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Understanding what consumers will and won’t do is pretty important for brands trying to increase loyalty. They’ve got to know if the strategies they’re considering will have a good chance of success. That’s one of the biggest reasons consumer research studies get started in the first place. Brands want to figure out if customers will respond to a given market strategy.
Recently, Loyalty360 spoke with Tom Caporaso, CEO of Clarus Commerce, to discuss the tech provider’s newly published study on premium loyalty. The main question the company wanted to answer: will your customer pay for a loyalty program? The research ended up producing significant results.
“We used Walker Sands,” Caporaso said, “and they started with a panel of consumers. We get the question a lot. Will customers pay for a loyalty program? Should we be charging our customers for membership? Ultimately, what kind of benefits are most valuable to those customers? So, we actually did the data study for the retailers to find out, straight from the consumer’s mouth. One interesting thing we found was that consumers actually agree that it’s harder than ever to keep their loyalty. There’s so many options and so many choices.”
He continued, “Competition is literally a click away, so even if they see an offer on merchandise from a certain retailer, they will go and compare and see that they get the best price or the fastest shipping. That’s part of the prevalence of technology and understanding how easy it is to use from a consumer perspective. What’s happening in certain loyalty programs is that they’re not driving loyalty to the brand. They’re driving loyalty to the discount, and they’re trying to find the deepest discount.”
To solve the discount issue, which Caporaso called “a little bit of a race to the bottom,” the study suggests that brands should use premium loyalty as a differentiator. “Discounts will always play a role,” he said, “but ultimately consumers don’t want a threshold, a triggered promotion. They want 10 percent or 20 percent across the board. Emotional benefits, making them feel personalized or exclusive, is the real differentiator. Making them feel like the retailer is listening to them and trying to drive personalized or exclusive benefits and offers on things they’re most interested in will drive loyalty.”
In addition, the study found that 87 percent of consumers who are satisfied with the benefits offered by a premium loyalty program will likely choose that retailer over a competitor that is offering a lower price. The study also found that 65 percent of those who belong to a premium loyalty program plan on joining an additional program within the next years. These stats are massive indicators that premium programs are working.
“As you think about premium loyalty,” Caporaso said, “discounts have to be a part of it, and if you do it right, and you mix both the transactional discount benefits with experiential benefits, then retailers can pull back on some of those discounting-to-all type of offers. Right now, you’re competing with the likes of Amazon and Walmart and Target, who have a lot more bandwidth and margins to play with, and I think that’s where brands of a smaller size have to differentiate: around experiential benefits.”
Indeed, Clarus’ research showed that 67 percent of respondents were motivated by experiences such as instant discounts that can be used in any shopping channel. Another 61 percent were motivated by fast, free shipping. 56 percent really like free giveaways. Experiential rewards like these are the bread-and-butter of premium loyalty, and they just can’t be replicated in transaction-only programs.
Overall, Caporaso believes that premium loyalty programs offer the personalization that comes with a customer-first mindset, a customer-centric approach. The new study backs him up on this idea.
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