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Create A Loyalty Program That Turns Customers Into Fans November 30, 2021 (0 comments)


Merrick, NY—Since the start of the pandemic—now almost two years ago—more than 75% of consumers have changed their buying habits, says a new report from retail consultancy McKinsey. Within that parameter, 39% of shoppers have changed either brands or retailers, and 79% plan to continue exploring their options.

But McKinsey partner José Carluccio says loyalty programs are one strategy that can help offset consumer willingness to switch to another retailer or brand. McKinsey’s research has found that good loyalty programs can boost revenue from customers that redeem points by 15% to 25% per year, by increasing their purchase frequency and/or purchase amount.

But many loyalty programs don’t deliver value, writes Carluccio. He offers eight strategies to help boost loyalty program value. Here’s a summary:

  1. Take advantage of redemption elasticityi.e., lower the “price” of points redemption.
  2. Measure ‘breakage’ (customers who don’t redeem their points) by segments and seek to reduce it, especially among high-value segments. Customers who earn points but then don’t use them represent lost sales opportunities.
  3. Enlist partners to enhance offers and rewards.
  4. Offer points + cash options to reduce redemption threshold and allow customers to attain rewards sooner.
  5. Measure success based on engagement (i.e. redemption), not just accruals.
  6. Segment customers by behavior, not demographics.
  7. Try A/B testing to see what marketing programs work. This is especially true for email marketing, which has one of the highest ROI (every $1 spent generates an average of $38).
  8. Generate a separate P&L statement for your loyalty program.

To read the full article including details for implementing each strategy, click here.

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