500FRIENDS BLOG
Loyalty trends & best practices

Loyalty for Luxury Brands

by Arif Damji
October 19, 2015
Loyalty for Luxury Brands

Over the last year, there has been a migration of luxury brands towards launching loyalty based programs. This, on our side, has meant a number of conversations with high-end brands interested in starting or restarting a loyalty program, often with the intention of moving customers to their direct channel and retaining more of their best customers. However, many remain concerned that a loyalty will “cheapen” their brand to their most discerning customers. I’m reminded of a conversation with the CEO of an online jeweler retailer who proclaimed, “Why should my customers collect points? They collect fine jewelry.” This fear and concern is of course valid, and in a world of declining loyalty program participation, high spending consumers are the first to lose interest in loyalty programs.

So, should a luxury brand even look through the looking glass at a world of loyalty? The answer is a resounding YES, especially as many high-end brands thrive on pillars of convenience, appreciation of VIPs, and exclusivity.

Now, we aren’t going to provide you a complete guide of how to launch a luxury brand loyalty program in a blog, but we’ll first highlight a few key best practices to get you started. Look out for future blog posts on how to manage the cost of your loyalty program and how to message it to your customers.

Keep it simple and convenient

Much like the experience of visiting a high-end store, customers don’t have the patience for a non-intuitive program. Too often programs add layers and layers of complexity with non-standard earn and redemption periods, varying bonuses, and an unclear value at redemption. This does not align with the desired experience in-store or online with the brand, so why would it hold for a loyalty program?

In the words of our VP of Loyalty Strategy, Zach Woith: “We build programs for brands using a 30-second rule; either the customer understands the program in 30 seconds or they won’t join. For high-end brands, it is probably more of a 15-second rule.”

Reward VIPs accordingly

Loyalty should reward higher LTV customers more than less valuable ones. Hence, a Fendi customer that buys one perfume for a family member cannot receive the same value from the program as a three times a year handbag purchaser.

A currency-based points system is an easy method of ensuring benefits are allocated correctly, however, that doesn’t always align well with the brand. Instead, try a tier-based model with benefits (that can include rewards like “free gifts with purchase”) that are tied to spend.

Build exclusivity access to products and events

Many top brands do not leverage the excitement around new products and events for their programs. High-end sporting sponsorships and clear customer excitement to purchase next season’s products can differentiate a program. Benefits around access to new or limited edition products, meet-and-greets with celebrities, and access to VIP sporting tickets are going to make a customer feel appreciated and build up exclusivity as a key program benefit.

Hopefully these suggestions will provide a starter list of ideas around how to create a successful program for your luxury brand. Look out for further blog posts and feel free to reach out with any questions!

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