success.

Tips for successful loyalty programs

So how do retailers ensure that their customer loyalty system is doing its job of boosting loyalty and increasing revenue and profit with every scan? Here’s our three top tips for retailers wanting to get the most from customer loyalty programs:

1. Create the loyalty your customers want

Loyalty is driven by wanting to feel valued, seen and known – and retailers need to understand exactly what that means for their customer base, so they can design a program for retail success. Considerations include:

• Types of rewards, including points, but also non-financial incentives such as special events, exclusive information, donations, and a sense of community.
• Personalization and communication methods.
• Loyalty program access – apps, messaging, digital and physical cards.

2. Create the loyalty that your business needs

Just as retail takes many forms, so should customer loyalty programs. The loyalty program that a supermarket retailer implements will be very different to, say, an optical store. What works in hospitality may not be appropriate for jewellery and the program in a hardware store will not be the same as in a fashion retailer.

Retailers with multiple brands may want to consider a single loyalty program  – in fact, + if they worked across multiple brands.

Retailers must therefore ensure that they select a customer loyalty program that is highly tailorable, and that has an extensible codebase to allow them to deliver exactly the right program for their business.

3. Integrate loyalty into the retail ecosystem

For some retailers, a customer loyalty program is an ‘add-on’ that sits alongside their POS software. But to treat loyalty this way is to miss the opportunity to leverage its full value. To get the most from loyalty, it must be part of an integrated retail technology platform. The best POS systems integrate loyalty with:

• Point of sale (POS) systems, including mobile payments and self-checkout – making it straightforward for shoppers to earn and burn points as they check out.
• Marketing platform – to automate the process of sending out personalised messages, offers, invitations and coupons for customer engagement.
• Data analytics – to capture customer data, and analyze it for data-driven insights that inform campaigns.
• Inventory management – to ensure that product campaigns are supported by sufficient levels of stock.
• Returns processing, to preserve the integrity of points – when goods are returned, so are points.
• Reporting – to track key data such as the impact of campaigns, the lifetime value of loyalty customers, and the cost and benefits of loyalty programs.
• Omnichannel retail – so that the customer has a single set of points across all channels.

If retailers follow these three tips, they can be sure of loyalty programs that increase the 80% of revenue that is generated by their most profitable 20% of customers.

FAQs

What are some of the things to consider when planning a loyalty system?

There are many things to take into account and the profile of each retailer’s loyalty program will be different. But key considerations when designing and tailoring a program might include:

• The rewards offered – points, offers (buy one get one free), discounted prices, exclusive invitations to member-only events.
• Welcome gifts – whether to offer a ‘sign up bonus’.
• Sense of community – can the program offer non-tangible benefits, such as a forum or chat?
• Donations – can rewards be donated to charity?
• Access method – can customers access the loyalty program with a digital card, app, website, or physical card?

How does a loyalty program offer long term value to a retailer?

If managed well, loyalty is the ‘gift that keeps on giving’ to the retailer. It not only drives increased sales and profits, but it also provides information that uncovers useful insights into customer behaviours, which can then be used to fine tune and personalize offers. The retailer can build campaigns that are data-informed and therefore more effective, and with each campaign, the retailer learns more about what works and doesn’t work, allowing them to fine tune the system even further and build deeper, long-lasting relationships.