Grab A Latte And Start Spring Shopping — You’ll Be Rewarded
We’re not surprised. Loyalty programs are a hot commodity — and I mean commodity: It’s incredibly hard for brands to maintain a differentiated program. Our data shows that more than 80% of loyalty programs use a currency — such as points and miles — to incentivize behaviors, and almost as many use instant cash back or discounts. The result: All programs start to look alike to the 90% of global consumers who belong to loyalty programs.
Commodity Antidote: Experiences
To counter that sea of sameness, smart loyalty programs are adding experiences to their rewards portfolio, such as Barneys’ tempting private designer events, beauty treatments, and restaurant offerings. Experiences create a lasting memory for the member, evoking the Holy Grail: emotional loyalty — loyalty based not on rational incentives but on deeper personal and cultural connections. Emotion-evoking experiences can also be tailored to the brand so that the member feels she could not get the same thing anywhere else. Such experiences are much harder for competitors to copy.
The move to more experiences in loyalty programs doesn’t mean that all brands should convert to all-experience offerings. Consumers still expect points and discounts — that’s not going away, and you can see that reflected in Barneys’ percentage back on all purchases. Our recent research on the trend of consumers trialing direct-to-consumer (DTC) disruptor brands (such as Le Tote, Trunk Club, and so on) shows that consumers have never been so open to trying new things, implying the converse: Consumers have never been so open to cheating on their favorite brands. To keep consumers from straying, brands must use their full arsenal of loyalty-inducing incentives.
Can’t Offer A Ton Of Experiences? At Least Tailor For Preferred Point Redemption
Starbucks’ upgrade reminds marketers that no program can rest on its laurels. Our data shows that consumers vary in their redemption behavior, with some consumers preferring to hoard points, others being savvy in how they redeem, and a final segment that likes to redeem immediately. Brands must design their program according to the composition of their member base while also considering category and demographics. Starbucks won’t have the same type of experiences to offer as a Barneys. If Starbucks has more “Fast Fanatics,” as we call them, it can shorten the time from earning to redemption while offering any experiences they can (e.g., a birthday treat). We would look for Starbucks to complement this upgrade (which I’m sure is based on the oodles of data the company collects via the program) with “surprise and delight” offerings (e.g., a free treat at checkout, just because) that deliver the emotional equivalent of a shot of espresso.