Customers love loyalty programs that bring value to their shopping experience - it's that simple.
However, as customers have tried numerous loyalty programs they've become selective and demand more value than ever before.
This increases the standard criteria for not being: "Yet another loyalty program"
But don't worry. In this article I will use practical examples to show you the tricks that leading brands use to create loyalty programs that retain customers. I will also show you how the Emplate loyalty program for malls works.
The headlines are:
A loyalty program brings many positive benefits with it. You of course know many already, so I have been digging for some statistics and proof of the benefits.
1. Customers prefer malls with loyalty programs
According to a report from the global research institute Nielsens, 84% of customers state that whether or not a retailer has a value-given loyalty program is part of their buying decision.
When this applies to retail it's very likely to be true for shopping malls as well.
84% percent said they were more likely to choose retailer that offered a loyalty program
2. Customers who use a loyalty program have a higher lifetime value
According to the consultancy Accenture, loyalty program subscribers drive 12 - 18% more revenue than non-subscribers. This means that converting customers into loyalty program users is a beneficial long-term strategy.
Members of loyalty programs generate between 12-18% incremental more revenue growth per year than non-members
3. Loyalty programs create customer insights
Another great benefit for shopping malls is that app-based loyalty programs make it possible to track when the customer visits the mall, and how they move around the mall. Thereby it's possible to create heatmaps like the one below.
If you are interested in how to create customer insights on the same level as e-commerce shops I recommend you read our earlier articles:
Traditionally loyalty programs were designed to make customers want to spend more to get a free gift or discount as a reward. That's still a great benefit but today loyalty programs bring many more benefits.
In recent years we've seen that customers have figured out that loyalty programs make them buy products they don't really want. This results in negative memories as customers are reminded about the bad experience every time they look at the product. The loyalty consultancy Smile.io elaborates further on this.
Therefore it's dangerous to create a loyalty program which only triggers a reward when customers have bought products worth a specific amount.
However the goal is still to make customers buy more, and that's why loyalty programs combine many elements.
The 3 elements I will talk about in this section are:
A way to make customer keep using your loyalty program is to show them a reward every time they earn points.
We know from studies that our brain tries to replicate good experiences, and by giving customers a small reward when they perform a specific action (like visiting your mall or buying at tenants shops) you create an experience that makes customers like the using the loyalty program.
This tactic is called reinforcement, and developed by the American psychology professor BF. Skinner.
Below I show you an example from Starbucks, but later in this article I will show you how malls can use reinforcement.
Pro example: How Startbucks uses reinforcement
A good example on how reinforcement can be used in loyalty programs comes from the American coffee chain Starbucks. Here customers get 1 point just for visiting a Starbucks cafe (See picture below).
By using this tactic customers get a good experience when entering the cafe, and will connect visiting the cafe with a good experience.
Another effect is that customers using the loyalty card will suggest friends to meet at Starbucks cafes more often. Thereby customers become advocates for the Starbucks brand.
In a scientific study conducted among large retailers it was concluded that continuously small tasks and rewards have a greater effect on customers degree of loyalty than large but fewer rewards.
In the study customers stated that they enjoyed the process of fulfilling small tasks and saving up for the big reward.
That's the tactic of gamification
Gamification is when loyalty programs makes customers achieve special prizes or offers by fulfilling specific tasks.
A good example of gamification in loyalty programs is Starbucks Rewards system. Here, customers earn stars every time they buy, and when the customer has earned enough stars they raise in status - opening up for special offers, jump the line, merchandise and invites events.
The program uses elements from computer games. Therefore customers only need to spend a few dollars to increase in status, and then it gets harder. This progress is made highly visual (see picture below) and this mechanism hooks the customers to the program, and the constant involvement makes it fun to rise in status.
Example: How Waves used gamification to increase visits to the foodcourt by 10.7%
When the Danish mall Waves opened their food court they wanted customers to know about it.
Therefore they gave customers 5 points for fulfilling the task of visiting the food court. Thereby customers had an incentive to visit the food court and felt happy when fulfilling the task and receiving their points - resulting in a good experience.
Giving out the extra points was also beneficial for Waves.
During the first month the increase in customers visiting the food court was 10.7 %
One of reasons behind McDonald's enormous success is that the menu changes often. Thereby customers always have new offers to experience, and the change creates a sense of urgency, so customers needs to come and buy before the offer is gone.
When creating loyalty programs we can learn three things from the MaDonald's example.
