Retail Loyalty Programs: How to Drive Customer Loyalty and Business Growth

79% of consumers in the U.S. are more likely to continue doing business with a brand that offers a loyalty program. This statistic highlights the significance of retail loyalty programs in retaining customers and driving business growth. As competition in the retail sector intensifies, these programs have evolved into a vital tool for brands looking to foster long-term relationships with their customers.

What are retail loyalty programs?

Retail loyalty programs are structured marketing strategies designed to encourage customers to continue shopping at or using the services of businesses associated with each program. These programs offer various incentives such as discounts, exclusive offers, points, and rewards that encourage repeat purchases. In essence, they aim to convert occasional shoppers into loyal customers. Customers always want loyalty programs that are- seamless to use (53% of respondents), offer huge discounts (39%), and easy to understand (37%).

The importance of retail loyalty programs is further emphasised by statistics from Statista, which found nearly 58% American shoppers who pay for loyalty memberships expect free shipping and no minimum order requirements.This shift in consumer behaviour makes loyalty programs not just an added benefit, but a crucial part of a retailer's strategy to attract and retain customers.

Key benefits of retail loyalty programs

1. Increased customer retention

Customer retention is a critical factor in the long-term success of any business. According to Harvard Business Review, increasing customer retention rates by just 5% can lead to an increase in profits by 25% to 95%. Retail loyalty programs play a significant role in boosting retention by creating a sense of value and appreciation among customers.

For instance, the Colloquy Loyalty Census reports that the average U.S. household is enrolled in 12 loyalty programs but actively participates in only about 4.7. This indicates that while customers are open to joining loyalty programs, engagement is driven by how well the programs meet their needs and expectations.

2. Enhanced customer experience

Retail loyalty programs offer personalised experiences, which are becoming increasingly important to consumers. Accenture found that 91% of consumers are more likely to shop with brands that provide offers and recommendations relevant to them. By leveraging customer data, retailers can tailor their loyalty programs to offer more relevant rewards, thereby enhancing the overall customer experience.

3. Valuable customer insights

Retail loyalty programs generate vast amounts of data that can be used to understand customer behaviour, preferences, and spending patterns. This data is invaluable for retailers as it helps them make informed decisions on inventory, marketing, and customer service strategies. A study by McKinsey & Company revealed that companies using customer analytics extensively are 23 times more likely to outperform competitors in acquiring new customers and nine times more likely to surpass them in customer loyalty.

Successful retail loyalty program examples

1. REI Co-op Membership

REI, the outdoor gear and apparel retailer, offers a unique Co-op Membership program that has been instrumental in building a loyal customer base. Unlike traditional loyalty programs, REI's program requires a one-time $30 fee to become a lifetime member.

Key features:

• Annual dividend: Members receive an annual dividend of 10% back on eligible purchases.
• Exclusive offers: Access to members-only sales, special pricing on events and classes, and rental equipment.

2. Walmart Plus

Walmart Plus is another example of a loyalty program that has made a significant impact in the U.S. market.

Launched in 2020, Walmart Plus offers benefits such as free shippingdiscounts on fuel and access to Scan & Go technology for faster in-store shopping. 

The program is designed to compete with Amazon Prime, and it’s been reported that Walmart Plus members spend more than twice as much as non-members on Walmart’s platform.

3. Ulta Beauty's Ultamate Rewards

Ulta Beauty, a leading beauty retailer, has developed the Ultamate Rewards program, which is praised for its generous rewards and tiered structure.

• Point-Based System: Customers earn points for every dollar spent, which can be redeemed for discounts on future purchases.
• Tiered Membership: Three tiers—Member, Platinum, and Diamond—offer increasing benefits, including birthday gifts, bonus points, and exclusive events.

With over 42M wallet-happy members, the program significantly contributes to Ulta's robust sales growth and customer retention.

4. The Nordy Club by Nordstrom

Nordstrom’s The Nordy Club is a loyalty program that offers customers exclusive perks such as early access to sales, personal styling services, and more. 

The program is tiered based on spending, with higher tiers offering more significant rewards. 

• Get 1 point per dollar
• Enjoy exclusive events such as icon-only event, Anniversary Sale Fashion Shows and more
• This structure not only incentivizes more spending but also strengthens customer loyalty by offering experiences that resonate with Nordstrom’s high-end clientele.

5. GameStop Pro Rewards

GameStop, the video game retailer, has crafted a rewards program catering specifically to gaming enthusiasts.

