Are loyalty programs effective for luxury brands?

March 2018

“If a brand implements a loyalty program, this is not a luxury brand” – such a myth must have been created by those who put an equal mark between a loyalty program and a discount program.

Indeed: relying on discounts and screaming hot offers looks cheap and is not likely to be a successful strategy for luxury brands. But it doesn’t mean you should keep away from building your well-thought-out loyalty program for a luxury brand by implementing relevant technologies and considering recent marketing studies.

For example, HBR in its e-loyalty research says genuine rewards programs for retail businesses add 5% to customer retention level and, as a result, boost profits up to 95%. The data from Branding Strategy Insider Delivering your loyalty program to customer mobile phones should include implementation of best practices and valuable experience in mobile development area. We can offer all mentioned above and even more. VALFOR Company is a great partner for luxury businesses in any industry. We assist in functionality improvement for mobile and omnichannel communication with customers moving the brand recognition to the new level. Our company scrupulously works on every indicator to evaluate the performance of your company. We have enough talent and technological solutions to support our ambitions and remaining one of the top companies in the industry. is even more encouraging: luxury brands’ rewards programs can increase the number of high-spenders from 10% to 15-20%.

What kind of a luxury brand’s rewards program would be effective?

It makes your customers feel special

According to Forrester research, mass-market customers gravitate towards rewards programs as a way to cut expenses, but 59% of them want getting special offers, enhanced customer services or participation in member-only events and experiences. As far as experiences are concerned, remember that 39% of active loyalty program participants are interested in experiential rewards: tickets to a VIP event or exclusive workshop.

It has an attractive cover

Your goal is to make your rewards program look attractive and delicious. Give your program, points and tiers creative names:

  • Starbucks gives stars to collect and redeem;
  • Sephora called its program Beauty Insider;
  • tarte launched their loyalty program with the name Pretty Perks;
  • Swarovski in its Just Because rewards program created the following tiers: Shimmer, Shine, Sparkle and Swarovski Prestige.
Swarovski

It makes each earned point valuable

It can impact the way your target audience perceives the program. A lot of points with every order doesn’t add value as it is ‘available for many’.

It helps measuring your relationship with customers

However, to create a working rewarding plan it’s necessary to investigate your target audience, understand the features of the segment and keep a constant control over the results of the chosen strategy.

Measure your relationship with customer by using metrics: measure new members, breakage rate, redemption rate etc. It helps to reveal how customers respond to a marketer-controlled message and adjust this message, if necessary.

B2C marketing specialists should monitor the impact of rewards program on “customer involvement with a brand, physical store visits, social and customer service call sentiment, shared content, and brand affinity” – says Forrester research agency.

It doesn’t say a word about ‘savings’ and ‘discounts’

This one is crucial. High class customers aren’t interested in saving on purchases, it may even look offensive and discouraging. The words ‘unique’, ‘exclusive’, ‘only’ are a lot more suitable. Make sure your brand provides experience that is not available to everyone: you can offer both generic and non-generic rewards, offer a choice, add more value to rewards by giving time limits for redemption and offering them only once.

Audemars

The reward strategy of Audemars Piguet, a Swiss watch manufacturer, is a great example of a successful rewards program. The brand has organized unique tutorials at the Four Seasons Hotel in Manhattan. Participants had an opportunity to complete the assembling of their watch by adding the last missing details to the mechanism. This way the product has acquired the status of a special personal thing – its value has increased significantly in the eyes of the owner.

uterque

You can practice in offering pre-sales for dedicated customers as one the ways to reward them. For example, the Spanish fashion company Uterque has offered an opportunity to buy clothes from the new collection before it becomes available for other customers. The advantage of this type of reward is that pre-sales offer all the sizes, colors and models from the new collection of the brand. Thus, a privileged customer has the option of choosing first. By adding an services of a personal shopper – you can enhance the value.

It offers VIP status – to few

VIP tiers should be created the way only a limited number of shoppers can reach the top. Luxury brand customers enjoy being on top of the status pyramid, so give them what they want or show them the way to get there. The optimal percentage of VIP shoppers is around 5% – to make it motivating and exclusive indeed.

It engages opinion shapers and media

Due to various digital technologies and the Internet, bloggers have directly connected brands’ products and their audience. Today they test new products, write reviews and offer their own opinion on what is best for a certain market segment. Bloggers may attract new customers and keep the dedicated ones. Lots of millennials and even older people pay attention to what they say. That’s why collaboration with a famous blogger is a great option to build a strong relationship with customers for a luxury brand.

Dior

Fashion brand Dior has collaborated with blogger Hanneli Mustaparta. The girl has taken part in a series of makeup tutorials created for the brand. She has used Dior’s latest beauty products and showed how to apply them in a proper way. Cosmetic brand MAC has collaborated with blogger Goar Avetisyan, Clinique called Hannah Bronfman, Tavi Gevinson and Margaret Zhang to participate in the advertising project.

Lancome has approached the collaborations even more creatively: starting in 2015, the company has its own blogger – make-up artist Lisa Eldridge. Regular posts in social networks has strengthened relations with the brand’s existing audience and additionally has attracted new customers.

It makes use of digital technologies

Personalized brand experience is exactly what loyalty brand’s customers seek for. Traditional rewards programs with plastic cards are going to lose the great battle with updated in-built programs available in mobile apps, because the latter has better opportunities to reach customers, enhance their awareness of company’s news and events and turn a rewards program into captivating gamified experience.

loreal

L’Oreal Paris has developed an interactive showcase within an app – Makeup Genius. Customers can visualize the use of any decorative cosmetics product by uploading a photo and adding a product. This provides customers with a lot of positive emotions, contributes to the creation of user-generated content and increases visits to offline stores. Users have already tested more than 65 million looks.

Sephora replaced plastic cards and created a loyalty program within their mobile app. The use of iBeacon technology allows the client to receive targeted notifications while moving around the store. At certain stands they receive messages about exclusive offers, invitations to workshops or free advice from a make-up artist.

At the checkout the application reminds of the earned bonuses and gift certificates to redeem. You can use:

  • Refined mobile app design that matches the in-store brand perception;
  • Personalized push-notifications based on previous purchases and analytical data;
  • Creating your rewards program tiers as game levels, where customers unlock rewards;
  • Use personal suggestions before the in-app checkout: matching or similar goods, ‘you may have forgotten to add X to your cart’;
  • iBeacon technologies;

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