Multiple luxury retailers reported lackluster sales in the past six months, sparking a debate about what it takes to earn and keep affluent customers’ loyalty.
According to Karen Katz, CEO of Neiman Marcus, the price transparency and accessibility that comes with online shopping is also driving customer attrition. Thanks to the proliferation of e-commerce and cross-channel communications strategies, consumers have access to more luxury brands than ever before.
Faced with more competition, luxury brands are looking to bolster customer loyalty. One way is through a well-designed loyalty program. The best programs increase sales, engage customers, and create brand advocates. But not all loyalty programs are created equal, and designing a program that engages the luxury shopper can be challenging. While affluent customers love a good deal as much as everyone else, they can’t be lured with the same classic punchcard offers and cash-back opportunities that work well for other brands.
Luxury brands make mistakes when they don’t consider what differentiates their consumer base from the rest. So what traps should retailers avoid when designing luxury loyalty programs?
• Prioritizing hard-value rewards over experiences and benefits: Reduced prices for repeat shoppers are more motivating for consumers who are shopping at discount brands. Luxury shoppers, however, need more emotional incentives.
Luxury brands should reward loyal customers with personalized services that add value to the experience beyond just some saved cash. Expedited checkouts, concierge services, beauty consultations, and other services will create a more lasting impression than 10% off. As a plus, these services are typically less costly to the retailer in the long run.
• Providing an inconsistent eperience across channels: Loyal luxury customers want VIP treatment everywhere—not just in a store. Loyalty programs are less effective if they are not consistently supported across all channels, including desktop and mobile websites and apps. This doesn’t have to mean providing the same exact benefits across platforms, but loyal customers should be rewarded regardless of where they shop with a brand.
In fact, offering web or mobile exclusives is a great way to engage luxury shoppers across channels. For example, this past holiday season some luxury brands offered products that could only be purchased by members of the loyalty program through the mobile app.
Starbucks, while not necessarily a luxury brand, provides an example of a strong omnichannel loyalty program with My Starbucks Rewards. The app displays loyalty status, allows for reward redemption and on-the-go ordering, acts as a mobile payment vehicle, and even streams music.
• Failing to recognize member status: For luxury shoppers, loyalty programs are often a badge of honor. Luxury brands can drive loyalty by recognizing the member’s status.
Retailers such as Neiman Marcus and Nordstrom use loyalty programs with tiers based on shopper value as thresholds to members-only benefits and services. This might translate to invitations to exclusive events such as fashion shows, receptions, or partnerships with other luxury brands (top-tier hotels, auto companies, etc.).
Additionally, luxury brands can train sales associates to make loyal customers feel valued. Staff should recognize the most loyal members by name and learn their preferences and personal style. Creating a personal relationship with frequent shoppers will do more to drive loyalty than any gimmick or singular savings.
As luxury brands face steep competition among each other and non-luxury brands, it’s tempting to look at cost-cutting measures. But loyalty and engagement programs should not be on the chopping block, especially because a well-designed program should be producing measurably incremental revenue.
Skimping on loyalty efforts can be a critical mistake for brands looking to give shoppers reasons to keep coming back. Rather than trim a loyalty program or implement a lackluster one, upscale brands must refine their strategies to provide value to their frequent shoppers looking for a unique experience.