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Times are changing for loyalty programs: How brands like Sephora have adapted in the time of COVID-19

Sephora's loyalty program adaptation amid COVID-19.

Customer loyalty programs have evolved beyond the points-for-rewards cookie-cutter format. Now, they are much more than that. They’re revenue drivers, brand reps, and vital to building customer relationships.

Recent events have caused customer loyalty programs to – rightly – be thrust into the ecommerce spotlight. This is because classic acquisition strategies are skating on thin ice. Uncertain times are impacting customer confidence and trying out new brands remains low on the priority list. To cope with life in lockdown, some 29% of marketers have even reallocated budget from acquisition to retention.

With a loyalty program, you can focus on the fans that you’ve already got, rather than investing in new customers that are less likely to buy. Plus, the relationship you’ve built will encourage customers to return and increase the wallet share they spend with you over time.

At LoyaltyLion, we’re seeing the needle shift before our eyes. Across 600 stores using our programs, we’ve seen loyalty program activity rising. The number of points earned and redeemed has remained 15% higher than when the pandemic first hit. This means customers are still interacting with brands they know and love.

So the data is showing a positive outlook for loyalty programs. But what’s been going on under the hood? As more and more consumers move to shopping online, we’ve seen many retailers implementing new approaches to their loyalty programs, in order to increase their share in existing customers’ wallets. Here’s a taster. 

Sephora’s beauty insider program: Rewarding with one experiential perk at a time

Rewarding around 25 million members, Sephora’s Beauty Insider program isn’t one to scoff at. Last week, the beauty brand announced another overhaul to its loyalty program, showing that their rewards strategy is still front of mind, despite challenging times. 

Allegra Stanley Krishnan, Sephora’s VP of loyalty, noticed that members wanted to use and earn points in new ways. Because of this, they’ve extended their rewards to offer facials from “skin-care gurus” and behind-the-scenes access to product formulations. They’ve also introduced members discounts and point multiplier events. 

Sephora has also promised that the program facelift will “provide greater emotional and memorable experiences”. This overhaul is an attempt to get customers to increase the share of wallet spent on cosmetics. Customers will return and spend as they know re-engagement edges them towards the experiential rewards.

Stanley Krishnan also noted that Sephora’s “members are craving value more than ever”. That’s why they are now letting customers use their points to donate to charities such as; National Black Justice Coalition (which works with the Black LGBTQ+ community), and Project Glimmer (which serves at-risk teenage girls). 

Sephora is using their community to rally behind important causes that matter to their employees and customers. A valuable approach, as 62% of customers of consumers told us they would join a loyalty program if they knew the rewards had a positive social impact.

“Our goal is to create a multi-faceted and well-rounded program to cater to the changing needs of our clients. We know they want more ways to save and even more access to things like products, brand founders, services and one-of-a-kind experiences that are unique to Sephora”

Allegra Stanley Krishnan, Vice President and General Manager of Loyalty at Sephora. Source: BusinessWire

Astrid and Miyu: Content to create excitement

When customers join a loyalty program, they’re saying, “send me cool stuff”. Recent events have made brand to customer communication even more crucial. 

Shoppers needed to know if brands are still trading, what the “new normal” means for delivery, and if stores are able to get stock. The pandemic has also exposed the need for brands to calm customer worries with conversations online. 

Content has a leading role here. Of all the benefits it has to offer, its ability to provide value and build relationships has been vital. It’s also the first place shoppers look for positivity, inspiration and direction in times like this.

Astrid and Miyu are using their loyalty program and emails to tell positive stories through their content – rather than selling. They also use them as a way to build up their community, giving them something to look forward to.

Emails include positive mantras and feel-good playlists. They have also been offering mentorship and advice sessions to smaller businesses.

By focussing on community wellbeing, Astrid and Miyu have secured dedicated brand fans who will continue to re-engage after the pandemic passes.

100% Pure: Product diversification

With regular supply and demand chains getting disrupted, brands have got inventive. Many have rolled up their sleeves and buckled down to create new products for these trying times.

As a brand that strives “to live with compassion and empathy”, 100% Pure has created products to make its customers feel protected. This included a range of sanitizers. They have also allowed customers to buy a “Hand sanitizer donation” for someone else in need.

100% Pure has leaned on its existing customers to give back to a cause that reflects its values. With their loyalty program, Purist Perks, every time a donation is made, customers receive loyalty points. This makes shoppers more willing to donate as they know they get something in return. 

This also increases the likelihood of the customer giving a larger share of their wallet to the beauty brand over time. Over half of shoppers say they would re-engage with a brand if had a positive social impact. 100% Pure’s initiative will leave existing customers with a positive perception of the brand. They are then more likely to return as they know it has philanthropic values. 

The new normal for loyalty programs

This changing landscape has made retailers sit up and tweak their loyalty programs. The goal is to increase the share of wallet their customers give them during this time – and after the pandemic passes. We’ve said it before and we’ll say it again, “Those who survive are not the strongest or the most intelligent, but the most adaptable to change.” (thanks for that one Darwin). 

To find out how to shift gears and drive revenue from your loyal customers, start a conversation with us. Or, suss out the gaps in your retention strategy by filling out our retention scoresheet.

This article originally appeared in the LoyaltyLion blog and has been published here with permission.

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