For decades, loyalty programs have proven to be a win/win for businesses and their
customers, across a wide range of retail markets. Rewarding customers for spending their
money and attention at brands encourages engagement and repeat purchases, while raising
brand affinity and customer loyalty.
Loyalty programs are certainly worth the brand’s effort: with the cost of acquiring a new
customer estimated to be as much as five to seven times the cost of retaining an existing
one, it makes sense to invest in keeping customers happy and coming back for more! What’s
more, a study by top US management consulting firm, Bain & Company found that a mere 5
percent increase in customer retention can result in a 75% increase in profitability. That’s an
incredible pay-off in anyone’s books.
Breaking the Velvet Rope: The Luxury’s Loyalty Dilemma
Even though 78% of affluent individuals consider member programs to be a vital aspect of their brand relationships (surpassing the average among consumers in general), this lucrative avenue for customer retention is often dismissed by luxury brands. This is particularly true of ‘earn & burn’ style programs, with luxury brands often prefer to use a more experiential approach when nurturing their relationships with these affluent customers.
Full Price, Full Pride: The Luxury Discount Tightrope
There are three key reasons why a luxury brand may choose not to participate in an ‘earn & burn’ a loyalty program.
First, there’s the risk of devaluing their own products value: if a customer is continually offered a loyalty discount, it may suggest that the goods are not worth the full RRP. From the customers’ point of view, too, there may be a perceived extension of the idea that “if you have to ask the price, you can’t afford it”; there’s a certain kudos in being able to afford to pay full price for a luxury item.
Fleeting Encounters: The Luxury Loyalty Frequency Conundrum
Secondly, luxury brands tend not to have high frequency purchase opportunities in the standard model of their customer relationship to make ‘earn & burn’ loyalty a relevant model. They are not in the business of daily-purchase type items, so points or rewards accumulation would only happen over a long period of time, and in the meantime the brand doesn’t get the benefit of ‘top of mind’ customer awareness. Furthermore, the lengthy accrual period may cause customers to perceive the rewards as unappealing or unworthy of their interest.
Exclusive Touchpoints: The Luxury Personalization Puzzle
The third reason relates to personalization. Bespoke experiences are the holy grail of the luxury industry, but luxury brands are short on customer data: the very narrow range of products they offer do not reveal much about customers’ day-to-day lives or broader preferences. Other methods are often employed to forge an enduring connection, for example asking customers to complete questionnaires, or offering experiential loyalty rewards, such as invitations to exclusive VIP events. Traditional ‘earn & burn’ style loyalty programs don’t provide sufficient additional data to support increased personalization, and certainly not at the risk of devaluing the brand’s products.
Bridging the Gap Between Luxury and Loyalty
However, there is now a way to make points- or rewards-based loyalty programs more
attractive and effective, especially for luxury brands. The CoinBridge Loyalty-to-Payments™
solution enables customers to convert loyalty assets – points, rewards, miles, vouchers, etc. –
into actual money to be spent on anything, at any store, anywhere in the world. Basically, turning loyalty assets into a seamless payment method. This, in turn, drives higher purchasing frequency and higher spending at the loyalty brand itself, enabling retailers to optimize spending volumes and the programs.
Essentially turning loyalty into currency, brands take the perceived connection between brand value (their high-end goods) and discounts out of the loyalty equation: customers gain something valuable – being able to burn points elsewhere – while the brand protects the perceived value and desirability of its products.
Offering monetary rewards for purchases also enables the brand to be present in the customer’s life, even in a domain characterized by infrequent purchases: say if the customer accumulates points worth £100 in cash that they can spend on everyday shopping anywhere, they will be engaging more with luxury brand each time they tap to pay through the luxury brand’s loyalty app.
As for getting to know their customers better, Loyalty-to-Payments™ ticks this box big time. Each time the customer redeems their points, no matter where and no matter on what, the brand gets access to the transaction data. As such, brands can now have a much more complete, in-depth individual customer profile, without segmenting or grouping them into broader categories. This data can then be used to become intimately familiar with each customer and understand their personal preferences. A win for the brand, and a huge win for customers who feel recognized as individuals and better understood.
The Way Forward
The road to business success is paved with innovation, new strategies and even a certain amount of reinvention. CoinBridge Loyalty-to-Payments™ is a novel, smart approach to customer loyalty that not only rewards shoppers with limitless redemption opportunities, but encourages them to engage positively and frequently with the brand – even a luxury brand -without diminishing the perceived value of its products. Together with the added-value data sources the solution provides, this is a proposition that changes the paradigm of how loyalty is perceived and practiced in the luxury sector.
Unlock the future of luxury loyalty with CoinBridge. Visit coinbridge.com to discover how our Loyalty-to-Payments™ solution can elevate your brand’s exclusivity and customer engagement while maintaining the prestige and desirability of your products. Experience the ultimate blend of loyalty and luxury today.