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How to develop an effective Retail Loyalty Program?
How to develop an effective Retail Loyalty Program?

An excellent Retail Loyalty Program shapes customer satisfaction and loyalty. As a retail owner, you have to be specific while developing the program. There are multiple Loyalty programs available in the market, the point is to invest some time in knowing them and figuring out if they match your requirements. It might sound easy, but market research shows retailers often fail to understand the bridge between program and business objectives. Here are the stats that shows the same:

  • A study states that customers are active only on 6.7/15 membership subscriptions, i.e., less than half of the Retail Loyalty Programs.
  • Many Retail Loyalty Programs are traditional, and even in the data-dominating era of the 21st century, we rarely witness any pathbreaking programs.
  • Nearly 81% of the memberships are from Gen X, and they are more inclined to gamified Loyalty Programs whereas, only 62% of the retail sector uses Gamified approach for their Loyalty Program.
  • Only 2/10 customers are satisfied with the existing Retail Loyalty Program.

Retail Loyalty Programs Challenges

  • High Dropout rate:

    You might be giving out exciting offers to customers, but somehow, customers are not using it. Is it worrisome? A minute dip in customers availing offers might be a good thing for you as it saves unnecessary expenses.

    It is worse when you see a lot of dropouts in your offer-based Loyalty Program. These dropouts could mean customers are failing to connect with your brand.


    You need to personalize your Loyalty Program and check if the right customers are getting the right information. Keep on analyzing the customer dropout rate and its causes by performing quantitative/qualitative research or both. Also, stay aware of customer interaction trends.

  • Similar Retail Loyalty Programs:

    If you are witnessing a dip in your subscribers, it can be due to customers’ loss of interest in the Loyalty Program.

    Customers can lose interest due to a generalized Loyalty Program that lacks distinction. It can even force customers away from interacting with the brand!


    You must bring out your unique value proposition through customer-friendly offers and must spread the word across social media channels, the later especially if you have a strong USP.

    Every retailer has unique ways to conduct its business and maintain its customer base. Some unique value propositions examples:

    • Walmart:

      Walmart has managed to stay in business even in the era of Amazon, eBay, and other eCommerce giants. It has managed to do so by continuing to be true to its customers - By offering them money-saving deals on every purchase. Their unique value proposition - “Save Money. Live Better.

    • Zappos:

      This Las-Vegas based online retailer offers customers various shoes, clothing, and accessories options for online buying. It helps customers with a series of customizable product selection options that help them to minimize their shopping options based on their needs. That allows customers to buy things the way they like.

  • Inability to Attract Younger Customers:

    A retail Loyalty Program should impress Gen X, Millennials, and Gen Z.

    A study shows a sharp decline in reward-based Reward Loyalty Programs and a need for new ways to keep the younger and tech-savvy audiences engaged!


    You should bring out an interactive Loyalty Program to keep the tech-savvy generation happy!

    Gamifying the overall experience and usage of interactive games, quizzes, and feedback would become industry standard soon.

  • Inability to Look beyond Transactional Interaction:

    A study shows that nearly 75% of the customers want to stay connected with businesses on a non-transactional level. The question is - Are retailers keeping their doors open to interaction beyond business through their Retail Loyalty Programs? Often not!


    Frequently interact with your customers on social media and through newsletters, email campaigns, and feedback forms.

  • Focusing Only on Discounts:

    You must know that discounts are not always the answer to an effective Retail Loyalty Program. Customers might not always respond to the offered discounts.


    You must invest ample time in Customer Experience. A powerful combination of incentives and a smooth Customer Experience can boost your brand name and help grow a large customer base.

Things to Focus on Before Laying Out a Retail Loyalty Program:

  • The retail sector is fiercely competitive.
  • Retailers need to bring out their unique identity while laying out their Loyalty Programs.
  • The retail Loyalty Program should mainly focus on establishing a connection between your repeat customer and the brand ethos.

Steps to develop an effective Retail Loyalty Program

  • Get to know customers:

    You need to have a 360o view of your customers, for example, what bought them to the website, the channel of purchase (social, emotional, rational), and so on. Having answers to the following questions would be helpful for you to understand your customers:

    • Which customers are engaging and why?
    • What are their preferences?
    • What is their profitability?
    • When are the customers more active?
  • Embed Omni-Channel:

    Millennials and Gen Z often associate with brands that offer an omnichannel experience. That means brands should be reachable from every social media channel and through any device and, if possible, via an app. For example, Apple – be it their website, mobile web app, native mobile store app, in-store purchase – the journey remains the same. If customers feel safe and secure while interacting with official channels, there would be a higher chance of premium member conversion.

  • Strategize Retail Loyalty Program:

    Once you are aware of your customer's perspectives, you need to find your frequent customers. You must analyze how to keep those customers engaged with your Loyalty Program. You can do so by distributing:

    • Rewards, Coupons
    • Referrals, Partner Programs
    • Memberships, Free Trials
  • Pilot:

    Once you are ready, run a pilot with a selected subset of your customers. You must keep on measuring the responses – capture the feedback and reaction to dig deeper.

  • Testing:

    You need to keep track of your customer’s feedback and ensure bugs/defects are remediated early. Testing a loyalty program even before it is primed for full launch helps retailers understand the implementation success rate.

  • Implement:

    Once you have all the data points, you should roll out the Retail Loyalty Program for the wider audience and look for social media signals for immediate reaction.

  • Keep an eye out for improvement:

    It also helps to keep an eye on customers’ purchasing habits. It is seen that customers are more interested in engaging with a Loyalty Program when they are offered the following services-

    • Easy to access 24X7 Customer service
    • Secure website
    • Omni-channel experience

Technologies that Companies Must Embrace While Developing a Retail Loyalty Program: 

  • Big Data and Machine Learning:

    Data crunching and machine learning can help you identify the reasons for a drop in loyal customer base and the pattern to attract a new set of loyal customers. While the costs of setting up an internal data science team could be high, hiring an analytics company can help you precisely achieving your business objectives at a far lower cost.

  • Gamification Software:

    A gamification software helps retailers integrate polls, trivia, and other interactive elements into their platform.


  • Engagement Solution:

    A retailer must be able to reach out non-intrusively to the customers on various platforms. That is possible only when they have a good engagement platform.

  • Retail Loyalty Platforms:

    A retail loyalty platform is a single stop shop for all the needs of a retailer. Loyalty Platforms such as our business partner, Brierley, help you achieve customer delight and much more with minimal effort!

Top Retailers with their Retail Loyalty Program:

  • Target:

    Target displays customers’ preferences over customers’ mobile phones via their app.

    How does it work?

    Customers scan the product barcode, and they get offers and discounts displayed on their mobile screens.

    Customers can even pay with any saved cards via this app. They can also choose to pick up or drive up to collect their stuff.


    Source: Target

  • Sephora:

    They are quite a tech-savvy organization that has an interactive chatbot and Apple Pay.

    Sephora's Retail Loyalty Program:

    It offers rewards to the US and Canada region customers. After all purchases, the customers have rewarded some points that are redeemed later for the next big purchase!


    Source: Sephora

The above examples and pointers suggest that a well-researched, personalized, interactive, continuously tested Retail Loyalty Program is always the champion!

If you want help with strategizing and energizing your retail loyalty program, then let’s connect!