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How Retailers Can Use Loyalty Points To Improve Customer Experience

As CTO of Engage People Inc. Len Covello helps companies differentiate loyalty programs to deliver a better experience for their customers.

Published August 21, 2023, 9:00 a.m. EST

In-store shopping took a back seat during the online shopping boom over the past several years, but tides are turning as shoppers go back to stores seeking a more personal connection. A survey by Mood Media found that nearly 40% of consumers are shopping in-store more now than in 2020.

As shoppers head back to in-store locations, they’re demanding a whole new retail experience centered around innovation, convenience and personalization. Square’s “The Future of Retail Report” says that 73% of consumers prefer automation like being able to view product information or inventory without having to find staff to ask. In short, consumers expect the convenience of modern digital experiences to carry over to physical stores.

This demand means having streamlined ways to pay, easy access to discounts and promotions, and the ability to personally engage in the ways that matter most to shoppers.

Retailers looking to capitalize on this trend while increasing customer acquisition, retention and conversion should look to their loyalty programs as a foundation, especially since 81% of consumers agree that a loyalty program membership influences their likelihood of making a purchase.

How Innovation Provides A Leg Up Against The Competition

By incorporating the ability to pay with points (PwP) at check out, especially in stores, retailers can be more progressive and innovative. Offering nontraditional payment options, like using the ability to pay with loyalty points, demonstrates alignment between the retailer and the future economy. It also serves as a point of differentiation, especially for early adopters.

Retailers that are tuned into the benefits of a seamless checkout experience can increase engagement and satisfaction. Square’s report points out that 70% of retailers have a goal of prioritizing more ways of shopping, including mobile checkout, virtual reality and QR Codes.

Part of looking to loyalty programs to drive engagement in-store is incorporating the ability to make purchases, either fully or in part, with loyalty points at checkout. The benefits for retailers are similar to incorporating other payment options, like mobile wallets or contactless payments.

By adding PwP into the mix, retailers can offer their customers a way to supplement their daily spending, especially if they choose to accept loyalty points from partner programs like gas stations, financial institutions or even other retailers. This can go far in building both brand loyalty and engagement.

In addition, providing a streamlined checkout process ensures customers have a consistent experience regardless of how they prefer to shop with a retailer. More options to engage cause stickiness, keeping a retailer top of mind for subsequent purchases.

So how can retailers get started with adding a modern flair to their loyalty offering?

Making The Most Out Of The Loyalty Experience

Regardless of whether a retailer is launching a loyalty program for the first time or evolving an existing one, setting goals is a critical first step. Goals can include anything from increasing brand awareness and engagement to expanding reach and attracting new customer bases. Or, for existing programs, the goal could be to reduce liabilities by clearing loyalty points from balance sheets.

Once the goals are clearly defined, it’s time for retailers to determine which modern loyalty program perks, features and solutions will best meet consumer demands while delivering the program goals. Examples of modern solutions can include launching an immersive loyalty program app or integrating the ability to pay with points at checkout. Each path comes with a unique set of challenges to consider.

Overcoming Challenges

Any time technology is involved, a decision needs to be made about whether to buy or build. Each option has its advantages and drawbacks and should be weighed against the broader business goals and objectives, as well as budgets and internal resources.

Control Versus Convenience

For example, by integrating with a loyalty technology vendor, retailers gain access to a team of individuals that are highly experienced and specialized in their craft. With a specialized team behind them, retailers don’t have to worry about building out the loyalty program infrastructure. Instead, they can focus internal resources on other areas. On the other hand, retailers wanting full control of their loyalty program and offerings might consider building their solutions in-house.

Drawbacks of outsourcing loyalty technology can include supplier changes that lead to disruptions as well as issues with exclusivity. But by keeping the build in-house, retailers may find themselves competing for internal resources, and potential changes in management can lead to incomplete project handovers.

Communicating With Customers

Another challenge to overcome when launching a new loyalty solution is figuring out how to best communicate the benefits to customers. Without a proper launch, the solution may not demonstrate ROI as quickly as retailers need it to. To combat this, retailers need to think through their broader marketing strategy. Will their customers be receptive to email blasts and drip campaigns, or are more personalized communications and promotions the way to go? Regardless of the path retailers choose, it is important to remain focused on driving traffic and converting sales.

For example, if a retailer’s new loyalty program includes the opportunity to pay with points or to leverage mobile wallets at checkout, they need to make sure customers download their apps or know how to leverage their mobile devices to take full advantage of the program. With more options for conversion, ensuring a proper rollout can positively impact a retailer’s bottom line.

Reducing Promotional Costs

Lastly, once the technology is up and running, retailers need to ensure they are reducing promotional costs to get the most out of their new investment. They can do this by offering focused and targeted promotions to key market segments rather than offering widespread discounts.

Final Thoughts

Retailers have a plethora of options to engage with consumers as the “return of the experience” continues to take hold. But one thing to keep in mind is that as consumers head back to stores, they’re going to expect the same online conveniences to carry over in-store. Loyalty programs, when approached using the steps and best practices listed here, can provide an opportunity for retailers to ensure this is the case by incorporating modern technology.


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