How 3 Brands Have Modernized Their Loyalty Programs in 2023
Virtually every top retail brand today has a mobile app designed to build loyalty, but the majority of those apps aren’t delivering the kind of return on investment that their creators expect. With so many branded apps and loyalty programs vying for consumers’ attention, companies are learning that they have to lean into personalized experiences and create truly compelling content to achieve real results.
Although the average consumer is a member of 17 loyalty programs, they’re active in just eight. Survey after survey show that to keep customers engaged with their programs, brands need to offer personalized experiences and rewards that are actually meaningful and valuable to their most frequent customers.
As they look at ways to add value to their loyalty programs, a number of major brands and retail chains have worked to modernize their strategies based on the evolving demands and wishes of their most frequent customers.
Coupling location-based technology, data analytics, and innovative strategies, companies like Starbucks, Macy’s, and Best Buy have been updating their loyalty programs to be more rewarding, experiential, and financially lucrative. With programs no longer confined to discounts or points accumulation — and some even charging customers fees to join — companies are expanding on what it means to connect with customers in a way that truly drives sales.
Here’s how three major brands have modernized their loyalty programs to keep up with the latest trends.
A number of retailers have decided to offer the best loyalty perks to customers who spend the most at their stores, but Macy’s stands out for the recent changes it has implemented to its Star Rewards program. Earlier this summer, the department store chain announced that it would begin charging regular shoppers $9.99 for shipping back returns, however the fee will be waived for members of Star Rewards — a free program that anyone can join. Rewards program members are also getting more “experiential benefits,” like the opportunity to win access to exclusive experiences.
Certain members of the Star Rewards program and Macy’s credit card holders will additionally get access to “priority customer service” based on how much they spend at Macy’s each year. Credit card holders will be grouped into Platinum, Gold and Silver categories. At the same time that Macy’s is increasing the rewards available to these high-value customers, the company has pared down, or simplified, the rewards it offers to more casual, or less frequent shoppers.
The changes make financial sense. Macy’s reportedly generates nearly 50% of its $25 billion in annual sales from the top 10% of customers, or those who belong to the company’s Platinum customer category. Giving those shoppers the greatest incentive to stick around, through significant discounts, is one of the savvier ways Macy’s is attempting to use its top customers to fuel in-store and online sales growth.
Starbucks has modernized its Starbucks Rewards program over the past year by adding more digital capabilities, deepening its loyalty components, and integrating more personalization. This includes things like pushing more personalized offers to customers who use the company’s branded mobile app, offering more targeted product recommendations, and making it easier for customers to order ahead and utilize mobile payments.
One of the most noticeable changes is the addition of more personalized offers. Starbucks now sends a greater number of offers based on customers’ past purchases, so they’re more likely to see suggestions for drinks or food items they actually want to purchase. For example, a customer who has been ordering more vanilla lattes than usual might see an offer for a promotion involving vanilla cold brew drinks on a warm day. Starbucks is also using enhanced timing algorithms to provide precise wait-time estimates for online orders, and adding exclusive pickup lanes for mobile orders as a way to encourage customers to download and use the Starbucks mobile app.
According to the company, the number of 90-day active Starbucks Rewards customers grew to 75 million globally in the third quarter of 2023, which is an increase of more than 25%. Members of the Starbucks Rewards program drove 57% of overall sales.
3. Best Buy
One of the benefits of a digital rewards program is that it gives retailers more options for customization. Best Buy is taking customization to the next level in 2023, rolling out a new tier-based program in late June and changing the name of its membership program from TotalTech to My Best Buy. The new My Best Buy program puts paying members into three tiers. The lowest two tiers are free to join, but they offer the least enticing deals. Top tier members of the My Best Buy program get 24/7 tech support, two years of product protection, and 20%-off repairs, in exchange for paying $180 per year.
In interviews, Best Buy executives said they’ve found that different types of customers want different types of perks — for example, older customers are more likely to be interested in paying for 24/7 tech support, while younger shoppers want exclusive discounts. The retailer’s revamped membership program is meant to better fit the needs of customers with different budgets. However, broadly speaking, members of the retailer’s rewards program also happen to shop more and buy more across all categories than non-members.
To learn more about the platforms that power top omnichannel loyalty programs, read 6 Omnichannel Loyalty Platforms for Multi-Location Retailers.