Why so many brands are revamping loyalty programs
A customer who opens the recently redesigned myWalgreens app on a Saturday morning looking for help with a child’s ear infection will see a different offering than someone who checks the app mid-week to schedule a COVID-19 vaccination. The ability to anticipate, and execute, such a level of personalization is integral to myWalgreens, a revamp of the drugstore chain’s near-decade-old Balance Rewards loyalty program that rolled out late last year.
“We don’t look at it as a one-size-fits-all, but as a platform we’re able to personalize to each of our customers,’ communities’ and patients’ needs,” says Alyssa Raine, group VP of customer marketing platforms at Walgreens. For "every single customer, when they open their Walgreens app, it will be completely different experience.”
It isn't simply Walgreen's; loyalty programs are getting upgrades across the industry as brands seek out new connection points with customers and try to capture more first-party data. A bevy of marketers including Kohl’s, Lowe’s and Dick’s Sporting Goods have recently redesigned their loyalty programs to cement an experiential relationship with repeat and potential shoppers in a way that goes far beyond the traditional discount-driven proposition. These new programs offer assistance so personalized that they anticipate a customer’s needs ahead of time. Some also include extra points of connection like video filters and tools that consumers can use to share on social media. It’s an area of focus that can help distinguish one brand from another, experts say.
“Loyalty reached a point of saturation and settled on a very standard playbook, and the standard playbook is cool, but once you reach complete saturation, there’s no differentiation and loyalty is not doing what loyalty is supposed to do,” says Caleb Yarian, a strategy partner at Work & Co. “If everyone in the market you’re competing in is still offering the same thing with loyalty, then why do it at all?”
End of cookies
Much of the interest in loyalty is being driven by the transition to a cookie-less future. Brands are seeking out new ways to identify customers in order to know how to market to them through various media channels. One way involves convincing the consumer through a loyalty program to supply their own personal information to the brand directly, with the expectation that the consumer will receive something in return, which can include a more personalized app experience as well as a coupon.
“In this digital world where Google has dominated so much of marketing and identity, you have to create alternatives to support the business going forward,” says Wayne Townsend, president of technology at Epsilon, which works on loyalty solutions for brands including AB InBev.
Loyalty’s rise can also be traced back to COVID-19, Townsend says, noting that brands lost the value of in-person store interactions during the pandemic when consumers moved the bulk of their shopping to e-commerce.
“You get some of those benefits of relationship and experience in-store, but when that was shut off, brands needed other mechanisms to build experience and build relationships, and digital and loyalty programs are one of the ways they’re doing that,” says Townsend.
Now, the pressure is on brands to build their own relationships directly with customers. To do this, brands are throwing out the old playbook of a loyalty program, where typically a member would spend a certain amount and receive a coupon, or “reward” for a next transaction. This value-based model was based more on monetary savings than on brand experience and differentiation. The new model involves a singular and consistent offering at all touch points, including website, store and app, that doesn’t necessarily have anything to do with a purchase. It’s more of a one-to-one marketing approach that creates a direct relationship with each customer.
“It’s about converting that one person and keeping that one person close,” says Yarian.
At Walgreens, for example, the myWalgreens program awards points to customers going for a run and tracking health with their FitBit. The offering is resonating—since it launched, mobile app usage is up 30% year-over-year; the net promoter score, which measures customer satisfaction, is 41% higher for myWalgreens than for predecessor Balance Rewards.
“We saw we had new opportunities to really unlock all the assets that Walgreens had for our customer—we weren’t doing that the best way we could through Balance Rewards,” says Raine.
“We call it not a loyalty program since it’s not about discounts and transactions—we call it a customer engagement platform.”
New category demands
While retailers like Walgreens have invested in loyalty offerings for decades, the demand for a similar type of customer connection is extending into other categories as well. Experts say consumer packaged goods brands and automotive companies are also overhauling their strategies to build stronger retention with shoppers. Previously, CPG brands relied on in-store marketing and TV ads; they did not need to pursue a direct relationship with a customer. Now, the rise of Amazon, a shopping platform that makes it difficult for a CPG brand to differentiate itself, has made that more challenging, according to Townsend, who notes that the digital transformation of the retail world has created more demand for direct-to-consumer relationships. A spokeswoman for Kellogg, which has an eight-year-old loyalty program called Kellogg’s Family Rewards, recently told Ad Age that it is “always looking for ways to keep it modern and relevant, further leveraging data and technology to enhance our consumer engagement.” The company recently added an opportunity for users to pursue community outreach donations during the pandemic.
In automotive, Townsend says that new trends such as car sharing are instigating new ways for brands to build relationships with customers who might not buy a car at a dealer, for example.
“There are industries that hadn’t historically been heavy in loyalty that are heading that way because of the digital transformation in general,” he says.
At Kohl’s, a new loyalty program tracks shopper data in order to provide the best individual experience for customers, executives say. The Menomonee Falls, Wisconsin-based retailer rolled out Kohl’s Rewards, a simplified version of its long-running loyalty program that no longer deals in hard-to-understand points, in September. The shift was in response to customers asking for a simplified program, according to Greg Revelle, chief marketing officer. But in addition to rewards, the program also provides product recommendations and more individualized perks, he says, noting the importance of personalization and a test-and-learn approach to what shoppers want.
“We’re able to leverage data and technology to create a unique experience to meet the needs of individual customers,” Revelle says. “By analyzing our customers’ behaviors and preferences, we are able to better tailor our offers and communications to them, and continually test new personalized perks to see what resonates.”
Bloomingdale’s is using its recently refurbished loyalty program to help the heritage department store chain connect with younger shoppers, a huge target for the 160-year-old brand. The new system is tender-neutral in order to attract customers who aren’t as reliant on a store credit card, according to Chief Marketing Officer Frank Berman. The program also offers perks like free priority shipping and access to private virtual shopping events and Instagram posts that include opportunities for pre-order before anyone else. Since rolling out last month, the platform has resonated with women under 40, executives say.
“There’s a lot of access and opportunities for access doing multiple onscreen events for those customers and custom content either through private social channel or outreach for gifting programs with exclusive product,” says Berman. “It’s a really unique experience. We’re trying to touch them as often as we can to thank them for their business and thank them in unique ways beyond value.”
Many modern loyalty offerings aren’t even labeled as such. Work & Co’s Yarian says that brands come to his agency because they want to provide value or utility through a digital product experience or e-service rather than a typical quid pro quo loyalty program. For example, Work & Co recently created a video editing app for Gatorade called Highlights that allows users to create shareable content. A similar app, GX, provides health trackers to help athletes track and measure their sporting performance. The new offerings are meant to unlock more value from using Gatorade for shoppers.
“Consumers choose brands because they like the experience the brand delivers and they want to feel connected in a way that’s different from just the money they’ll fork over,” Yarian says. “People want to associate themselves with brand because the brand works for them on multiple dimensions—the social cachet that a relationship with a brand brings."