Although membership in loyalty programs continues to climb, and program members say they’re more likely to shop at stores that offer rewards to frequent customers, expectations for these programs are higher than ever. According to a survey by the loyalty marketing research firm Colloquy, 75% of consumers say relevancy matters when it comes to the rewards that businesses provide. Millennials, in particular, tend to respond best to “status-oriented” rewards, such as getting access to exclusive products or services.
One of the easiest ways for businesses to deliver relevant rewards is by tracking purchasing behavior, however loyalty programs that reward members based on buying patterns are still in the minority and they’re more likely to be used by national chain stores than local merchants. It doesn’t have to be that way. Hyperlocal vendors are increasingly marketing their high-tech loyalty programs at small and mid-size businesses, with easier ways for business owners to deliver loyalty rewards based on data captured through the point-of-sale.
Here are seven examples of smart ways that merchants can take advantage of purchasing behaviors and offer more relevant rewards.
1. Making targeted product recommendations. “When a customer signs up for a loyalty program, they are essentially formalizing their relationship with the business—they’re agreeing to share their purchasing data in exchange for some kind of value. Today, brands can do so much more than just drop 30%-off coupons in the mail every few months—they can actually provide a better experience for every one of their customers. I think most customers would say, ‘If I’m going to share my shopping history with you, then make it worth my while. Understand who I am, and don’t try to sell me meat when I’m clearly a vegetarian. Instead, tell me about a new product I would actually be interested in.’ Leveraging past purchasing history to personalize the experience results in a higher redemption of offers and increased cross-selling opportunities for the business, but it’s also a better experience for the customer.” (Debbie Kim, Index)
2. Giving VIP customers a unique experience. “Businesses should use transaction data to provide completely different and unique experiences for their best customers. The reality is that the 80-20 rule holds even for brick-and-mortar businesses—where 25% of customers generate two-thirds of sales—but most businesses treat all customers the same. That makes no sense. We use transaction data to automatically deliver customers in the top tier of spending a completely unique mobile experience—unique communication, rewards, status, everything. What’s amazes me is just how much this personalized, elevated treatment matters. For example, our single best performing push notification is the one sent to customers right before they reach VIP status. According to our data, 95% of people who receive this notification respond by spending more money, and 81% of VIPs increase their monthly spend.” (Zach Goldstein, Thanx)
3. Generating new revenue from infrequent customers. “There is certainly the opportunity to organically grow loyal customer relationships, but brands shouldn’t overlook the revenue opportunity in infrequent customers. For example, a fast casual restaurant client ran a Cardlytics Direct campaign to identify and target hard-to-reach infrequent customers. This campaign resulted in significant incremental revenue, 37% of which was from customers who hadn’t been into the restaurant in the past six months.” (Dani Cushion, Cardlytics)
4. Segmenting customers by when they visit. “If your business has a loyalty program that’s integrated with your POS, you can easily segment your customers by when they’re frequenting your business. Through your loyalty program, you can influence their purchasing behavior by creating a limited-time reward. For example, offer your lunchtime regulars a free coffee or breakfast treat to entice them to visit earlier in the day. Or play into seasonality. If some customers only drop by to get their car washed when the weather warms up, offer them a reward for a discount on another service they haven’t tried yet. By analyzing when customers are shopping, you can push them to change their behaviors with a great rewards incentive.” (Jenny Beightol, Belly)
5. Winning back lapsed customers. “One of the most effective, and largely untapped, consumer marketing strategies is customer win back marketing. On average, 69% of previously loyal customers haven’t returned in the last four months. This should scream “revenue opportunity” for any business. However, with no way to track transaction histories or to personally contact individuals, businesses struggle to target their lapsed customers. Businesses should use transaction information to figure out exactly when customers deviate from their average frequency, and then tailor their communication accordingly.” (Zach Goldstein, Thanx)
6. Leveraging the products that customers want most. “Businesses can use purchasing patterns to understand which products to promote. You want to leverage your winners, and understand why the losers are not doing as well. For example, if people are heavily buying a certain product, then it is vital to reach out even further by supplementing the product with some sort of event, such as a giveaway, raffle, or contest with the product being the reward. This will further gain traction in the awareness of the product when it is shared online.” (Nathan Barber, Digital Advertising Works)
7. Determining how loyal your loyalists are. “A DIY automotive store client thought that customers who visited more than twice a year were loyal to the brand; however, the purchase intelligence showed us that 40% of the brand’s moderate customers—making three to five annual purchases—still gave more than half of their category purchases to competitors. With this insight, the client expanded their campaign targeting to provide more offers to these moderate customers resulting in an additional $5 million to $6 million in incremental annual sales.” (Dani Cushion, Cardlytics)
Stephanie Miles is a senior editor at Street Fight.
Interviews have been edited for length and clarity.