Transactional reward programs are easy, but do they build customer loyalty?

August 26, 2022

Another day, another retailer loyalty program launch. Bath & Body Works earlier this week made its debut its “new” rewards program, which soft-launched in July after beginning testing in March.

Bath & Body Works joins a host of retailers and brands, including Lowe’s, Walmart and General Mills, who are doubling rewards to encourage customer loyalty in the face of rising prices. Is this a sustainable path to current spending?

Move towards bathandbodyworks.com and a splash screen prompting to download the app to access the rewards program. “PERK ALERT: ALL NEW REWARDS MEMBERS GET $10 OFF A $30 PURCHASE! (Offer and details will be in your wallet within 72 hours of joining),” it read. According to our findings, app downloads jumped 147% in the first two days of launch, but it will be a few months before engagement can be seen.

At first glance, Bath & Body Works Rewards resembles Sephora Beauty Insider Rewards: both programs allow customers to earn points for every dollar spent. Sephora notably, however, does not focus its program on “transactional loyalty” or “do whatever it takes to make the next sale, which is usually dependent on a discount,” as the vice president of Sephora said. the loyalty of the retailer, Allegra Stanley. Forbes in 2020.

Sephora didn’t join the bandwagon of rewards program updates this year; instead, it launched another digital experience to encourage loyalty, “automatic replenishment,” or product subscription top-ups. In July, it went a step further, teaming up with Klarna to offer buy now, pay later for auto-replenishing subscriptions.

Arguably, subscriptions and rewards programs are oversaturated and require delicate design to generate value for both the consumer and the business itself. Kearny Global Consulting wrote this spring that a subscription apocalypse is looming. He revealed that more than half of subscribers wanted to reduce their exposure to paid subscriptions to around $50 per month. In total, 40% of consumers think they have too many subscriptions.

Meanwhile, recent research from Forrester, Brand Keys and Novous Loyalty acknowledges the prevalence of rewards programs these days and indicates that transactional rewards – especially when applied automatically – are the most conducive to loyalty. .

Insider information published a study by Brand Keys on simplicity as a key to the success of loyalty programs. Sixty-one percent of survey respondents indicated that having rewards automatically applied (as opposed to mandatory redemption) was a reason they would use a loyalty program more often.

A recent Forrester report on customer loyalty found that “value propositions remained centered around cash back redeemable at the brand.”

Loyalty writes this month that the programs are “oversaturated” and that “cash credits were the most preferred and ranked first, followed by coupons, free surprise rewards and the gift card loyalty program” .

DISCUSSION QUESTIONS: What are the keys to creating real customer loyalty? Do you think the recent discount-focused retail rewards program updates are more effective, equally effective, or less effective than the approach taken by Sephora?

Braintrust

“The key to a good loyalty program is obvious: keep it simple and customer-focused.”

“Paid programs are great if you know when you’ve saved more money than the cost of the program.”

“There is a big difference between ‘loyalty’ which is earned and ‘loyalty’ which is bought.”

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Joseph P. Harris