How Best-in-Class Brands Acquire and Retain Customers Today

Marketers continue looking to loyalty programs for growth and sustained customer relationships, tailoring loyalty investments that enable holistic views of customers. Fifty-one percent of marketers within retail intend to increase loyalty program spending this year to improve program awareness and engagement through multichannel ad campaigns, and to increase benefits that deliver real value upon participation. On the flip side, over half of loyalty program memberships are inactive, and nearly a third of members abandon programs without capitalizing on collected rewards.

Gartner’s third annual Intelligence Report: Loyalty 2019 unveils how best-in-class brands are acquiring and retaining customers in a hypercompetitive environment, including combining incentives with experiences and streamlining messaging across digital channels to uphold engagement. The report benchmarks 187 brands across six sectors on their promotional tactics, loyalty program models, multichannel deployment and mobile integration.

Here are several key findings that emerged from that research:

Take a Test-and-Learn Approach

To safeguard the success of new or revamped programs, brands increasingly test loyalty programs through phased “soft” launches. After incorporating loyalty-like features into the site’s account, lululemon athletica launched a new fee-based loyalty program, initially introduced to target markets prior to a full launch. The pilot program’s success determined the efficacy of the $128 annual membership fee and the value consumers find in the program.

Brands that don't have a formal loyalty program but have built out account infrastructures can also consider weaving loyalty-like benefits into accounts. In addition to capturing customer data, brands can still grow engagement through account benefits. High-end fashion brands such as Gucci and Diane von Furstenberg, which sunset its official loyalty program in 2017, have especially benefited from infusing loyalty elements into account features and marketing communications when loyalty programs aren't fully aligned with marketing strategies.

Develop a Multichannel Strategy for Program Visibility and Engagement

Brands must leverage marketing tools outside of their websites — e.g., search and display advertising — to incentivize program sign-ups and clearly convey program logistics and benefits. To continually foster engagement, brands must also demonstrate effective orchestration of digital touchpoints to engage customers both online and in-store.

Chipotle possesses a multipronged strategy when it comes to loyalty visibility and engagement that has yielded approximately 3 million memberships and 9.9 percent growth in first quarter same-store sales. The restaurant chain’s success is derived from its effective use of site assets, email campaigns and display advertising content to get its loyalty program in front of prospects and incentivize membership sign-ups and app downloads.

Make Your Program Accessible and Easy to Interact With

Brands are removing barriers to entry by shifting away from credit card-only programs and leveraging apps to streamline interactions with loyalty programs. Of the brands currently holding private-label credit cards, 79 percent open loyalty participation for all customers outside of store-branded credit card owners. While brands now expand their loyalty programs’ eligibility to all customers, they also ensure that credit card owner benefits are distinguished against standard membership rewards. In fact, over half of brands with private-label credit cards integrated into loyalty programs emphasize the additional benefits of owning a store-branded card, such as faster rewards accumulation.

Another way that best-in-class brands increase the accessibility of their loyalty programs is by having a mobile strategy with loyalty-specific features. Apps from beauty retailers Sephora and Ulta streamline rewards tracking and in-store redemption by centralizing rewards highlights on the app home screen, in addition to integrating digital loyalty cards into Apple Wallet.

For brands that are testing out loyalty, it's critical to think about what current foundations can enable customer loyalty and gauge response from key markets to a beta program model. With a program relaunch or revamp, brands must ensure that they're deploying a multichannel approach to augment program awareness and retain members. Finally, as brands seek to elevate their loyalty programs and increase program usage, they must address UX pain points through loyalty-specific mobile features.

Lili Meng is a senior specialist and Karen Lee is a specialist in Gartner’s Marketing practice.