Incentivizing Innovation: Customer Loyalty in 2016

Incentivizing Innovation: Customer Loyalty in 2016

By Dax Dasilva, Lightspeed

While it may seem as though loyalty has migrated online, the reality that will take shape in 2016 and beyond is that consumers are channel agnostic when it comes to choosing their favorite brands. Store owners are already preparing accordingly: a recent survey showed that while just 25 percent of retailers currently have a loyalty program, an additional 30 percent plan to implement one by year’s end. With retailers of all sizes jumping on the loyalty bandwagon, the most important question is how they will make those programs truly valuable to customers. The answer is incorporating perks with real value for the customer – whether in the form of upfront savings or enviable rewards – without breaking the bank.

Without the right incentives, 2016 will not be the year of Apple Pay

Merchants aren’t the only ones faced with the challenge of encouraging loyalty – companies like Apple want consumers to be as loyal to their payment method as they are to the store where they shop. However, as of October 2015, just 16.5 percent of iPhone 6 users have tried Apple Pay. Will 2016 be the year Apple puts some incentive muscle behind its payment service? With consumers dragging their feet and only 34 percent of retailers planning to accept Apple Pay by the end of 2016, it’s not looking good.

Credit cards offer everything from points to miles to luxurious experiences, which causes hoards of consumers to instinctively reach for plastic. People originally intended for just large purchases or emergencies, but now racking up rewards gets people to swipe for even smaller purchases on an everyday basis. While credit cards and Apple Pay aren’t mutually exclusive, NFC payment providers need to start thinking about similar incentives and rewards that will make contactless payment the new norm.

Independent retailers will get in on Amazon- and Costco-like membership models

The world’s largest retailer relies heavily on Amazon Prime memberships for its impressive customer loyalty. With the promise – and convenience – of free two-day shipping in exchange for an annual fee, it’s easy for customers to shop online for everyday items they might otherwise purchase in store. In 2015 we saw the rise of similar brand loyalty programs in the form of subscription-based models, like Instacart, Fabletics and Sephora, which have designed membership programs that promise discounts and perks in exchange for an upfront fee.

This trend isn’t limited to online shoppers, as the strategy of offering value to entice loyalty will continue to apply both in-store and online. Just look at warehouse giant Costco, which shows thatyou don’t have to be online to garner best-in-class loyalty. The wholesaler uses rock-bottom prices as a no-nonsense formula for renewing annual memberships and getting shoppers to return at an astounding rate. In 2016, independent merchants will follow suit, and we can expect subscription and fee-based loyalty programs will expand, even with smaller retailers. The catch is that those merchants need to be sure the program is profitable – both in terms of bringing in revenue and building a loyal customer base.  Free shipping and other perks mean increased overhead cost. Smaller merchants will need to support those programs with sound business management software to ensure introducing perks is a smart decision.

Loyalty was once governed by word of mouth, but in 2016 and beyond it will be ruled by having the best answer when customers ask, “what’s in it for me?” at sign-up, and won by giving those customers a deeply personal experience with each purchase. Luckily for independent retailers, they’re already seen as community members whose interest in getting to know each customer is obvious: they’re neighbors. But as communities get larger, keeping track of everyone will depend more on adopting technology that tracks and organizes all interactions - from a social media “like” to a purchase - so that small businesses don’t get eclipsed by big-box retailers in the loyalty race. As the online and offline worlds merge into one in the customer’s mind, successful loyalty programs must span in-store and online if they are to succeed in an omnichannel world.