Customers shop at a specific merchant for a variety of reasons. Loyalty may be defined by product availability (which has recently been put to the test by supply chain challenges) or convenience, particularly in the grocery sector.

Simultaneously, other elements such as value for money, emotional connection, and customization can work as motivators for repeat purchases, ultimately assisting businesses in building connections with consumers - as well as that all-important set of data insights.

Of course, loyalty schemes aren't appropriate for all retailers. Return on investment is critical, and high discounts might reduce margins in some situations. Many argue that loyalty does not exist in retail, particularly in grocery. That loyalty programs are more aligned with effective marketing (thereby helping to improve brand penetration rather than absolute customer loyalty).

McDonald's is increasing purchase frequency by using digital rewards (and ordering)

The Covid-19 outbreak prompted a revolution in the restaurant sector, with customers increasingly ordering online, through apps, or third-party delivery services. Restaurants are now incorporating digital loyalty into the mix to push this behavior further.

McDonald's, for example, released its 'Accelerating the Arches' digital growth strategy in 2020, centered on the 3D's of 'digital, delivery, and drive-thru.' 'MyMcDonald's Rewards,' the company's first digital worldwide loyalty program, will be introduced in the UK in July 2022. McDonald's Rewards allows customers to earn rewards wherever and however they acquire their McDonald's, aligning with changing consumer behavior driven by the epidemic (such as more digital app orders), with the app acting as a 'digital shop' through which customized offers may be discovered. 

Creating a loyalty ecosystem through collaborations such as Target and Ulta Beauty

According to McKinsey research, many brand loyalty programs fail to go beyond typical rewards and redemption tactics. Only 18% of the 50 loyalty programs from prominent businesses surveyed have experience-led programs, and only 6% have connected products. McKinsey predicts that networked or ecosystem-centric loyalty will define future tactics. According to the company, this will be 'based around a fluid partnership of products, services, and experiences.' We anticipate some businesses will go even further, seeking collaborations as a new competition method.'

Some huge retail brands are already seeing this possibility. Target, for example, now lets Target Circle members link their loyalty accounts to Ulta Beauty's Ultimate rewards. Customers can earn points and benefits from both loyalty programs when they shop at mini Ulta Beauty outlets within Target stores.

Customers benefit from loyalty pricing at Boots, Tesco, and other retailers.

Customers use loyalty programs for various reasons, including savings and discounts. Amid the cost-of-living crisis, value for money is becoming increasingly important, prompting brands to recognize the need to provide good value to customers - and to communicate this effectively. According to new Clarus Commerce data, 65% of US buyers are prepared to pay for a premium loyalty club if there is a guarantee that discounts will help offset the significant inflation affecting grocery prices.

Conclusion

To begin developing a loyalty program, you must first prioritize the client experience. A loyalty program will not miraculously address all of your customers' problems; instead, it is a more involved method of saying 'thank you, come again.' Once your clients have gained your trust, they will be eager to earn rewards for doing business with your company. After all, don't they deserve to be treated like royalty for being such devoted customers?