Building Digital Loyalty Programs That Work

By Salvatore Ciolfi November 6, 2020

Building Digital Loyalty Programs That Work – the latest in BrainStation’s Digital Leadership Event Series – took place on November 5th, and featured three experts from McDonald’s Canada, Brooklinen, and Ritual Vitamins. 

You can watch the full panel discussion here:

The humble loyalty programs of yesteryear – the era of “buy nine subs, get your tenth sub free” – have come a long way in the digital age. Today, consumers have many more ways to interact with brands, including in bricks-and-mortar stores and pop-up locations, curbside and delivery, on websites and social media, and through newsletters and SMS. Each of these touchpoints represents an opportunity to implement a loyalty program with the goal of gleaning valuable data and, ultimately, driving consumer habits.

We spoke with three executives overseeing ambitious and highly diverse loyalty programs – for McDonald’s Canada, Brooklinen, and Ritual Vitamins – about how loyalty programs are changing, how they can be a key driver of customer experience and customer insights, and their best advice for making a loyalty program work.

Every Loyalty Program Is Unique

Unsurprisingly, different brands need different things from their loyalty programs. One of the key determiners here is the timescale at which purchases are made.

At McDonald’s Canada, for instance, Digital Director Adam Cooper oversees a loyalty program to drive daily purchases, which grew from an offline rewards card where every coffee purchased earned a sticker. “A few years ago, we replicated the paper program within our mobile app,” Cooper says. “Results are strong. And when you couple it with something like a reorder feature, which increases the habitual nature and the ease of coming to McDonald’s, the value proposition is pretty strong.”

Allie Donovan is Director of Email and Retention at Brooklinen, a D2C provider of bed linens and other homewares; unlike at McDonald’s, her customers may go months or even years between purchases, meaning “loyalty” needs to be measured differently. For  Donovan, loyalty is less about habitual behaviors and more about building a strong relationship. “We think that relationships have to be the very center of the marketing that we do,” she says. “We have to acknowledge that our customers are helping us – we’re very grateful for their business and we have to give them something in return.”

Loyalty also looks completely different at Ritual Vitamins, where everything is retailed through a subscription model. As Director of Customer Lifecycle and Growth Laura Brodie explains, repeat sales are built into the subscription plan, so the goals of the loyalty program are very different: “We look at our customer lifecycle on a monthly basis, based on how long they’ve been subscribed, and we do lots of research as to what questions our customers have at what point in their tenure.” 

Because loyalty programs are bespoke, they always begin with research – ROI being a prime consideration – and clear objectives. How do you define “loyalty”? What is your priority – retention, higher average order value (AOV), more customers? And are you sure you know what your customer hopes to get out of it?

Depending on the market, “there could be years between purchases,” says Donovan. “We had to think about the signals that tell us you’re a loyal customer. Frequency and AOV can be very interconnected. But there are also signals like, are you coming to our site? Are you looking at the information we give you? We really think about retention and loyalty as one.”

Your definition of loyalty will shape your program in many ways. Some programs, like the typical points system, are highly visible to the customer. But some programs operate in the background. “As you’re there longer, you’re getting rewarded,” Donovan explains. “Even though you may not know it, you’re seeing surprise and delight offers come through, not knowing that you’ve earned them because you’ve ordered a certain number of times. Some people really want that challenge of points and rewards, and others want to be much more passive – but they still want to be acknowledged.”

Especially in long-timescale programs, there may be a temptation to reward bad behaviors in an attempt to entice customers to reactivate – but this should be approached carefully. “We want to keep the relationship between what we pay for a customer and their lifetime value in check,” Brodie says. 

The solution is to find incentives that work for your specific customer base – which could be as simple as a customized product recommendation, demonstrating that you understand their needs. There are many ways to appeal to your customers besides discounts: exclusive offers, content or events open to members only, including programming or a house publication, or pre-sale access to high-demand products; convenience, like the ability to pay through an app rather than waiting in line; bonus offers like free embroidery or engraving on a purchased item; free samples or gifts; and personalized or tailored content.

In fact, one way to boost loyalty is to incorporate customer feedback into your product development cycle – showing them their input is valued while also making your products more appealing to them. 

UX at The Core of Loyalty Programs

All the touchpoints mentions above – physical stores, curbside and delivery, online and social channels, email newsletters and SMS – correspond to a different stage of the customer journey, and as such, are part of the same UX.

