How to Use Loyalty Programs to Maximize Holiday Shopper CLV

Amidst inflation and layoffs, nearly half of consumers say that they will buy less this holiday season than last year. To make these fewer purchases count and boost their overall performance marketing strategy, retailers need to drive up customers’ lifetime value (CLV) in holiday spending mode by perfecting and promoting customer loyalty programs.

Loyalty programs drive CLV of first-time holiday shoppers

In our piece on holiday 2022 marketing strategy,  we questioned the effectiveness of holiday promotions. The residual CLV during the first two years of newly acquired holiday shoppers tended to be about 12% less than those outside the holiday season. New customers’ value seemed limited to seizing initial Black Friday and Christmas deals.

However, the CLV of first-timers who join a loyalty program during holiday shopping is on par with shoppers for the rest of the year. Consider residual CLV of shoppers for a leading fashion and accessories retailer (also Crealytics client) during the same time period:

·     No loyalty program: The repeat purchase value for first-time shoppers during the holiday season was 25% lower than non-holiday.

·     Loyalty program: CLV for Black Friday consumers is nearly equal — just 2% less – than buyers outside the holidays, illustrating that loyalty programs help identify and retain new customers. Also, CLV for shoppers who join loyalty clubs during Black Friday sales is nearly nine times that of those who do not sign up.

These metrics show loyalty programs’ core benefits — identifying high-value customers immediately after the initial purchase and potentially boosting lifetime value. Therefore, retailers should prioritize such programs now to acquire new, loyal customers and refine their performance marketing strategies.

 

Tips for driving your holiday loyalty programs

To help drive your customer loyalty programs, consider these tactics:

 

1.     Entice with bonus points

In structuring your loyalty program, allow customers to earn points for purchases that can apply to future shopping. This approach incentivizes spending now and later, upping the likelihood of customer retention.

With savings top of mind for consumers right now, be sure that the monetary value of your store’s points is clear to shoppers. Take this example from s. Oliver — the European retailer identifies the monetary equivalent of 100 s. Oliver fashion points:

“ You receive 3% of the purchase value in the form of bonus points,… 100 s.Oliver Fashion Points are worth 1 euro of shopping credit. With the s.Oliver Card, you also receive special offers at family prices and news about exclusive discount campaigns.”

To supercharge average order values (AOV) with your points programs, consider bonus “deal days” in which you reward customers double or triple the regular points per dollar spent.

2.     Offer loyalty tiers

Build membership rewards into tiered loyalty programs. According to data from another leading clothing retailer, VIP rewards programs significantly drive up spending post-holiday for new customers. For instance, the CLV of holiday shoppers who became VIP members upon their initial purchase was more than four times higher than consumers who became regular loyalty club members in the same time frame.

Consider using fulfillment benefits to differentiate member rewards, particularly as nearly 50% of consumers say that free shipping influences where they buy gifts this year. For instance, offer only loyalty club members free shipping but add in free returns for your VIPs.

3. Go omnichannel

With nearly two-thirds (63%) of U.S. consumers planning to shop in-store this holiday, don’t forget to take your loyalty programs brick-and-mortar. Use tactics like loyalty cards to ensure that customers can earn points and utilize benefits both in-store and online.

Moreover, an omnichannel approach helps measure how digital campaigns influence in-store sales. To make this actionable in your paid media campaigns, consider Google’s Smart Bidding for store sales integration which helps with measurement and reporting to optimize for the total value of your online ads.

4. Consider subscription programs

If CPG (consumer packaged goods) make up a significant portion of your inventory, consider offering loyal shoppers subscriptions. Although margins are less, as shoppers receive a discount (typically 5%), you ensure repeat purchases, driving up CLV.

Data from Subscribe & Save, Amazon’s subscription program, shows that low-cost items, which need to be regularly replenished, are strong candidates for subscription offerings. For instance, Vitamins & Supplements, Groceries, Pet Supplies, and Beauty & Personal Care are top categories for Subscribe & Save categories based on percentage revenue.

5. Refine your performance marketing strategy

After ramping up signups, you’re likely better equipped to train Google smart bidding to focus on the metrics that matter, especially predictive customer lifetime value.

The additional customer data gained through memberships helps CLV predictions be more precise so that Google algorithms better recognize new high-value customers and optimize for shoppers more likely to join loyalty programs.

Hear more about leveraging customer data for predictive CLV from Google’s Nicholas Darveau-Garneau

For more on how predictive CLV can help you win more loyal customers, check out our article on data activation. Also, get a head start identifying high-value customers with our short quiz.

 

Driving points home (for the holidays)

Loyalty programs are powerful tools to predict which new customers are most likely to be high-value for your business, even during the holidays when many consumers are one-time purchasers. Refining your holiday loyalty programs now helps you reach customers worth your investment for more efficient retention marketing.

To help reap the benefits of using predictive CLV in your performance marketing strategy over the holidays and beyond, check out Crealytics paid media offerings, including our SaaS iCLV tool.