Brands Double Down on Rewards, Experts Want Easy, Meaningful

Consumers may still be pondering resolutions for 2017, but brands seeking to win or reinforce consumer loyalty have already put enhancing rewards programs at the top of to-do lists for the new year.

“Loyalty in the U.S. is at a tipping point,” according to association loyalty360.org. “With the number of companies entering the marketplace and competing for consumer attention skyrocketing, capturing consumer loyalty is not an option – it is essential to the survival of brands.”

In a third quarter 2016 earnings call, David Kornberg, President and CEO of Express, said a full “refresh” of the Express Next loyalty program would begin to roll out in February 2017, building on a “relaunch” that began in 2016.

Meanwhile, Williams-Sonoma, Inc., the multichannel retailer of products for the home, is making its loyalty program the tie that binds a portfolio that also includes Pottery Barn, PBTeen, west elm and more.

“Following this cross-brand success we’ve also recently introduced The Key, our first cross-brand loyalty program,” Williams-Sonoma CEO Laura Alber said in her call on third quarter 2016 results. “The Key is designed to showcase our brands and reward our customers for shopping across our portfolio.” The program will be expanded over the next two years, Alber said.

Why successful rewards programs are so important

The importance of a successful loyalty/rewards program is the simplest part of the equation.

“[F]ully enrolled Next customers spend approximately two and a half times that of a non-fully enrolled member, and four times more than non-loyalty customers,” said Kornberg of Express.

Robert Passikoff, founder and president of Brand Keys, Inc., says in a blog post, “The kind of loyalty generated by leader brands means consumers are six times more likely to use the brand’s products and services in other categories too.”

What that means for a company like Apple, for example, is that consumers loyal to MacBook laptops will show brand loyalty on smartphones, tablets and more.

Jeannie Walters, founder and CEO of 360Connext, expects that a loyal Kohl’s customer armed with $20 in Kohl’s Cash will spend considerably more, perhaps $100. The Yes2You rewards program now sends customers reminder emails that Kohl’s Cash is expiring soon, which Walters calls an example of how “Kohl’s has always been exceptional in understanding their customer.”

Cross-brand, integrated & omnichannel, but true loyalty?

While the focus has been on making rewards digital and multichannel, understanding customers and providing them with a valuable experience remains the ground floor for loyalty.

“Loyalty is based on consumer engagement with the brands, and that’s based on how well you see the brands meeting your needs,” says Robert Passikoff, founder and president of Brand Keys, Inc., the New York-based consultancy specializing in customer loyalty and engagement research.

Seems simple, but Passikoff calls the arena of loyalty and rewards his “bête noir.”

He thinks of the standard practices – points that add up and convert to dollars or products, and spending that results in money back as price deductions or disguised as a gift – as continuity programs.

“Consumers have come to expect these things,” said Passikoff, remarking that everyone signs up for every rewards program. The result, he says, is they’re “not really loyalty programs – they are continuity programs.”

“Today, most of the stuff that is working the way loyalty is supposed to work is membership,” said Passikoff, a fan of American Express, which has membership programs built in to create loyalty. For example, consumers with a Premier Rewards Gold Card get upgrades at hotels, twice the Membership Rewards points and a $75 hotel credit to spend on qualifying dining, spa and resort activities.

“That would cause me to be more loyal,” said Passikoff, who thinks people will pay for things that have evident value. “If you are a careful consumer, you can end up with the sweet end of the lollipop.”

What works, what doesn’t & the challenges

Rewards programs meant to inspire loyalty have been around a long time. Everyone remembers coffee shop punch cards; get them stamped or punched 10 or 12 times and the next coffee was free.

That antiquated hands-on system reflected a loyalty prerequisite, according to Jeannie Walters of 360Connext. She said it’s important to communicate to the consumer “this is the reward you earned and this is how you use it.”

Now rewards have to be digital and multichannel to compete, and that creates as many challenges as opportunities.

“The ‘curse’ aspect means it’s getting more difficult for non-digital brands to create the kind of emotional engagement consumers’ desire,” Passikoff writes in a blog post. And his formula for success sees emotional engagement as critical: Loyalty + Emotional Engagement = Positive Consumer Behavior = $$$$

He and Walters find mixed results on the rewards and loyalty landscape, citing pressures faced by brands and temptations offered by technology.

Williams-Sonoma’s test run of The Key rewards integration was largely focused on the holiday shopping season, but emails from Williams-Sonoma and Pottery Barn offering rewards didn’t mention The Key or its 3% in rewards dollars across brands.

That violates a basic tenet for Walters. “It really does come down to simplifying the communication on what you need to do to earn the rewards, and any proactive way to help the customer use it,” he said.

One rewards/loyalty star for both Walters and Passikoff is coffee giant Starbucks. “They’re super successful because they are listening constantly to customers,” Walters said. “They are very clear that this many stars gets you this, and it’s all on your phone” via the Starbucks app.

That checks another box for Walters, who said, “If I’m loyal enough to have the app, the app better do everything for me.”

Starbucks was among the seven brands showing the greatest loyalty leadership gains in 2016 on Passikoff’s list, gaining 22 places to number 18. The jump came in a year when Starbucks tweaked its rewards program, including offering new members Gold status after a single purchase.

Messing with the terms of rewards often backfires, though. “The challenge with a lot of rewards programs is if [brands] promise to reward a whole group with a certain thing, sometimes that gets out of control and they have to change the rules,” Walters said. “That doesn’t impress a lot of people.”

She cited airlines as offenders. “Airlines are doing a lot of things now that are so complicated and so complex the everyday traveler cannot even figure it out,” she said. By contrast, Walters said, “Wouldn’t it be awesome if, when you’re booking an airline ticket, something pops up and says ‘You have this many points.’ ”

The example comes from Walters’ positive experience with the pharmacy chain Walgreens. “A few years ago Walgreens started its loyalty program,” Walters recalled. “When you check out, they’ll tell you, ‘You have $5, do you want to use it now?’ ”

“This is how it should work,” Walters said. “I shouldn’t have to think.” She added that loyalty program members also shouldn’t have to feel like they need to “game the system” to achieve meaningful rewards. “If they’re real rewards for your most loyal members, people who earn them are earning them,” she said. “If these people have your app on their phone, they are the most loyal customers you have. So treat them like that.”

Walters’ closing thought for 2017? “The trend I’m seeing that I like is incorporating everything that’s associated with the behavior of loyalty in one place, like an app.”

One-stop rewards, ease of use, meaningful perks and emotional engagement will add up to loyalty success in the coming year and beyond.

Douglas P. Clement is Principal of Boardwalk Media + Communications

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