“The power is in the consumer’s hands,” Donovan says, “whereas 10 or 20 years ago, they just didn’t have the choices that are available now, everybody really is your competitor. A bank is something very different from the homeware sheet business – but you might go to a bank’s website, and they have smooth transitions from all their pages and you can get exactly what you want done. When you have a great experience like that, you suddenly expect it from everybody. If anyone is clunky and old-fashioned, it jars with you.”

Experience is key not only to attracting repeat customers, but also to building trust – whose importance to growing a business can’t be overstated. As Brodie explains, “We equate trust with loyalty. And trust is based on so many things, especially with a product in the health space. Once you earn that trust, you unlock the ability to do a lot of different things in your customer experience. When we get customers to trust us, it means that, one, they’ll stay with their habit. But two, they’ll look for more and more from our brand. That’s what loyalty really is.”

In other words, loyalty programs are not just a carrot to entice customers to spend. They’re about building relationships by showing customers that you value both their business and their feedback, and being responsive to what customers want from your business. This also relates back to incentives: some customers are looking for a monetary reward, but community-building and showing customers they’re being heard can be equally powerful. 

A loyalty program can reward far more than just making purchases, too. Donovan explains, “We designed our program in a way where you earn points for everything that you buy, as well as for some of the other activities that we want you to take, maybe liking us on Instagram or giving us your birthday – things that are very good indicators of your loyalty.” 

In fact, there are several ways loyalty programs can teach you more about its members.

Loyalty Programs Provide Customer Insights

Besides incentivizing specific behaviors – both habitual ones as well as one-time actions like completing a survey or writing a review – there are at least three ways a loyalty program can yield insights about customer behavior: once when the points are earned, again when the points are redeemed, and finally, when customer behaviors are analyzed in aggregate.

The first phase, when the customer is racking up points by completing different rewarded behaviors, reveals what actions a customer is taking (or not taking), giving you a window into where there’s room for growth. “We get some really interesting trend lines on transactions, retention and habitual use,” Cooper explains. “If we see you buying coffee every day, but we see that you never use the reorder function on the app, maybe we can start sending emails to say, ‘Hey, have you seen this feature? Have you seen the value? You can now get your coffee in four clicks.’ Similar to if we see you buy Happy Meals but you never use curbside service for mobile ordering.”

The way points are redeemed can also be a window into customers’ values. Once you’ve earned points with Brooklinen, Donovan says, “you can spend them in three ways: you can redeem them for a coupon, you can exchange them for a free item –different levels, different amounts, and you can have lots of different items – or you can donate your points to Habitat for Humanity New York, which is a really nice way to give back and have the customer feel that they’re being part of the charity effort.” 

All these touchpoints are opportunities to peer into the mindset of individual customers. But taken in aggregate, these behaviors can also reveal new patterns in statistical data. “We get top-line, high-level data on just how many people are engaging with our digital experience and our loyalty programs,” Cooper says. “Where we go from there is retention and turning profitability on for every offer, and the programs at large. When you can do the math on that, it really is a huge opportunity. Especially during the pandemic, when we’ve had to close the inside of some restaurants, there’s been an opportunity in how loyalty can help – knowing the customer can actually help us to get them into a curbside spot or open up mobile ordering to them. Having that relationship with our guests, knowing a little bit about them, has allowed us to see where we can convert to help drive the business.”

Brodie confirms the value of this data. “We recently went through and audited our survey process to make sure that we really were learning about the customer at every stage, and not having it really loaded toward onboarding, for example. We look at tons of different touchpoints, and then we can also look at engagement within their account. Are they snoozing their order, are they changing their delivery date? Are they taking an active role in managing their subscription?” This can feed directly into top-level business strategy: “We work super collaboratively with our product and data teams, as well as our customer insights team. The main starting point is, what are we learning about our customers at each stage? Then we’ll take survey data and match it with the behavioral data we’re seeing in terms of product usage and metrics like retention. Only once we bring all of those pieces together do we try to formulate recommendations, and that will go into the development of more formal features and things that the product team would work on.”

“I always think of a retention and customer relationship management team like a central hub of the company,” Donovan adds, emphasizing the importance of these insights to all levels of a business. “Everyone either wants something from you or you need something from them. It’s at the center of what everyone’s doing.”

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