This is a repost of my recap on loyalty strategy, from the Secrets of Retail event at OgilvyOne.

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Loyalty Panel speakers, including MikMak, Fitch, Ikea, Simon Ventures, The Gap, and Zady

Rewards have gone hand in hand with loyalty marketing since the advent of frequent-flyer programs. The idea is simple: encourage repeat business by rewarding customers for their loyalty. It’s true that rewards are a great tool for encouraging a sale. But the customer who only comes back for a discount isn’t necessarily loyal. Retail innovators are building true loyalty by taking the focus off rewards.

To create real loyalty:

1)  Start by creating a series of positive experiences

The CMO of JackThreads referred to his eCommerce strategy as “a series of hugs until purchase.” I think the same is true when considering your loyalty strategy. Make customers feel good, and they will come back (no rewards needed). This means diving deep into your customer journey to figure out how and where your brand can provide unique value. Tricia Nichols (Global Lead of Consumer Engagement at Gap) understands this. She owned Gap’s partnership with Virgin Hotels. Under this program, a hotel guest at Virgin can order Gap clothes to their hotel room via mobile device. Anything they decide to keep goes on the hotel bill. Instead of being a reward, this is actually another point of sale for Gap. But it’s a point of sale that provides value to the customer too. A traveler can hop on a plane knowing they can pick up anything they forgot, right in their hotel. And knowing this program exists, a customer is more likely to come back to both the Gap and Virgin Hotels.

2)  Create habits by tapping into existing behaviors

If you’re trying to build customer loyalty, what you’re really trying to do is build a habit. You want customers coming back again and again. According to The Power of Habit, the easiest way to create a new habit is to tap into ones that already exist. Most retail marketers forget this. They try to force habits on customers by bombarding them with marketing until customers make a purchase. Rachel Tipograph (CEO of MikMak) confirmed that her old job in retail was to “annoy customers.” So she founded MikMak. MikMak doesn’t fill your inbox when you’re busy. Instead, MikMak taps into people’s habit of consuming content in the evening. How? MikMak releases shoppable videos every night at 9 p.m. on their app. The videos are so fun and entertaining that customers tune in to the app every night. They’ve formed a habit. And now MikMak has a loyal base of consistent users on their eCommerce platform.

J. Skyler Fernandes also touched on the idea of tapping into existing habits. Mr. Fernandes is Managing Director of Simon Venture Group, a fund set up to invest in the future of retail. He gets regular pitches from start-ups aiming to offer a universal loyalty card across brands. According to Fernandes, these companies fail to gain traction because consumers don’t have them top of mind. They don’t have a habit of using universal cards. What would work? Fernandes wants a universal play that requires no effort on the part of the consumer. “What if your Visa/Amex/MasterCard could become your loyalty card?” he asked. In other words, build the use of a universal loyalty program into a habit people already have.

3)  Don’t forget about your employees

Fitch’s Christian Davies brought up something that’s easy to forget in today’s age of digital experiences. He reminded us of the importance of people: “If I ask someone about their top ten moments in retail, they all involve people. If I ask them about their ten worst moments, they all involve people.” Employees are one of retail’s secret weapons for building loyalty. They can differentiate an experience, build trust with customers, and create the emotional connection critical to loyalty. But, they can just as easily turn off consumers from a brand. It’s crucial for retailers to consider their employees when crafting a loyalty strategy.

It might seem like digital would take away from the importance of people, but it’s actually made them more important. Messaging apps and concierge-style services provide new opportunities to build the connection with consumers. 2016 has already been dubbed the “year of conversational commerce.” More transactions will happen in messaging apps. Those retailers who take advantage of this to build loyalty (like Nordstrom’s TextStyle) will reap the benefits.

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