3 Ways for Retailers to Reimagine Their Loyalty Programs

Every retailer understands that they need to refresh their loyalty program regularly to keep customers interested and drive repeat purchases. However, differentiating loyalty programs and winning dedicated customers requires more than a points system, which every retailer has. It takes fostering emotional connections with shoppers through memorable experiences and unique offers.

Three ways for retailers to reinvigorate their loyalty programs and increase lifetime value are artificial intelligence chatbots for delivering personalized experiences; values-based rewards; and personalized, identity-driven offers.

AI Chatbots to Deliver Personalized Shopping Experiences

AI chatbots on e-commerce sites can do much more than simply answer questions about shipping, return policies and product details. Though they greatly streamline online shopping, they also collect valuable data about each customer to tailor a more personalized experience and product suggestions for each shopper.

Consider a college student shopping at an online store with an AI chatbot assistant. The chatbot might say, “Let me know if I can help you find discounts.” The shopper then may ask, “Do you offer discounts for college students?” If the answer is yes, the retailer gains a way to drive loyalty and repeat purchases. It can offer product suggestions and promotions for students upon a repeat visit or coordinate email and SMS campaigns — all because the AI embedded in the site collected valuable data through an initial conversation.

In this case, the individual shopper will begin to foster a sense of loyalty for the brand whose homepage consistently features promo codes for college students or on-trend products for young people. In short, AI chatbots can greatly enhance the efficacy of any loyalty program that hopes to keep up with its shoppers' needs and desires.

Values-Based Rewards Programs

In 2024, brands are recognizing the importance of shoppers’ values. For example, a vast majority of young shoppers identify as environmentally conscious and are driven to buy from brands that offset their carbon emissions or take care not to use wasteful packaging. Similarly, many brands are catering to customers seeking women-owned or Black-owned businesses or businesses whose products are cruelty-free, for example.

Brands can curry favor with shoppers by catering to values that genuinely align with their own. And with younger generations increasingly tightening their budgets, implementing rewards programs that speak to their values offers a critical opportunity to win their hard-earned dollars.

Take Sephora for example: while it offered a generic rewards program for years, in 2020 the beauty retailer began an initiative where customers could donate their accrued points to the National Black Justice Coalition, a civil rights organization that fights against racism, homophobia, and stigma against the Black community in the U.S.

Sephora’s initiative generated excitement and chatter on X, where customers enthusiastically coached one another on how to donate their points-turned-dollar amounts. Effectively, this clever use of the rewards program enticed values-minded consumers to keep shopping, knowing that their rewards points would directly contribute to a cause about which they cared deeply.

So how can brands re-create this headline-grabbing effect in their own rewards programs? Like Sephora, identify causes your customers care about and values they hold. Then, reward them for shopping in line with their values. While Sephora’s approach was to create a new avenue for spending rewards points in a conscious way, you might also consider rewarding shoppers for making value-based shopping decisions, such as buying net-zero carbon footprint products, Made-in-America items, or cruelty-free products. Ethically minded shoppers will feel recognized and, in turn, recognize the value of shopping with you.

Personalized, Identity-Driven Offers

Most customers love discounts and promotions. But with seemingly every online retailer churning out discount codes, how can brands ensure their customer base doesn’t migrate to competitors?

One of the more effective — and creative — ideas to minimize attrition and retain brand loyalty is to show your customers you care not just about their money but about their unique identities. Brands can do this by rolling out personalized, identity-based offers and promotions for specific segments of their customer base.

In a moment where exclusivity is highly sought after, generalized, site-wide discounts don’t cut it. Instead, more exclusive promotions targeted at specific shoppers create an aura of exclusivity, which will keep shoppers returning to your store. Some real-life examples of this include Barnes & Noble’s teacher discount, ASICS’ military discount, and Apple’s student discount.

Consider Comcast’s success with its Xfinity on Campus (XOC) service. The company targeted specific college campuses to learn what barriers its potential clients faced to enrolling in the program and learned that students prioritize internet services that bundle high-speed internet, music, gaming and streaming. Comcast then created just that: a tailor-made plan for college students that met all their internet service needs in one place. This exclusive subscription package quickly became a deal that college students wouldn’t want to miss out on.

Comcast’s story exemplifies the power of a loyalty program that centers customers’ identities and personalizes offers around them.

To create an adaptable and long-term loyalty program, first take the steps required to understand your customer base: not just in terms of how they shop, but who they are and what they value. Then you can enliven your loyalty program by centering it on those traits — and attract new brand enthusiasts in the process.

Bill Schneider is vice president of product marketing and communications at SheerID, the global leader in identity verification for commerce.