What impact/return a brand expects to make, depends on its stage/mode.
Brands tend to operate similar kinds of loyalty programs across different sizes. The point of difference is how much they’re able to do within those programs.
Most of the loyalty programs we see at big companies (Starbucks, Amazon Prime, Sephora) have been turned into off-the-shelf components/apps that smaller brands using cart platforms (like Shopify) can use.
The one thing most of these apps haven’t taken and run with is limited-time game experiences like McDonald’s Monopoly or Soapy Joe’s scavenger hunt; these have too much of an in-person component to them for a simple “app”, it’s also not clear that something like it could be translated into a digital interaction in a way that’s still fun and engaging. A VIP loyalty program is kind of a game - “earn points, level up” - but it’s not a communal, limited-time experience.
If we break the customer base for loyalty apps down into the following very broad groups:
Needs to get their name out there, and fast, to get some money coming in.
Has some customers, but needs to improve that customer base’s LTV to grow revenue and reduce CAC.
Has a successful business and their marketing operation is likely doing just fine; they probably want to pick up low-hanging fruit and get previous customers to 1) make additional purchases they otherwise wouldn’t or 2) make higher-value purchases than they otherwise would.
Most Shopify stores fall into groups 0-1 or 1-2. They don’t have the resources to build a loyalty program, or the staff to maintain one. They want something low-cost with an immediate benefit.
Because 2-n companies have resources to spare, they can do two special things: spend money to build their own bespoke loyalty platform and spend time maintaining a personalized, high-touch, experiential rewards program for their best customers.
As a 2-n company, McDonald’s annual Monopoly promotion is about increasing the number of times people come into the store and getting them to order more while they’re in there. In 2019, 3 of McDonald’s 4 busiest weeks in the UK were during the Monopoly promotion.
More expensive menu items lead to more prizes (up-selling) and having customers try new food items might get them to buy those again in future (cross-selling). It’s all about increasing marginal revenue per customer. In 2010, McDonald’s increased sales by 6.5% with this promotion.
When a 2-n company launches a promotion like this, it’s not transformational. The goal is a small bump in spending across many customers, usually on low-priced impulse purchases like fast food and sweets, and they’re rarely onboarding those customers into something more permanent.
When Soapy Joe’s (a 1-2 company?) ran its scavenger hunt, they were onboarding all participants into a new customer list on which they can build new sales and marketing initiatives; they were able to do it without a huge spend on a novel platform to do it. And while other companies can certainly use Taco’s services to do their own scavenger hunt, Soapy Joe’s was leveraging unique assets (or “cornered resources”) like their specific locations, their specific relationships with other businesses, and their specific customer base habits.
0-1
1-2
2-n
So how are these brands trying to incentivize these behaviours? What’s working?
Sephora’s Beauty Insider program is a combination of Earn & Burn points and VIP tiers based on spending.
Amazon runs their paid membership program, Amazon Prime.
REI
Rothy’s (DTC shoes)
Company has grown a loyal Facebook community group “Rothy’s Addicts”, to over 24k members
