192 F E ATUR E “Historically, loyalty programmes have been impersonal and transaction-based – for example, customers earning points for every purchase and redeeming them for rewards such as product discounts,” he says. “However, the proliferation of these schemes in the retail industry means that they’re no longer a differentiator for brands, so they don’t engender true loyalty. Instead, brands should take a holistic approach and build a loyalty programme that drives retention across all customer touchpoints.” It's crucial for brands to rethink end-to-end service design and re-evaluate all their customer touchpoints to ensure no pain point is left untreated, says Rajagopalan. “They must also improve the interstitial moments in the customer journey, especially if their business model means that consumers rarely engage with a human brand ambassador,” she adds. “These interstitial moments provide the ideal opportunities for retailers to anticipate consumers’ needs and make personalised interventions that will drive loyalty that extends beyond the transaction.” Brands are now experimenting with various types of experiences to attract and retain customers. “Some brands are doubling down on their resale business, providing customers with the opportunities to sell products back once they’ve finished using them, while others – like furniture and homeware retailer Ikea – have developed services to enable customers to rent items,” says Rajagopalan. “These services keep customers coming back to stores regularly, ensuring that the brand stays top of mind and often tempting people to buy items they would not otherwise have purchased.” In addition, brands such as sports equipment and apparel retailer Nike are inviting customers to join exclusive communities of like-minded individuals. “The free Nike Run Club app allows users to track their running journey, access training and wellness tips, participate in individual or collective fitness challenges, and more,” says Elliott. “Nike isn’t selling directly to customers, but rather welcoming them into its ecosystem and delivering a value-added service that caters to their needs, thereby subtly establishing itself as their preferred brand.” Some major retailers are taking this a step further by introducing subscription-based models, where customers pay either a onetime or recurring membership fee to join a loyalty programme that offers exclusive benefits and personalised experiences. For example, Walmart customers can pay to join the US-based hypermarket chain’s Walmart Plus scheme to gain access to exclusive perks such as free deliveries, exclusive fuel discounts, movie streaming platforms and more. Similarly, exercise equipment and media company Peloton offers members live and on-demand classes, personalised class recommendations, access to training programmes, and more via its paid-for loyalty app. Research indicates these paid programmes are successful; consumers typically have bigger baskets, transact more frequently, and are more apt to engage with a brand’s broader suite of offerings. A 2020 McKinsey & Company survey found that the likelihood of someone spending more with a brand increased by 60 per cent if they participate in a paid programme, compared to just 30 per cent if they are a member of a free programme. “Although paid loyalty programmes are difficult to implement initially, brands can derive higher customer value from those who sign up if they’re executed well,” says Hilding Anderson, vice president and head of retail strategy for North America at Publicis Sapient. “In this scenario, paying members can be worth several times more than non-paying members, so it’s worthwhile for brands to consider establishing this type of programme if they can.” Elliott notes that paid loyalty programmes simultaneously act as a flywheel for encouraging customers to keep coming back to the brand, and a flywheel for enabling the business to do more to improve the consumer experience, products and services. “Online retailer Amazon, for example, uses money generated by Prime subscriptions to fund research and development efforts that allow it to create better products, services and experiences,” he says. “Meanwhile, [cash and carry warehouse chain] Costco makes most of “ Retailers need to know as much as possible about customers to make them feel special” HILDING ANDERSON, PUBLICIS SAPIENT
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