How Customer Loyalty Impacts Holiday Shopping

December 21, 2017

By Jack Cooney | Marketing

Holiday retail shopping has been forecasted to come in at a record $680.4 billion this year, accounting for a projected 3.8% rise from 2016. The projected bump in holiday season spending should certainly excite retail brands; however, it should also be a reminder of the importance of an effective, on-going loyalty program that prioritizes new program memberships and relevant, personalized engagements year-round to better position brands for capturing increased business during the holidays.

With 2017 almost in the rear view mirror, it’s time for marketers to consider how well prepared they are to significantly improve their loyalty KPI’s throughout the new year while maximizing desired outcomes from their customer base for the next holiday shopping season. Here are 3 areas to start with:

Rewards

As online shopping and technology continue to close the margin on pricing in retail, retail brands have to compete for customer loyalty by providing value in ways that aren’t directly related to price. Think about this year’s hottest gifts and the seasonal ads you’ve seen promoting them. Whether it’s a smart-home speaker, a powerful video game console, or the hottest Star-Wars related toys, most items that holiday shoppers are buying are going to be priced about the same no matter where they do their shopping. The advertisements you see for the products will differ based on the retailer marketing it, but the price is usually about the same. This is where a differentiated rewards program can help attract and retain customers from competitors.

Consumers are accustomed to budgeting and spending money during the holiday season. Many see purchasing gifts during the holiday season as fixed costs not unlike their mortgage and car payments. So when holiday shoppers are looking for where to spend their money, they often choose based on the retailers that present them with the most value. Many times that value is measured in the rewards they collect making purchases, as holiday shoppers increase their purchasing power when they collect rewards for their purchases.

The concept of purchasing power is similar to value, as it relates to the ability that a sum of money, or specific currency, possesses. For example, say a consumer is shopping for an Amazon Echo Dot to get their sister for Christmas. That product is $29.99 pretty much anywhere you look, whether the consumer buys it directly from Amazon, or from a retailer, the price will be the same. However, if that customer gets rewards points from a particular retailer that amounts to 5% of the purchase price, the $29.99 they’re spending at that retailer has a greater purchasing power than it does through Amazon, or a non-reward participating retail competitor.

And the more purchasing power a consumer has with a retailer, the more likely they are to spend.

A nationwide study commissioned by Citi Retail Service found that rewards are playing a central role in how people leveraging purchasing power while shopping holiday season. Not only did the study confirm that customers are more likely to do business with brands that offer rewards, it found out that those rewards are altering the holiday shopping habits of consumers. Holiday shoppers are using rewards to increase the money they’re spending at particular retailers in three ways:

  1. 50% of shoppers stated that they use rewards to buy more gifts than they would otherwise.
  2. 41% of shoppers are using rewards to buy things for themselves that they wouldn’t otherwise.
  3. 26% of shoppers are using rewards to buy gifts for someone else, who they wouldn’t otherwise.

Each of these three purchasing trends are generating revenue for retailers directly from the rewards program they provide to their customers. The customers are recognizing the purchasing power rewards programs provide them, and spending more to take advantage of that value. Offering rewards programs to your customers is a great way to inspire loyalty this holiday season, as the rewards they generate during their holiday spending will encourage them to return to spend said rewards in the future.

Recognition

An effective loyalty program can’t exist today without the mechanisms needed to recognize members on an individual level. This recognition enables brands to differentiate themselves by showing true customer appreciation and deliver emotional rewards that aren’t easily matched by competitors. They also provide an added means of meaningful customer engagement. My classic scenario to explain this involves two competing sporting goods retailers; both are near my house, offer almost everything sports related I could need at any point in time, and each have nearly identical points-based reward programs. As a result, I frequently shop at both, typically selecting one over the other based on what other errands I’m running in their respective areas.

Now, imagine one of those stores with a loyalty program that actually recognized the kind of shopper I am:

  • One who routinely buys workout clothes and accessories for himself
  • Always buying athletic gear for his wife and kids
  • Avid fan of the local sports teams (#RedSoxNation)
  • Prone to forgetting birthdays, anniversaries, and special occasions

Granted, gathering these types of details about customers takes time and effort, but can be done with multiple approaches:

  1. The most important information comes from purchases and site visits, which can be analyzed to understand categories and items of interest
  2. Running a structured test program can help identify the types of promotions and channels that are most likely to activate a member
  3. Another important approach is simply to ask; birthdays and other relevant information is often provided when asked, and can be effectively integrated into a member’s profile and the personalization of his or her communication stream

The payoff for this effort is the ability to send personalized messages and offers to convert more members into active shoppers. If I have a timely offer to score a newly released Red Sox cap that happened to be part of an email reminder that my wife’s birthday is just a few short weeks away and she might be interested in a small jersey for herself, that’s more likely to draw me into the store or click over to their website than a generic 20% off spring sale promotion. These types of personalized engagements solidify mutual appreciation between brand and customer, creating a bond not easily replicated or broken by competitors. The trick here is to develop a pathway to uncovering the right details for each member and utilizing those insights across all channels.

Shopping Experience

The holidays are a busy time for most people. With an increase in social events, traveling to see family and friends, and finishing the year strong at work, people are low on time during the holiday season and eager to get their shopping done as easily as they can. With so much going on, it’s no surprise that 2017 is expected to feature more online shopping than last year. A recent Deloitte holiday survey found that 55% of respondents will conduct their holiday shopping online.

With a majority of customers conducting their holiday spending online, it’s important that retail brands place the same importance on creating a memorable online-shopping experience for their customers as they do an outstanding in-store shopping experience. By nailing the online-shopping experience, brands will increase their chances at maintaining their existing repeat customers, and acquiring new ones.

Retail brands should already deliver their customers a satisfying online experience through clear pricing and product information, app-based shopping for the always increasing smart phone shoppers, and convenient shipping windows. But there’s a number of other benefits retail brands can provide to their loyal customers to make the online shopping experience more convenient and attractive, including:

  • Early access to products and promotions
  • Online chat-based customer service platforms
  • Flexible holiday return windows
  • Curated shopping lists based on customer profiles
  • Exclusive experience sweepstakes

Online shopping is going to continue to increase in popularity, so long as it remains a convenient alternative to in-store shopping. The better online shopping experience brands offer their customers during the holiday season, the more likely it is that they’ll return in the future. It’s important for brands to market to their existing customers during the holiday season by offering an improved and convenient online shopping experience.

For retail brands, every holiday season is an opportunity to expand an active customer base for the new year. But more importantly, having a differentiated rewards program in place year-round is what is going to best capture customer spending during the peak days of holiday spending.

At 89 Degrees, we help brands research, develop, and implement customer loyalty programs that drive meaningful results. Check out our new white paper to learn more about designing a loyalty program that creates actual loyalty.

About the Author

Jack is a sales and marketing professional with a passion for great customer experiences. When he’s not launching new campaigns or updating Salesforce, he enjoys writing, driving, and embarrassing his kids. He currently oversees all content marketing and demand generation responsibilities for 89 Degrees.

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