Key features:

• Point accumulation: Members earn points on purchases, which can be exchanged for rewards like coupons, collectibles, and gaming accessories. Get $5 Welcome Reward & $5 Auto-Renewal Reward
• Pro Membership: For an annual fee, Pro members receive additional benefits, including extra trade-in credit, a subscription to Game Informer magazine, and exclusive offers.
• Gamified Experience: The program aligns with its audience by incorporating gaming elements into the loyalty experience.

6. Kohl's Rewards

Kohl's, a nationwide department store, offers the Kohl's Rewards program, which replaced the previous Yes2You Rewards.

Key Features:

• Cash Back: Members earn 5% Kohl's Cash on every purchase, redeemable during designated periods.
• Exclusive Offers: Access to personalised deals, birthday gifts, and early sale notifications.
• Simplified Structure: Streamlined rewards system making it easy for customers to understand and utilise benefits.

The loyalty program has been instrumental in driving both in-store and online sales, contributing to Kohl's strong market presence.

Case Study: Walgreens Balance Rewards

Overview: Walgreens’ Balance Rewards program is a unique loyalty initiative that not only rewards purchases but also encourages healthy behaviours. The program was designed to integrate health and wellness into the customer’s shopping experience, positioning Walgreens as a health-focused retailer.

Challenges: Walgreens needed to stand out in a crowded pharmacy market, where price competition was intense, and customer loyalty was often driven by convenience rather than brand preference. The challenge was to create a loyalty program that would attract and retain customers by offering more than just discounts.

Solution: Launched in 2012, Balance Rewards offered customers points for purchases and additional points for engaging in health-related activities, such as walking, tracking their weight, and adhering to medication schedules.The program was integrated with the Walgreens mobile app, allowing customers to easily track their points, receive personalised health tips, and access exclusive promotions.

Results- Membership Growth: Balance Rewards quickly became one of the largest loyalty programs in the U.S., with over 100 million members by 2019.

Walgreens Balance Rewards is a prime example of how integrating health and wellness into a loyalty program can drive customer engagement and differentiate a brand in a competitive market. 

Strategies for implementing a successful retail loyalty program

Below are the startegies for implementing a successful retail loyalty program:

1. Understand your customer base

Before launching a loyalty program, it’s crucial to understand your customers’ preferences, spending habits, and what they value most. This information will help tailor the program to meet their needs effectively. For example, younger consumers might prefer digital rewards and mobile integration, while older customers might appreciate discounts and physical reward cards.

2. Offer value beyond discounts

While discounts are a significant draw, offering value beyond them can enhance the effectiveness of your loyalty program. Consider integrating exclusive experiences, early access to products, or personalised recommendations as part of the rewards.

3. Leverage technology

Technology plays a vital role in modern retail loyalty programs. Mobile apps, digital wallets, and personalized emails can significantly enhance customer engagement. For instance, integrating your loyalty program with a mobile app allows customers to easily track their rewards, receive personalized offers, and make purchases directly through the app. Example- Starbucks, Sephora, Amazon, Uber, Ben & Jerry’s etc.

4. Promote your program

A loyalty program’s success depends on how well it is promoted. Ensure that your program is highlighted across all customer touchpoints—online, in-store, and through marketing communications. Utilize social media, email marketing, and even in-store signage to educate customers about the benefits of your program.

How can GIIFT LBMS help?

Loyalty Business Management Solutions (LBMS) can significantly enhance the effectiveness of retail loyalty programs by providing a comprehensive, end-to-end platform that manages every aspect of customer engagement and rewards. 

By leveraging LBMS, retailers can create highly personalised loyalty programs that resonate with their customers, utilising advanced data analytics to understand consumer behaviour and preferences. 

LBMS enables seamless integration across multiple touchpoints, including in-store, online, and mobile platforms, ensuring a consistent and unified customer experience.

Moreover, the platform's flexibility allows for the design of customised rewards and offers, tailored to the unique needs of each retailer, which can drive higher customer retention and sales.

With LBMS, retailers can not only launch and manage their loyalty programs more efficiently but also continuously optimise them based on real-time insights, leading to more meaningful customer interactions and long-term brand loyalty​.

Connect with our loyalty experts for a free demo to understand how LBMS can help you launch engaging customer loyalty programs globally.

Conclusion

Retail loyalty programs are an indispensable tool for driving customer loyalty and business growth in the United States.

By offering personalised rewards, leveraging technology, and continuously refining the program, retailers can build stronger relationships with their customers and secure a competitive edge in the market.

Whether you’re a small business or a large retailer, investing in a well-designed loyalty program can lead to significant returns in customer retention and sales.