StrategyFeb 06, 2019

Who Won Loyalty in 2018: The Effectiveness of Reward Programs

Cooper Hess

I recently emptied an old wallet to consolidate into a new, smaller one. During this process, I stumbled across many punch cards and loyalty cards for small businesses and restaurants that had only been used a few times each. As I threw several in the trash, I contemplated what separates a successful loyalty program from an unsuccessful one and how brands can successfully develop relationships with their customer bases through loyalty programs.

Loyalty programs can be a tool to learn more about customers and use that information to increase retention, improve service offerings, and enhance digital and mobile technology. This, in turn, can increase customer spending. Punch cards are a step in the right direction, but the biggest winners implement a cohesive loyalty strategy aimed at capturing the right information on their customers. In this article, I’ve identified some of the loyalty and rewards programs that rose above the rest in 2018.

Who Won in Financial Service Rewards/Loyalty Programs: Chase Sapphire Reserve

The Chase Sapphire Reserve credit card was able to win loyalty and stand out among the many different financial services rewards and loyalty programs in 2018 due to its large sign-up bonus, increased earning rates, and valuable services and redemptions that provide value for cardholders far surpassing the typical credit card rewards program. The card, which was at one point so in demand that Chase ran out of materials required to produce the physical card, was one of several cards released by credit card providers that was only accessible through a high yearly fee. The Sapphire Reserve was a highly popular resource, and given the amount of benefits provided to customers, will continue to be popular.

Due to the higher than normal annual fee, the card provides a variety of premium benefits, including a credit toward Global Entry/TSA PreCheck, $300 toward any travel purchases, and increased value when redeeming points for travel or other rewards. Along with these many benefits, the premium nature of the card creates a sense of exclusivity among the many who have begun to use this card. This, combined with positive publicity and word of mouth among early adopters, has inspired loyalty and additional sign-ups, all of which have given Chase an additional revenue stream that far exceeds the cost of providing high quality benefits. Moving forward, Chase will have the opportunity to provide additional benefits and services to Reserve cardholders.

Who Won in Retail Rewards/Loyalty Programs: Nordstrom Nordy Club

In September, Nordstrom announced an update and re-branding of their longstanding loyalty program. Newly renamed “Nordy Club,” the program provides a focused digital experience through a mobile app, increased membership options for customers without the store branded credit card, and more flexibility to redeem awards at lower levels. The new smartphone app also aims to be a more engaging customer experience. A highly personalized “Nordy Portrait” feature will allow customers to develop their style choices and store them in the app, as well as receive personalized fashion recommendations based on past shopping and browsing history. Nordstrom has taken an established and successful rewards program and updated it to engage a wider customer loyalty base, which has seen 20% growth. The improved customer engagement through high-tech digital features can be considered a strong differentiator for customers seeking personalization in a crowded retail industry reaching for new ways to attract loyal shoppers.

Who Won in Food Service Rewards/Loyalty Programs: Chick-fil-A One

In the fast food restaurant segment, loyalty has often been difficult to achieve due to the transactional and, oftentimes, impersonal service. Chick-fil-A has sought to be the exception to the rule through relentless focus on providing excellent customer service and the famous “my pleasure” when thanked by their customers. In 2018, they took steps to extend their customer service to the digital space as well. The introduction of the Chick-fil-A One app aims to become an influential digital loyalty and rewards experience in the fast food segment. The app adds a high-quality digital customer experience to the vaunted in-restaurant service quality bar.

At its core, Chick-fil-A One allows for members to earn points across three different membership levels determined by a customer’s spending in exchange for redemptions toward free food. By offering tiered membership levels, Chick-fil-A can gather data from over 13 million of its most important customers and gain a better understanding of what separates a casual customer from their diehard chicken fans. Additionally, enabled by their new digital loyalty experience, Chick-fil-A can stay top-of-mind with their customer base through push notifications showcasing special offers. For Chick-fil-A, improving loyalty with customers in exchange for free rewards is a win-win situation. Commitment to a consistent digital product offering on par with their in-restaurant product is a recipe for continued success for the beloved restaurant.

Who Won in Transportation Rewards/Loyalty Programs: Ride Sharing Giants (Uber and Lyft)

Uber and Lyft have been battling back and forth for several years in a pioneering industry, but in 2018 their competition shifted toward customer loyalty programs to grow and retain their customer bases. Both companies now have programs allowing riders to gain points for use on free ride credits, upgrades to nicer cars, avoidance of demand-based pricing increases on their most common routes, and priority in busy areas like airports, concerts, and sporting events. Through these benefits, both Uber and Lyft hope to encourage increased usage among their customers and even hopefully convince some to abandon their personal cars and rely solely on ride sharing. It will be interesting to see how the loyalty arms race continues to evolve as both companies seek IPOs in early 2019.

Increasing Customer Loyalty

Loyalty was a crucial focus to building a successful brand in 2018 for the companies outlined here and will continue to be a key consideration in effective business strategies across all industries. At Credera, we work with clients to create quality customer experiences that inspire loyalty to brands, products, and services through innovative, custom solutions. If your company needs to increase customer loyalty, please reach out for more information on how Credera can help.

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