Remember S&H Green Stamps? Our mothers and grandmothers would collect these gummed stamps from supermarkets, gas stations, and other stores, pasting them into booklets that they would then exchange for prizes from Green Stamps catalogs. That pioneering retail loyalty program was extremely popular in the mid-1960s, before the recession of the 1970s reduced its perceived value.
Although recession may have killed Green Stamps in the '70s, the most recent recession has had the reverse effect, as rewards programs gain popularity online. Since 2008, inspiring loyalty among consumers has become much more challenging. Even as the economy bounces back, private labels are holding on to their share of the market. Brands need to creatively find ways to drive loyalty in an already-crowded marketplace.
An online rewards program is a great, cost-effective tool to achieve that goal, partly because they're not aspirational. Consumers can collect enough points to make purchases within weeks or even days—not years, the way some credit card-based programs function. (Does anyone beside the frequent business flyer ever get free airfare to Hawaii?)
But even more important is that rewards programs drive customer loyalty in a way that online coupons do not. Although online coupons are recognized as an excellent way to introduce new products and they are used as part of integrated marketing campaigns, the way they drive sales is by undercutting margins. A national study by the Shopper Technology Institute (STI) found that just 45% of CPGs use online coupons (those that don't, cite the problem of limited scale). Although 61% of those that use them do so to drive sales, users of online coupons are loyal to savings, not to the brand that provides them.
Rewards programs, too, save the consumer money, but they approach that savings in terms of benefits, not just dollars. Loyalty programs encourage repeat visitors, who make known their shopping preferences; accordingly, the program can be personalized for the individual shopper, allowing marketers to put the right offers front and center and providing incentive for the return shopper to continue to buy.
Here are some ways to ensure that your rewards/loyalty program motivates your customers.
Make it simple
Any digital rewards program should be simple to access, at home or on the road. The rewards should be clearly marked and easily redeemable. Newcomers to the program should be able to sign up quickly and easily—with the added ability to use their already existing social networks to further simplify the process.
Partner with great brands
Brand loyalty may be waning, particularly among millennial shoppers, but brand still translates into quality for most shoppers. Combining national brands with newcomers to the marketplace, and mixing that up with local deals, imbues lesser-known businesses with the trustworthiness of the better-known brands. For example, a new entry to the CPG market would be served well by creating exclusive offers with trusted retail brands such as Target or CVS, encouraging consumers to purchase their products at their local retailer for an offer such as double points.
One size does not fit all
A recent comScore report on rewards programs notes that consumers have a wide variety of reasons for joining paid programs, including free shipping, free access to high-value content, and the value of the program versus how much they shop. When considering a program for your brand, look for one that meets the needs of your various customers across profiles, and offers different ways to redeem points—for example, gift cards, cash, donations, travel. (The same report reveals that participants enrolled in Amazon's Prime program are satisfied and more loyal to the online retailer.)