Loyalty programs have been around for quite some time. Credit card points have been one of the most effective loyalty programs around. I personally love Chase Reserve given that I earn 3x points for payments on food and travel. Those points are then worth 1.5x if I buy flights or use them to purchase at participating online stores. Another is the Dunkin’ Donuts App, where I’m constantly earning points and taking advantage of promotions.
How effective are loyalty programs? In this digital age, companies have to implement a loyalty program through their website and mobile apps to stay competitive. A report from Harvard Business Review indicates that acquiring a new customer is 5x-25x harder than retaining than existing one, which makes sense given that it probably is much easier to keep an existing customer happier vs. putting in the marketing and sales efforts to retain new business. It’s tough to fully attract new business and retain them given that almost every company nowadays has some sort of promotion going on. When I was in D.C. this weekend, I downloaded 4 different electric scooter apps because there were just so many different scooters all over the streets next to monuments and other touristy spots. Each app either provided some sort of discount or free ride, but the ones that stood out to me the most were the ones that saved me the most money (a certain price per minute) and had the best designs that gave the best user experience.
With mobile apps, companies like Auntie Anne’s and Jamba Juice offer free food just by downloading the app and registering for a loyalty account. What’s stopping people from just downloading these apps just for that one free small plate of food or juice and never using the app again? NOTHING. The meal kit delivery market with companies like Blue Apron and HelloFresh is so saturated that many of these companies struggle to retain customers after the first purchase. While these companies typically offer a large discount on your first order, typically customers drop off when they see that their subsequent payments are the normal price and may switch over to a competitor to take advantage of the same benefits. This is a problem for a lot of companies in this digital age.
What can companies start focusing on to retain customers and increase their mobile app and loyalty program participation? Another study suggests that companies with the highest spending customers are the quickest and most likely to check out competitors. This means that companies need to focus on keeping existing customers happy by giving them the attention that they need. This can consist in more proactive outreaches where surveys are conducted to understand what customers like or don’t like about the mobile app experience. It could mean implementing new features based off those results to have better user engagement. Companies like LevelUp and Fooda are focused on working with vendors to provide reward points for users to apply for money off future food purchases. This is great considering that these apps are restaurant agnostic in that sense that you can earn points regardless of what restaurants you purchase from.
Another way to work towards retaining customers and keeping them in your loyalty program is not spamming them with unnecessary communication. The Retail Council of Canada found that 49% of millennials stopped using loyalty programs after receiving too much irrelevant things like emails and promotions. 70% of consumers also don’t sign up for loyalty programs due to the inconvenience and time required to register. Knowing this, companies should focus on the UI/UX of their mobile apps and website registration processes.
A Forrester study says that customers want to feel special. They want to have rewards and special discounts that they can’t get from other programs or that other customers from different tiers might not have access to. 59% of online US adults want an experience like this in addition to just saving money in their online purchases.
Customers are looking for a unique experience that will keep them feeling valued in order to continue using the loyalty programs available to them. Ultimately companies should not lose sight of innovation or get too comfortable. In the digital age, utilizing mobile apps is great, but getting an increase in the mobile app usage by customers is even better. Each company also needs to understand what their customers are looking for. A restaurant selling burgers that uses a food rewards app can’t expect the same level of usage that maybe a white label app like Starbucks has. Setting real expectations and examining the data will allow companies to make more informed decisions around what is driving the usage of customers. The other half of the battle is understanding how to actually attract new customers and being able to retain them in the long run. There will always be new competitors, so innovation has to be a continuous task.
What are some of your favorite mobile apps to earn rewards. What about these apps keep you using them time and time again? What would be a dealbreaker for you that would prompt you to seek a new company’s app to get similar benefits?