First of all customers only save points to redeem prizes that they really want. That's why your loyalty program needs to have lots of different prizes in different prize categories and from different stores in order to satisfy all your segments.
Example: How 7 Eleven have created a good variety of prizes
At the American cafe store 7 Eleven, customers get rewarded for buying the products they already buy and love.
It can be drinks, sandwiches, newspapers etc. (See video below)
Thereby 7 eleven can advertise the loyalty program towards all of their customers.
Changes in prizes makes customers visit more often
The menu at McDonald's change often and this creates a sense of urgency, which makes customers visit more often to be sure not to miss the taste of a special burger.
The same effect applies to loyalty programs. That's why it's a proper tactic to make prizes change from time to time, making it very clear for customers when the offer will expire.
In order to get the prize customers must visit your mall enough times to get the prize. This makes the customer start choosing to visit your mall instead of shopping at other places.
Example: How 7 Eleven uses sense of urgency
7 Eleven doesn't have the same amount of products as a mall, and therefore they can't change the prizes that often. However they use changing offers to drive customers into the store.
In the video below do you see a small part of offers available for today. Customers can easily see when the offer will expire, and therefore need to take action if they want the product.
The average mall that we provide solutions for experienced that 167 customers redeemed prizes and 1899 customers collected points in November 2018 alone. After having build loyalty programs for more than a dozen of mall, we now know what works, and in this section I will tell you about the mechanisms. But first I will tell you about the 3 advantages that shopping malls have.
1. The goal is to increase customer visits: This means that you can focus on mechanisms that makes customers wanting to visit your mall. Here reinforcement is a good example.
2. Tenants should deliver all the prizes: As a mall you have tenants in all variety of branches. This means that you have the possibility to create a loyalty program that includes a large variety of prizes. Here you can read how we convince tenants to participate with prizes.
3. The loyalty program becomes a marketing platform: If you loyalty program is created as an app, then the app becomes an owned media where you control what customers sees and experience. Thereby you can convert customers to loyalty program users, and tell them about new products or events without paying for ads on other media. Read more about this here.
The Emplate loyalty program has 5 core elements:
1. App based to avoid manual procedures
The loyalty program is placed in an app. Thereby the mall will be able to track customer insights and there will be no extra work for tenants when prizes are redeemed. The mall will be able to send messages to the customers when there's exciting events going on. Read more about this here.
2. Customers gets "congratulation" notifications to reinforce the good experience
Customers are rewarded with 10 points when entering the store.
Therefore the customer will receive a notification saying "Congratulations you have received 10 points" Immediately after entering the mall (see picture below).
This make customers feel they have accomplished a task and gives them a good experience. This is a strong way to use reinforcement as customers will connect entering the mall with a feeling of joy.
3. Gamification helps retain customers to keep using the app
To gamificate the loyalty program we made it very visual to see which days customers have earned points (see picture below). Thereby customers automatically makes it a game to see how many times they can visit the mall and earn points.
4. Tenants deliver a large variety of prizes
Prizes are a mix of small and large prizes. This means the loyalty program can be advertise towards all the segments of the mall.
Prizes range from small prizes like a cup of coffee or ice cream from the local café to larger prizes like 70€ from tenant shops. In herningCentret customers can save up for 16 different prizes (See video below).
If you're interested in how we convince tenants to participate with prizes, then I have been writing about it here.
5. Usage of sense of urgency
The mall has the possibility to put an expiration date on all prizes, and this creates a sense of urgency.
In the case below customers can get a free ticket for the local football match when having earned 200 points.
At the prize screen customers can see how many prizes are left (6 in this case) and how many points they will need to earn in order receive the prize (120 still missing).
Thereby the customer will feel a sense of urgency, and if the prize is valuable enough, they will try hard to earn enough points to receive the prize.
It's also possible to create prizes with a low timerange like "Christmas" "Monday" or "Black Friday" prizes. This gives customers an incentive to visit the mall on special days, giving the mall another toll to increase visits on certain days
One of the greatest challenges in the process of creating a loyalty program is to convince tenants to participate with prizes that customers want to receive.
How you do so is the third point in my article: 3 ways to get content from you tenants on a daily basis. I can spoil as much as the trick lies in answering tenants "What's in it for me" question.
I hope this article has provided you with value - that has been the intent.
If you would like to discuss your loyalty program strategy with me then you can book a meeting with me here. I will love to give you my best advice.
I have a final giveaway as we have created a case study that shows the effect of our Apps.
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