Retailers that were deemed non-essential and shuttered because of the COVID-19 pandemic, and the brands sold in these stores, did their best to drive business online and heavily leveraged discounting. The shock has worn off and physical retail is slowly reopening. The challenge now is a fight for the consumer’s beauty dollar in an uncertain economy; deep discounting is a race to the bottom. Regardless of sector, brands need to rethink their current loyalty strategy in order to increase customer engagement, build loyalty, and create value.

The benefits of loyalty programs are well known, and competition for a larger share of customer spending is fierce. Sephora just announced an update to its popular Beauty Insider program that boasts 25 million members. This latest incarnation leans heavily on experience rather than transactions.

“When customer engagement is done right, it moves the needle in a big way for Brands. What drives businesses are the bonds they build with their customers, and the experiences are what create those bonds,” says Sean Claessen, EVP, Strategy & Innovation, Bond Brand Loyalty.

In the ninth year of the largest global study of its kind, The Loyalty Report 2019 surveyed over 55,000 consumers across more than 900 programs in more than 20 markets.

• Personalization: When done well, there is a 6.4x lift in member satisfaction with the program. Other outcomes of personalization are: members “say good things about the brand” (6.0x lift), “stay longer” (5.2x lift), and “spend more with the brand” (3.5x lift).
• Partnerships: Consumers have an appetite for partnership models. 60% are interested in partnerships.
• Rewards: 84% of all members have made redemptions, and there is a 1.6x lift in satisfaction among redeemers versus non-redeemers.
• Gamification: There is a 1.7x enjoyment lift when game mechanics are used, with 81% of members using game mechanics when present. Only 62% of health and beauty programs leverage these tactics.
• Gen Z and Young Millennial: These consumers are loyalty natives: they’ve been members of programs ever since they’ve been consumers and they’re highly influenced by loyalty programs (62% Gen Z and 67% Young Millennials).

The Drivers of Loyalty Programs:

1. Must meet your consumer’s needs
2. Fun to participate
3. Makes brand experience better
4. Consistent with brand expectations
5. Rewards/benefits are appealing

Leaders in Loyalty:

Health and Beauty:

1. Sally Beauty Rewards
2. Bath & Body Works
3. M.A.C. Select

Department Store:

1. Kohl’s – Yes2You Rewards
2. Nordstrom – The Nordy Club
3. JCPenney Rewards

Specialty:

1. Bed Bath & Beyond – Beyond+
2. Pet Smart – Treats
3. REI – Membership Coop

Drugstore:

1. Walgreens – Balance Rewards
2. CVS – Extra Care
3. Rite Aid – Wellness Rewards