There is no question that when done right, loyalty and rewards programs can impact revenue through increasing customer spending. The idea is that you offer customers "points" for performing certain actions, such as signing up for a customer account, spending a certain amount of money with the brand or even engaging on social media. Customers then cash in their points for discounts, saving them money while also incentivizing them to keep purchasing. This model has seen huge success in the travel and grocery industries. Additionally, the brand is able to acquire data on the customers, which can then be utilized to retarget. Loyalty programs can help push someone who was just trying your brand to be a repeat customer and supporter of it. They can also help garner reviews and social media followings. So what could be the downside?
It seems that loyalty programs have become a staple of many DTC brands. However, it is unclear whether they are being utilized to their full potential. A company cannot simply stick a graphic about loyalty and rewards on their website and hope for the best. These programs can be somewhat complicated and not intuitive to use, potentially causing friction for the customer. A company that I interned for recently was having such trouble. Customers were racking up points, but very few realized it and actually used them. It was clear that there was a missed opportunity to encourage repeat purchases. What was missing in this example was activation. The customers may need to be nudged and reminded of the value they are leaving on the table, especially those that recently made their first purchase and we want to capture as brand loyalists. It's important to remember when evaluating loyalty and rewards programs that simplicity and user experience are key, and activation can play a huge role in making the program successful.
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