The Ultimate Guide to Data Driven Loyalty Programs in 2022

There was a time when brands engaged customers through a single channel: face-to-face, when the customer was paying for their purchases at the check-out.

Then brands started engaging customers in other ways – posters at the bus stop, giant billboards along the highway, and commercials slotted in during your favorite TV shows.

These days, brands can engage customers in a whole host of ways, including:

• Social media
• Email
• Text messages
• Push notifications (via digital loyalty apps)
• The list goes on…

Age-old strategies like celebrity endorsements and product placement are giving way to more targeted marketing techniques, as it’s getting easier to directly engage specific customers and appeal to their unique preferences. How? By harnessing the power of customer data.

Why is data an essential component to any decent loyalty program in 2022?

Analytics is transforming customer loyalty programs into data-driven platforms. Consider your standard “Buy X, Get Y” paper punch card system. For the sake of simplicity, let’s use the example: “Buy 6 coffees, and enjoy your 7th free”.

There’s not a whole lot of flexibility in this reward-for-purchase structure. Perhaps the customer can earn a stamp with any hot drink, or use their stamps to redeem a milkshake or iced tea rather than a coffee.

But what if they buy a sandwich and a slice of cake along with their coffee every time? Does a single free coffee adequately reward six transactions of around $10 each? Surely their reward should be larger, or come sooner than that of someone who is only purchasing a coffee with each visit.

What about the customer who is always in a rush to get to work… would they perhaps place higher value on skip-the-queue benefits over a free coffee with every six purchases?

Paper punch cards never allowed for this kind of versatility in a loyalty program, because they never told the brand anything about the customer (other than how many stamps they’ve earned). As such, no loyalty program could appeal to every potential customer at once.

But with a data-driven digital loyalty program, customers can enjoy more flexibility in how they accrue points, what rewards they receive, and how the brand and the consumer engage each other.

This means that two customers from different demographics, with different preferences and purchase histories can simultaneously enjoy completely different experiences with the same loyalty program in 2022.

This is called personalization, and it leaves the “one size fits all” approach to marketing in the dust.

When used properly, data provides brands with the means to directly engage existing customers with tailored communications, making it easier to:

– increase frequency of visit
– upgrade the average transaction value (or “basket-size”)
– strengthen customers’ emotional connection to the brand

Data-driven loyalty programs offer answers to questions like “what are my customers buying?”, “how much are my loyal customers spending?”, “how frequently are they making purchases?”

For the customer who only ever buys formal menswear, why not send him a push notification offering him a limited-time 30% discount on all collared shirts, satchel bags and dressy shoes purchased in-store or online?

The most successful loyalty programs in 2022 are driven by data, including Starbucks Rewards and Sephora Beauty Insider.

Starbucks Rewards

Source: Starbucks

A recent Manifest study revealed that of all smartphone users who regularly use restaurant loyalty apps, nearly half of them (48%) use Starbucks Rewards.

Former Starbucks CFO Scott Maw said digital engagement was almost solely responsible for Starbucks’ same-store sales growth. More and more customers are interacting with Starbucks (browsing the menu, placing orders and even paying) via the app.

The premise of Starbucks Rewards is simple: for every dollar the customer spends on purchases made through the app, they earn two stars. There are numerous promotions and double-star days where customers can earn bonus points and maximize their rewards.

Customers receive push notifications to let them know their stars are about to expire, with instructions on how to save them. Other push notifications include spontaneous limited-time discounts, invitations to try new menu items for free, and other tailored offers that always seem to come through right around lunch-time, or when a customer is in close proximity to a Starbucks.

All of this information stems from the customer’s previous transactions: what products they like, what time of day they tend to visit the store, whether they prefer to dine in or take away… data.

Not only does this personalize the relationship between Starbucks and each of its 16-million-plus loyalty members, but it also encourages a sense of urgency and FOMO (fear of missing out).

Sephora Beauty Insider

Image Source: Sephora

With 25 million members and counting, it’s safe to say that Sephora has achieved astronomical success with its Beauty Insider loyalty program.

Like many standard loyalty programs, customers can exchange accrued points for rewards like discounts and free beauty products.

Unlike standard loyalty programs, however, customers can also choose to exchange their hard-earned points for memorable experiences exclusive to Sephora, such as:

• meeting the founder of your favourite cosmetics brand
• indulging in a luxurious day spa package
• creating your own personalized fragrance
• enjoying a personal makeover with expert recommendations and advice
• gaining exclusive access to product launch events
• VIP invites to in-store beauty classes

The data acquired from a Beauty Insider member’s interactions with Sephora will give the rewards database a good indication of what kind of experiential rewards will most appeal to every customer.

By now, you should have a pretty clear understanding of why customer data is the crucial ingredient to any digital loyalty program. More data = more personalization.

