Advantages of loyalty programs: Three ways a loyalty program could be the alternative to discounting

It’s time to ask yourself the question: should you discount discounting and start focussing on loyalty instead?

Let’s flashback to Boxing Day 2018.

Discounting hit a record high with average reductions reaching 43%. And despite the huge cuts, the number of customers bagging bargains reached an all-time low.

Black Friday Cyber Monday has fostered a mind-set that sees price reduction as the only way forward. But, as 2018’s Boxing Day sale period demonstrates, this focus on slashing prices as a sales strategy is falling flat on its face.

“Boxing Day has become less important as a trading day. You don’t get that massive surge, particularly as we’ve had virtually continuous discounting since Black Friday.”
Diane Wehrle, insights director at Springboard

The fact of the matter is, big discounts no longer win customers’ hearts. A different method is needed to earn their trust, which is one of the main advantages of loyalty programs.

In this blog, we will take a look at the following ways a loyalty program could be an alternative to discounting:

  1. Christmas casualties
  2. How to compete on personality not price, and
  3. Sustainable growth

 

Christmas casualties

If the public’s love affair with the discount is reaching a bitter break-up, why are retailers still trying to woo them with the same tricks?

Fashion retailer ASOS didn’t even make it into December before it had to issue a profit warning. A poor November hit hard despite promotions offering as much as 89% off. What hit harder was the share crash that followed, wiping £1.3 million of the company’s market value.

ASOS claimed that the heavy price cuts across the market had forced it into relying on slimmer and slimmer margins to retain its customer base. Nick Beighton, Chief Executive at ASOS, even stated, “In fashion we are seeing an unprecedented level of discounting, certainly something I have not seen before. [I was] astonished at the level of promotions and discounting, especially around Black Friday.”

Despite this astonishment, Mr. Beighton went on to predict that heavy discounting would continue in the coming months.

ASOS is just one example showing how slashing prices isn’t boosting sales anymore – instead, it’s a strategy that just narrows profits. In an undifferentiated sea of discounting, customers are no longer taking notice. As retailers play catch-up with their competitors, they are in danger of selling their products at a loss. To compete, they need to stand out from the crowd by differentiating on something more than just price.

Enter stage left, the hero of our piece, the customer experience.

How to compete on personality not price

The problem is that discounts only win customers over temporarily – and they don’t encourage repeat purchase either. Instead, paying attention to the customer experience is a sure way to win hearts.

Here’s how to get started.

1. Remember that you are a name (not a discounted number)

One of the advantages of loyalty programs is that they communicate your personality and brand identity – and customers will shop more regularly in stores they identify with.

Differentiate your brand by choosing a name for your loyalty program that tells people who you are and what you stand for. For example, 100% Pure named their program “Purist Perks”, reinforcing the organic nature of the brand.

100pure Splash

Likewise, Annemarie Skin Care named its loyalty program the “Honest. Wild. Beautiful. Tribe”. The use of the words “Honest” and “Wild” enforce the brand’s core purpose of creating naturally sourced skincare products. And, the word “Tribe” makes customers feel like they belong to something bigger.

Annemarie Skincare Tribe

So, take careful consideration when naming your program. It needs to embrace your brand values and connect with your customers. Once you’ve nailed this, customers will have a natural affinity with your brand as they’ll feel part of something bigger. As former Starbucks executive chairman, Howard Schultz said, “If people believe they share values with a company, they will stay loyal.”

2. Always give value (not more of the same)

Use your loyalty programs to give customers true value for shopping with you. Do this right, and you’ll no longer need to make unrealistic price cuts to gain attention during critical peak sales periods. Reward customers for on-site behaviour such as social follows or signing up to your loyalty program, and not just purchases. This way they’ll see the immediate value of your loyalty program before they have to start spending with you.

TheCHIVE have combined their store’s loyalty program with their blog. If users of the blog upload a photo, score others on their posts or share something on social, they get points to spend in store for the interaction. These points have added value because they’re quickly earned without forking out any cash. When your customers learn they can earn discounts this way, they’ll be more likely to return to your store long-term to earn and use them – rather than just during discount season.

TheChive leaderboard

Rewards add a feel-good factor – they enrich where discounting cheapens. This positive vibe encourages customers to spend more as they are getting more value from every penny. Every reward they gain contributes to them cementing an emotional connection with your store.

3. Your aim is to build trust (rather than slash prices)

Often, trust is lost with “too good to be true” discounting. Customers may feel like you only care about them when the peak sales season kicks in.

To overcome this, use your loyalty program to build long-term trust. One of the advantages of loyalty programs is that it gives you more opportunities to engage with your customers so they feel like they’re in safe hands.

One way to do this is to gift loyalty points as an apology if a shopper has a negative experience with your store. This demonstrates you’re paying attention to their needs and that you care about them beyond the short-term sales period – and they’ll give you their long-term loyalty as a result.

After the sales period, try re-engaging these new customers with personalised rewards. These could include bonus points for a product related to their first purchase or one-off free perk (such as exclusive access to an event). When you tailor the ongoing reward experience to each customers’ behaviour, it will become apparent that you’re paying attention to them beyond the high-frequency discount. You are still thinking about them beyond the discount days.  they’ll feel like tickets t them with exclusive rewards that are personalised to their previous shopping behaviour

Sustainable growth

It’s time to stop the short-termism of discounting and start building a brand that secures long-term identification and loyalty.

Slashing prices is not a viable competitive answer for retailers: in many ways, it’s a problem. We need to move away from unsustainable business models and towards fostering loyalty to secure sustainable growth.

And, the best place to start is by fostering emotional connections, building loyalty and adding value.

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