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GAP just enriched its customer loyalty rewards program. Should you do the same?

Posted by Neha De

August 9, 2021    |     6-minute read (1720 words)

Gap recently launched a new integrated rewards program across the U.S. and Puerto Rico, called One Membership. Four Brands. The program allows members to earn and redeem their reward points within its four brands, namely, Old Navy, Gap, Banana Republic and Athleta brands, by combining the previous credit card and loyalty programs under Navyist Rewards, Gap Good Rewards, Banana Republic Rewards, and Athleta Rewards.

“Our goal is to turn our customers into lifelong loyalists by reimagining our Rewards program and creating unique, personalized experiences that will make it easier to shop, earn and redeem rewards across our family of brands,” said Gap Chief Customer, Digital and Technology Officer John Strain.

Since relaunching their loyalty program last year, the company has enrolled more than 19 million new customers in less than 12 months. 

This begs several questions — What exactly is a customer loyalty program? How does it benefit a small business? Should you launch one for your company, too? Read on to find out. 

What is a customer loyalty program?

Also known as a rewards program, a customer loyalty program rewards users for making repeated purchases from a company. Often, these rewards are either in the form of free items after the users have made a specific number of purchases, or discounts on certain items. 

The concept of customer loyalty programs can be traced back to the 1700s, when retailers started giving their customers copper tokens with purchases that could be later redeemed against products on future purchases. 

Fast forward a couple of centuries, one of the most popular types of rewards programs was launched: the frequent flyer program. It was in 1979 that Texas International Airlines started using mileage tracking to reward its passengers.  

Talking about current times, such customer loyalty programs are the need of the hour. They not only allow companies to save money, they also help them boost their profits. According to research by Frederick Reichheld of Bain & Company, “Across a wide range of businesses, customers generate increasing profits each year they stay with a company.” 

Accenture Interactive research finds, “Members of retailers’ customer loyalty programs generate between 12% and 18% more revenue for retailers than do customers who are not members of the loyalty programs.”

What types of loyalty programs can a business offer its customers? 

Most startups and small businesses do not have massive marketing budgets. Fortunately, these companies can still offer incentives that could help them retain consumers. Check out five creative ways small businesses can leverage rewards programs that benefit both them and their customers.

  1. Loyalty discounts: Loyalty discounts allow businesses to give back to the consumer while also collecting data that can help them personalize their marketing strategy. Under this program, companies typically offer predictable and consistent discounts to members every time they show an identification marker, such as a QR code or a phone number, associated with the loyalty program. This allows them to capture data about their customers in order to learn their buying habits and offer them a personalized experience. 
  2. Points systems: This is one of the most common methods of keeping an eye on customer loyalty. In this system, companies offer an incentive along with a time frame to earn that incentive, by way of collecting points.
  3. Punch cards: Another commonly used rewards program is the punch card. Members are issued a card that gets punched every time a purchase is made. And once a certain number of holes are punched, the customer receives a special reward. 
  4. Partner programs: Companies can partner and combine resources with other businesses and create an offer that benefits everyone, both companies and their shared consumers. One common example of this type of reward program is a credit card sponsored by another company. 
  5. Referral programs: Organizations can incentivize their current customers sending referrals their way. 
Benefits of a customer loyalty program

Take a look at the five main advantages of offering a customer loyalty program: 

  1. Is cost-efficient: Research finds it costs five times as much to attract a new customer retaining an existing one. Therefore, it is a no brainer for organizations to keep their existing clients happy and satisfied. And a customer loyalty program is one easy way to do so. 
  2. Helps develop brand ambassadors: Word of mouth is still the most trusted form of advertising. And when users are enjoying the benefits of a loyalty program, they are more likely to spread the word about it. This can result in new customers that can be acquired, which can ultimately generate more revenue for a firm. 
  3. Allows collection and study of consumer trends: When a shopper signs up for a rewards program, all their relevant data gets recorded in the organization’s database, along with details such as customer behavior, preferences and buying habits. Companies can use this data to come up with tailored offerings and to refresh their pricing, promotional planning and so on.
  4. Helps gain relevant feedback: Loyal customers will be more than happy to share their valuable feedback, simply because they like the brand they are associated with and would like them to improve. 
  5. Help retain existing customers: Organizations can use reward programs to analyze how likely their customers are to stick around and how much money they will spend. Most customers make decisions based on more than just the best price; they look for an emotional connection with the brands. Loyalty reward programs can help them engage with the customers beyond the point of purchase and keep them on board for longer. 
Tips for creating a customer loyalty program for your small business

Retaining customers can be a challenging task in today’s competitive world. Effective and innovative customer loyalty programs can help businesses increase engagement and retention. Such loyalty programs also provide a boost to their marketing and customer service programs via referrals and positive reviews. 

