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Examples of Loyalty Programs

Posted by on July 25, 2020 in Business with 0 Comments

Starbucks-example of the my Starbucks Reward

Starbucks-you can hardly find a person who has not heard this name. This is a successful business (more than 22 thousand coffee shops in 67 countries) with a considerable income and an incalculable number of customers.

In 2007, the chain experienced a decline in sales, mass layoffs and the closure of a large number of its coffee shops. In the fight against the crisis, the solution was to completely change the menu, create new coffee recipes and a unique customer rewards program.

Before the crisis, Starbucks already implemented a loyalty management platform, according to the principle: “You buy a “Gold” card from us, worth$ 25, and it gives you a permanent discount of 10% from the receipt.” As practice has shown, customers were not ready to spend money on such a discount card and most refused to buy it.

Since 2008, My Starbucks Reward is a new Starbucks loyalty program. This is a free card that:

can be a gift certificate for the client's friends

it is a bonus card for accumulating stars

it acts as a card that can be used to pay in the Starbucks network, after putting money on it.

Rules for participation in My Starbucks Reward: 3 levels-Basic (Welcome), Green (Green) and Gold (Gold).

Customers of the Welcome level (regardless of the number of accumulated bonuses) received a gift for their birthday — a free drink of their choice.

Green level – 5 accumulated stars (1 order = 1 star)-free drink and access to paid Wi-Fi (recall that it was 2008 on the street and at that time Wi-Fi for visitors was still paid). It turned out that after 5 visits to the coffee shop, the client was given one coffee for free.

Gold level (30 accumulated stars)-giving the client a personalized card, the title of VIP client and free coffee after every 12 stars.

The program is a huge success and has more than 12 million active participants. And now let's think about the profit they get for each such active customer: in fact, they do not give them anything — just one 13-th Cup of coffee for free. And then we remember the price of coffee in this place and calculate the amount of the average check. Multiply by 12 visits and we have increased sales, a rapid increase in the percentage of regular customers, success and recognition.

In 2016, Starbucks again changes the game: now there are only two levels (Green and Gold) and earlier if the accrual of the stars was not related to the amount of the check, and was the main fact of the order, now take into consideration how much spent customer: the customer has received 1 star 1 visit, and now the star is issued at least $2. The conditions for moving to the Golg level have also changed — now it's not 30 stars, but 300, and you get a free Cup of coffee after 125 instead of 12 stars. Another new feature is that there is one day in the month when the customer gets double the number of stars.

Thus, Starbucks managed to save a fading business, stop the numerical closure of institutions, and return to the ranks of the most successful businesses in the world with a profit of $626.7 million for 2015.

Nordstrom-example of the Nordstrom Rewards

Can I combine the same loyalty program for a fashion online store and a retail outlet? The American company Nordstrom, where you can buy fashionable clothes, has created a loyalty program, which is called Nordstrom Rewards. When creating it, we set the main goal: the loyalty program should allow us to establish a strong dialogue between the buyer and the brand.

The beginning of the history of their loyalty program was the issue of cards for customers in 2007, which were linked to a Bank card. Card holders accumulate bonuses for purchases. The card was used in regular and online Nordstrom stores.

After that, Nordstrom updated the loyalty program and introduced a multi-level system: segmentation into levels, depending on the bonuses accumulated over the year. Top-level clients received VIP privileges, such as invitations to private fashion shows, first access to new collections, and others. After analyzing sales data, “bonus Days”were created to attract customers on days of low sales. Thus, buying something on this day, the customer receives bonuses for double or triple billing. Guess who managed to turn the least profitable periods into the most profitable ones?

Since 2016, customers can pay for purchases in a convenient way, and the customer is identified by their phone number when paying. Thus, Nordstrom uses the latest technologies in its loyalty programs.

Espresso Point-an example of a loyalty program

Opening a small business is a risk: the risk of losing your investment, failing, or drowning in a sea of competition. The owner of Espresso Joint also had to contend with competition when he opened a chain of coffee machines in 2010.

Marat Platonov, the owner of Espresso Point, came up with schemes for returning customers: special temporary promotions in the form of discounts on certain items in the menu, or the seventh Cup as a gift with the release of special cards on which customers marked each purchased Cup of coffee. The results were unsatisfactory — a large percentage of customers never returned, while others lost or forgot their cards. Therefore, the cost of attraction was not returned as a profit.

After that, we decided that we need to activate a loyalty program that will be stable and bring results. Among the many offers with the release of cards and mobile applications, Marat Platonov chose to connect the cardless loyalty program. As a result, this allowed us to build a customer base, reduce costs and increase sales — an acceptable solution for small businesses.

The first functionality that was applied in the case of espresso PTC is the accrual of bonuses from the amount of the receipt. This way, the customer was motivated to go back and buy another Cup.

Further, the reports allowed us to determine the days with the lowest sales and launch a temporary promotion for 100% bonus accrual.

In addition, customers receive notifications about the number of accumulated bonuses and promotions, as well as a free app where they can track their purchases and the latest network news. We plan to issue certificates and coupons for coffee lovers.

For more than 6 months of operation, sales increased due to the fact that the percentage of regular customers increased from 28% to 60%.

Analyzing the path we have passed, we get that the right approach to customers allows not only small businesses to survive, but also to achieve stability.

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