The concept of customer loyalty is fundamentally evolving. Where basic rewards were once enough to keep customers from switching, now brands must prove their worth with a more customized experience. Today, the best modern loyalty programs offer personalized incentives and foster a sense of community among their most active customers.
Loyalty today depends more on what companies can do for their customers and less on a static system of rewarding purchases
The most successful brands build these highly segmented loyalty programs on dynamic infrastructure—technology that can handle large volumes of customer data, quickly adapt to new customer needs, and work seamlessly across channels and devices.
Take a cue from these iconic companies as you map out your own modern loyalty experience, then learn more about how to achieve what they did with Lightrail’s Loyalty White Paper.
While some retailers are struggling with major industry challenges, like decreased sales and ailing business models, the beauty sector—and Sephora in particular—is proving that innovation can keep customers happy and loyal.
The beauty industry’s customers tend to pick sides: in 2017, 88% of all shoppers only shopped with one beauty retailer. Given this strong acknowledgment of exclusivity, Sephora depends on its Beauty Insider program to give customers a strong feeling of community.
Customers can aspire to two premium tiers beyond the free “Insider” status, depending on how much they spend with Sephora each year, gaining access to exclusive offers based on their status and product preferences. Twice a week, members are invited to snag special products from the Rewards Bazaar, where they can use the points they’ve accrued.
Sephora’s customers appear to respond extremely well to these benefits—in 2016, they made 80% of Sephora’s transactions through the Beauty Insider program.
Sephora’s Mix-and-Match Tech Stack
What’s under the hood at Sephora? For personalization, they use Dynamic Yield, a tool that segments their customers and helps them suggest the best products for each person.
“Personalization is at the core of our eCommerce strategy,” says Managing Director Alexis Horowitz-Burdick of Sephora’s approach. They also use the tool to optimize loyalty signup CTAs and customize offers elsewhere to drive new loyalty memberships.
For gift cards, the beauty company uses Cashstar to offer digital gift cards to their customers in addition to the classic plastic cards. Both gift card purchase options integrate into their ecommerce solution, Magento.
For deep segmentation and implementation of their many marketing programs and campaigns, the company leans on well-trusted Salesforce and Adobe Marketing Cloud. Moving to these enterprise solutions helped them consolidate customer data and closely examine the impact of their loyalty efforts.
The company’s own mobile app ties it all together for the customer, personalizing the loyalty experience on the go. Users can quickly check their points balance, see past purchases, and take advantage of targeted offers wherever they are.
Starbucks gift cards have been a hit with customers since 2001, but now coffee giant has a robust, multi-channel rewards program that loads over $7 billion onto both plastic and digital cards each year.
In addition to simply gifting a card to someone else, Starbucks customers can load money onto reusable Starbucks cards, pay straight from the Starbucks app, and earn all kinds of benefits by making regular purchases.
To round out the loyalty experience, the Starbucks Rewards program lets customers earn stars for purchases made with either a plastic or digital (via the Starbucks mobile app) Starbucks Card. They can earn more rewards, get exclusive access to events and other perks, and even get a special gold card once they accrue a certain number of stars.
Starbucks’ In-House Team Upgrades Tried and True Programs
When the company decided to digitize their existing gift card program several years back, the technical team wanted full control and customization of their loyalty infrastructure.
“If you have an existing plastic card program, you probably have a CRM, some segmentation, maybe an email strategy already in place. In this situation, you need a way to tie it all together,” says Susie Kroll, former Head of Digital Card and Payments at Starbucks who was tasked with spearheading the digital cards program.
$3.5 billion was loaded onto some kind of digital card in 2016. From their efforts in digitizing their card program, the team could see how much a member was planning to spend with them before the revenue even came in.
Starbucks took a hugely successful plastic card program and made it easier and more efficient for people to use, putting it on the Starbucks mobile app and adding new features. Though the engineering team had the means to build their loyalty stack in-house, Susie acknowledges the importance of other factors, noting that smaller companies build on existing technology and still offer a compelling customer experience. “The product team, marketing, funnel acquisition—it takes several teams to make a loyalty program thrive.”
To read more on how Starbucks views customer loyalty, read the full case study here.
As Amazon continues to blow past its own records for sales and growth, the company has seen similar success with Prime, a membership program that clearly defines “loyalty” customers from the others. In 2017 there were over 80 million Prime members, up almost 40% from the prior year and comprising a whopping 60% of all Amazon customers.
Each of these Prime members spends an average of $1,300 per year with the retailer, compared with $700 for non-members.
The most commonly known benefit for members is free delivery, but other perks include free media streaming and exclusive access to deals and perks.
Amazon’s Custom-Built Loyalty Machine
As Amazon is also known for its widely-used web infrastructure products, it makes sense that the company mostly maintains its own custom solutions.
Even from its early days, Amazon’s centered its customer experience around customization. The brand has one of the best, most relevant recommendation engines in the world thanks to its breadth (petabytes, in fact) of customer data.
This kind of data—information on each customer’s traits, purchase habits, and behavior on every device—isn’t cheap to store unless you have economies of scale, which Amazon clearly does. They have the capacity to use mass amounts of real-time data, providing each Prime member a truly unique and personalized experience.
Instead of creating a point or reward-based program, Amazon offers a simple loyalty option: pay the $99/year for Prime or don’t. This lets them reach high levels of customization, testing new perks and helping Prime members find what they need at the best price all year round, driving up customer lifetime value naturally instead of relying on tiered incentives.
Our success at Amazon is a function of how many experiments we do per year, per month, per week, per day. - Jeff Bezos
Of course, not every company afford to maintain this kind of dynamic and flexible infrastructure on its own. Check out Build vs Buy: Solving the Loyalty Infrastructure Dilemma to understand the options budget-conscious brands can chose from.
Takeaways and Next Steps
Now that you’ve seen what a few household names do to retain and delight their customers, here’s a recap:
- Don’t shy away from change—improve your existing programs
- Create a solution that supports the growing mobile audience
- Keep your loyalty program simple but easy to adapt
- Always be testing and iterating on your loyalty strategy
- Take advantage of third-party solutions that fit your needs and budget