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Today\u2019s customers expect brands to recognize their preferences while offering a personal connection that feels genuine and tailored to their needs. A handful of companies have found a formula that works.<\/p>\n
Sephora, Famous Footwear and PetSmart are unlikely peers, but they have one thing in common. These popular retail brands have well-executed loyalty programs that lean into their customers\u2019 interests and preferences, according to David Slavick, co-founder and partner with Ascendant Loyalty.<\/p>\n
Sephora members earn points that are redeemed for free items, encouraging customers to sample and expand the overall products they\u2019re buying. Famous Footwear\u2019s program has different customer tiers based on annual spend, including additional benefits for using its credit card. PetSmart\u2019s personalized program is based on the customer\u2019s pet, has community engagement through adoption events and provides complementary services like grooming, Slavick said.<\/p>\n
These programs offer more than just points and discounts.<\/p>\n
\u201cIt\u2019s that personalized, experiential recognition and reward that consumers are asking for if they\u2019re sharing their information with the brand,\u201d he said.<\/p>\n
It confirms what surveys indicate: Financial rewards are important, but consumers crave personalized experiences. In Deloitte\u2019s 2024 Consumer Loyalty Expectations and Preferences report, nearly three-quarters of respondents nominated personalized experiences or rewards as important features in a loyalty program.<\/p>\n
However, there\u2019s still room for improvement, with only three in five respondents in the Deloitte survey satisfied with the personalized experiences they\u2019re currently offered.<\/p>\n
The key is personalization based on customer data and segmentation as well as a specific understanding customer life events and preferences to deliver relevant and valuable offers, said Slavick.<\/p>\n
\u201cConsumers are saying,’Show that you value me and apply some level of personalization to give me what I want,’ as opposed to just being a guessing game,\u201d he said.<\/p>\n
Yet consumer behavior and preferences are like shifting sands, always changing and sometimes unpredictable. To steer a successful loyalty program, brands must stay in touch with their customers and ensure they\u2019re desirable and relevant.<\/p>\n
\u201cIt\u2019s understanding what\u2019s going on with customers, figuring out how you\u2019re going to approach them, what you\u2019re going to communicate and how you can give value to them,\u201d Slavick said.<\/p>\n
Leaning into data to drive personalization<\/h3>\n
Personalization relies on using data effectively to know whether someone has a fish or a dog as a pet, or prefers Converse over Crocs. Consumers will give something for this benefit, with just over half of Americans willing to share their data for more personalized experiences, the Deloitte survey noted.<\/p>\n
However, it\u2019s of little value if the customer information can\u2019t be translated into personal, meaningful interactions. In many cases, a customer data platform is needed to build a true 360-degree view of the customer and drive segmentation and personalization.<\/p>\n
When done appropriately, it connects all the components and links to different loyalty technologies as the control center, according to Slavick.<\/p>\n
\u201cA CDP helps you understand the individual customer segment journeys to then build your communications plan by customer segment and reach them during their journeys,\u201d he said.<\/p>\n
However, loyalty programs don\u2019t need to start with a CDP, and Slavick warns businesses against falling into the trap of thinking they must set up a complex, centralized platform to have personalization in their loyalty programs.<\/p>\n
\u201cTo do loyalty, you don’t have to get a CDP in place \u2014 that\u2019s like hitting the nail with the proverbial sledgehammer,\u201d he said.<\/p>\n
He recommends brands start by identifying and learning about the customer and building a permission-based capability to deliver some outcomes in the form of value or growth and working towards adopting this type of platform.<\/p>\n
\u201cBy creating incremental momentum, you’ve proven the data is in hand, you’re doing a good job of driving your business performance, and with that incremental lift in profit, you can fund the CDP,\u201d he said.<\/p>\n
The human connection: More than a transactional loyalty program<\/h3>\n
Brands that want a mature loyalty program need to forge deeper emotional connections with consumers, according to Lia Grimberg, principal and consultant with Radicle Loyalty. It requires mature data strategies that offer complex personalization levers beyond just tailored communications and offers.<\/p>\n\nSome brands are working from this playbook, building emotional loyalty through purpose-driven experiences. REI Co-op has a significant focus on environmental initiatives in its loyalty program. Walgreens rewards customers for health-related sign-ups, such as doctor\u2019s visits or programs to quit smoking, and purchases, including from nutritionists or therapists through its loyalty program.<\/p>\n
Similarly, Nike\u2019s loyalty program centers on fitness goals and tracking customer progress. It doesn\u2019t offer a traditional points-based system but instead rewards customers with personalized content.<\/p>\n
In each case, the loyalty program aligns with the brand\u2019s overall values and provides a non-transactional way to earn rewards, which helps drive customer satisfaction and engagement, Grimberg said.<\/p>\n
\u201cThis approach is more cost-effective and drives incremental behavior by providing value-added experiences,\u201d she said.<\/p>\n
By contrast, a loyalty program that\u2019s highly transactional, such as McDonald\u2019s, leaves little scope for being innovative and may just be rewarding people without driving additional purchases, Grimberg noted.<\/p>\n
Focusing on transactional behavior rather than aspirational or values-based rewards may not deliver growth because it doesn\u2019t drive truly incremental behavior, such as new trips or increased basket for a particular shop.<\/p>\n
\u201cBecause loyalty is so expensive, you don’t want to be paying customers for purchases they were going to make anyway,\u201d she said.<\/p>\n
The goal is to leverage data and technology to drive personalization while fostering a human connection to the customer. Deloitte\u2019s research shows human touch can deepen relationships and help brands respond to demands for increased personalization.<\/p>\n
Grimberg said luxury brands can pull off exceptional personal touch because they keep detailed notes on their customers, who tend to be smaller in number and valuable individually.<\/p>\n\nFor brands not in this position, it takes a collaborative effort between loyalty managers, analytics teams and other stakeholders to turn data into actionable insights that deepen the customer relationship.<\/p>\n
\u201cUse the technology and leverage that customer information so that the communication to the customer is truly actually personalized in a way that the customer expects,\u201d she said.<\/p>\n<\/p><\/div>\n
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