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So, what are some techniques brands can use to build up a healthy pool of customer data from the get-go?

1. Offer customers a mobile app-based rewards program

The majority of customers carry their mobile phone with them all day. A recent Vibes report stated that nearly three-quarters of smartphone users are eager to have all their loyalty programs stored on their devices in one handy spot, for convenience and ease of use.

When a customer gives you their phone number and/or email address upon signing up to an app, you have the opportunity to directly engage them. This is step one.

2. Ask for customers’ date of birth, in exchange for a birthday reward

Birthday rewards are a great incentive for customers to join, and they immediately provide the business with insight into a customer’s age bracket, which is useful for several reasons. You now have the first nugget of information that allows you to segment your newest loyalty program member into a generational group.

3. Extract all relevant information from customer receipts, right from the very first transaction

When a customer makes a purchase, their receipt reveals the “who, what, when and where” of that transaction. This information is invaluable, and it’s the reason why receipt scanning is the most effective mechanism for attaining customer data. It’s also a remarkably easy validation method for the customer to accrue points and redeem rewards.

What is receipt scanning?

In regards to digital loyalty programs, receipt scanning is a method for customers to prove their purchase and validate their loyalty points. Receipt scanning technology uses OCR (optical character recognition) to collect all relevant information from a picture of a receipt, and log it in the loyalty platform database.

The customer simply takes a photo of the receipt on their mobile device, and uploads the photo through the digital loyalty app. The information on the receipt is converted into data, and the loyalty points are automatically added to their membership.

Simple as that! As for brands, all the other information gained from the receipt allows them to increasingly personalize the customer’s loyalty program experience.

Receipt scanning technology allows for a much more streamlined, convenient and personalized customer experience than any other method for validating loyalty points; including paper punch cards, POS integration and the use of unique QR codes.

Case in point: Huggies Rewards

Image Source: Huggies

Huggies is a leading diaper brand that distributes products through many retailers around the world, including supermarkets, pharmacies and department stores. The Huggies Rewards Program (only available in the United States) rewards customers for repeat Huggies purchases and brand engagement.

The customer purchases a Huggies product, and then uploads their receipt through the Huggies Rewards app within 30 days of making the purchase. The receipt is scanned, the data is extracted and the points are automatically awarded to the customer’s account.

Huggies can use the data collected from receipts to segment its consumers into groups such as:

– VIP customers
– frequent customers
– infrequent customers
– lapsed customers

This allows Huggies to directly engage its most important customers (the VIPs) and incentivize customers from other segments to move up the value chain.

Receipt scanning technology is the ideal solution for FMCG brands interested in a data-driven loyalty program

For brands that produce fast-moving consumer goods (FMCG), a digital loyalty app with receipt scan technology can change the entire business. It establishes a direct connection between the brand and the customer, even though the product is being sold through an intermediary. This system requires zero involvement from the third-party intermediary.

A direct connection to the end-consumer allows FMCG brands to see exactly what customers are buying from them, what else they’re buying alongside it, and other crucial information that allows the brand to send increasingly tailored offers, communications and rewards.

How can a brand get the most out of its data-driven loyalty program?

There are some techniques you can employ to ensure that your digital loyalty program is using all that customer data to its full potential.

1. Engage lapsed customers with enticing offers

Often, a simple text or push notification with a small but attractive offer can be enough to lure a lapsed customer back.

This is a very straightforward process, and involves reaching out to a particular segment – for example, any registered loyalty program member who hasn’t visited the store or made an online purchase in the last three weeks.

Why not send this segment of customers a message along the lines of: “We haven’t seen you around the shop for a while – come in this week for a free/discounted X on us!”

2. Acknowledge milestones in every customer’s journey

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A sure-fire way to foster an emotional connection between the brand and the customer is to not only acknowledge milestones in the customer’s journey with your loyalty program, but surprise them with a spontaneous reward.

“This is your ninth meal with us – enjoy your tenth meal free!” or “You’ve been a valued member of our loyalty program for a year today! To show our gratitude, we’d like to offer you 50% off your next purchase!”.

Not only does this demonstrate that you value and appreciate their support for your business, but it also encourages further visitation.

3. Gamification

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When used alongside customer data, gamification can be a very powerful tool in digital loyalty programs. Starbucks, for example, is well-versed in gamifying each customer’s Starbucks Rewards experience in such a way that it appeals specifically to them.

A juice bar might use customer data to create a segment of customers who have tried all but three of their smoothies, for instance, and then send this group of customers targeted communications.

“You haven’t tasted all the colors of the rainbow until you’ve tried every one of our delicious smoothies! Try our X, Y and Z smoothies, and we’ll give you your favorite for free on your next visit!”

These kinds of menu challenges and “gotta try ‘em all” strategies can be very effective, especially when they are targeted to each customer’s unique preferences.

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