From online and instore retail, to delivery apps and services to the credit cards we use to make purchases, loyalty programs exist at almost every point of purchase.
These programs not only assist with acquiring new customers, they primarily seek to keep them coming back. Making them ‘sticky’ to a brand’s offering is essential and builds a strong foundation of growth and scalability for the business.
But loyalty programs are not new. Nearly three-quarters of consumers in Australia are already using promotional codes, cashback offers and rewards at the point of purchase so businesses need to determine the rewards that are most likely to resonate with their consumers and provide the strongest results.
Creating advantage in uncertainty
Retailers—more than any other vertical surveyed in FIS’ Global Innovation Report—cited financial risk (81%) as their top concern. Operating costs are still high, markets remain volatile, and firms are tightening their belt as inflation and rising rates continue to shape the retail industry. However, that is precisely the moment when businesses should not scale back on loyalty.
Consumers are always looking for the next best way to stretch their dollars. A new CommBank Consumer Insights report discovered that over ninety per cent of consumers are seeking out deals and re-evaluating their purchasing choices – particularly those with limited financial resources. Keeping this in mind when developing a loyalty program will ensure that it is relevant and successful.
Instead of looking at deals like ‘buy one, get one free’ or a points-based system, focusing on providing financial literacy or convenience can be more impactful to keep customers engaged with your brand. For example, spending money to curate unique experiences or special early access events can generate buzz, build the reputation of the retailer, and grow the customer base.
While historically loyalty programs have been simple incentives of reciprocity, today loyalty is also an opportunity for a brand to create an impression and tell its story to customers.
Technology continues to reshape loyalty
The new generation of consumers has a greater level of consciousness about their spending – they know how much, where and when they spend. With this savviness from customers, loyalty programs must meet their expectations or they will never be used.
In saying this, card transaction data has become highly effective in understanding consumer behaviours and can anticipate and meet their financial needs. Retailers have a real opportunity to leverage data and embedded finance to curate personalised experiences for consumers, to align with their conscientious spending.
Embedded finance is when consumers have unique, tailored financial service experiences delivered to them at the point of need by non-financial companies. Most commonly, consumers encounter these new financial service experiences in the form of in-app payments, like on social media platforms where a purchase is completed without leaving the platform.
For example, Velocity Frequent Flyer, the loyalty program for airline Virgin Australia, now has its own e-store portal and members can use this to shop directly through online retailers, earning Velocity Points. Each store provides a specific amount of points per purchase, and throughout the year consumers can benefit from bonus points and promotions.
The opportunity for loyalty programs is endless. Consumers also have the chance to donate loyalty points to charitable causes or even invest them in stocks, shares, or cryptocurrencies.
Building relationships with consumers
Moving forward, loyalty programs will further revolve around consumer habits and desires— accounting for behaviors, habits, interests and even their financial goals—as opposed to leading with wide-net benefits for everyone. Retailers should focus on curating more holistic, relationship-based loyalty models that reward consumer behaviours outside of transactional spend. This can deepen engagement and make a loyalty program feel like a real connection between a customer and their favorite business.
Competing for consumer dollars gets harder as the economic headwinds continue. As the upcoming sales periods near, and now more than ever, it is essential for retailers to build a strong relationship with their consumers through carefully curated, innovative benefits. It will not only be a win for the business, but for the customer as well.
Paul Koopmans is vice president for Australia and New Zealand at Worldpay from FIS.