But if you don’t know where to start when building your customer loyalty programs, take a look at these 10 strategies that can help you develop an effective loyalty program to achieve the best ROI.

  1. Analyze customer buying habits: A customer loyalty program comprises a set of strategies for rewarding loyal consumers based on their purchases. Having a clear objective of your business goals and knowing your target users can help create an effective loyalty program. Start by analyzing your customers’ buying patterns so you can find effective loyalty programs for them. Gather customer data from a variety of sources, such as your website analytics, sales figures, past conversations, customer satisfaction surveys and the like. Use these data-driven insights to design your customer loyalty program and improve your products or services to deliver top-notch customer service.
  2. Create an easy-to-use points system: Your customer loyalty program should reflect the needs of modern customers. Make your rewards system easy to join, understand and track. Give out points based on their purchases, and explain how they can redeem those earned points, whether or not those points expire, and if so, provide them with a date. 
  3. Choose a name with a deep meaning: The name of your loyalty program should be unique enough to prompt curiosity. Your name should allow people to understand the benefits of your loyalty program to make it as compelling as possible. Also, provide your customers with points for referring new people to your program and for encouraging others to follow you on social media platforms. The reward points can help your company generate long-term loyalty in your customers.
  4. Build a multichannel program: Customer loyalty is typically a result of a good customer experience. Consumers will often pay more for a guaranteed good experience. Therefore, if you want to maximize your rewards program's effectiveness, deliver a seamless, user-friendly, multichannel experience, be it on the web, mobile or in a brick and mortar store. Try to resolve customers’ issues during the first interaction itself, as well as offer a frictionless payment experience to customers across all platforms.
  5. Embrace technology for personalized offerings: Technology helps you record customers’ past experiences with your brand, such as calls, emails and messages, so you can create a more personalized experience. Customize products or services with multifaceted content and descriptions based on customers’ expectations and behavior, as well as current market trends are always well-received. 
  6. Adopt affiliate partnerships: Explore partnerships to provide customers with more compelling offers. You can forge affiliations with other enterprises to create offers that benefit you, your partner and your shared customers. For example, many grocery stores partner with fuel companies to offer discounts on gas based on past grocery purchases.
  7. Inform via messaging campaigns: Using email and messaging campaigns to let your customers know about special offers can make your program work better. According to research by Experian, emails targeted at your loyalty program participants have 40% higher open rates, 22% higher click-through rates, 29% higher transaction rates and 11% more revenue per email.
  8. Market the program: No matter how creative your customer loyalty program is, unless your customers know about it, it’s not going to get you very far. Invest in marketing so your consumers are aware of your loyalty program, and ensure you create a marketing strategy that fits with your business' needs. You might consider online and newspaper ads, social media, press releases, in-store signage, and/or an email newsletter.
  9. Set up exclusive deals and discounts: Businesses can find ways to reward their customers for their loyalty, irrespective of their industry. Your email subscribers and social media followers are all potential customers. You can create a unique hashtag for providing offers to your social media customers. Or, utilize email newsletters and social media platforms to give members exclusive, limited-time deals and discounts.
  10. Incentivize customers with valuable rewards and gifts: Whether you choose to offer discounts on future purchases, free rewards or gifts, the rewards should provide value to the customer and make financial sense for your business. To find the most appropriate incentives for your loyalty program, analyze the needs and purchasing behaviors of your target customers. Simple service prioritization methods can also add value for your loyal customers.
Loyalty rewards programs can help businesses retain customers engaged with your business beyond just the point of purchase, subsequently boosting profit. Implementing the right loyalty program for your customers and managing it well can ensure long-lasting success for your firm as well as better customer retention.

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