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In today's digital age, retailers and consumer goods companies are faced with the ongoing challenge of retaining customers while catering to their ongoing price sensitivity. To respond to this challenge, leading brands and retailers are building more consumer-centric membership strategies that offer hyper-personalization, connected experiences, and intelligent-driven programs. Through extensive research, PSFK has uncovered the latest membership, loyalty, and token strategies that retailers and consumer goods companies can use to engage customers and enhance the retail experience.
In addition to traditional loyalty programs, retailers are elevating their programs to reward their most loyal customers with elevated services and benefits. These programs collect valuable data that informs retailers on their promotions, pricing, and inventory management. The integration of token technologies such as NFTs and blockchain has also highlighted the potential for innovation and enhancement in the retail experience. PSFK's research delves into these trends and showcases how they are being implemented in the retail industry.
In this newsletter, we will share the key trends that are shaping the retail experience, including the use of token technologies, engaging Gen Z customers in product development, and tiered loyalty programs. But first, let's analyze what's driving innovation in the membership economy further:
In response to feeling mistreated and nickel-and-dimed, consumers are seeking elevated services and frictionless experiences that value their time and loyalty. According to a survey of 1,000 consumers, 74% experienced a product or service problem in the past year, up from 66% in 2020 and 56% in 2017. Only 32% reported a problem in 1976.
As consumers face a cost-of-living crisis and economic downturn, retailers need to offer value and benefits to remain essential to their customers. Membership programs act as a form of future-proofing to meet this need. Recent research by Kantar found that consumers are reporting the cost-of-living crisis as a more emotionally taxing wellness stressor than the pandemic.
Loyalty programs have emerged as a solution to meeting consumers' desire for enhanced experiences. By offering elevated services and exclusive benefits, retailers can increase customer engagement and loyalty. A recent study found that 78% of consumers are willing to pay to join a premium loyalty program, indicating a growing demand for enhanced experiences. “Customers today expect more than just a transactional relationship with brands. They want to feel valued and appreciated, and providing elevated services and exclusive benefits is one way to do that,” says Shep Hyken, Customer Service and Experience Expert.
As brands adapt to societal changes, they are creating opportunities for consumer belonging through evolving membership programs that offer personalized experiences and build mindshare. A study by Salesforce found that 76% of consumers expect companies to understand their needs and expectations.
In response to these expectations, many brands are evolving their membership programs to offer more personalized experiences and build stronger connections with their customers. Retailers can establish trust with customers by collecting data transparently through membership programs, enabling a personalized experience. Michelle Dennedy, Chief Privacy Officer at Cisco Systems, says that “Transparency is key to building trust with consumers. Companies that are transparent about their data collection practices and how they use that data are more likely to earn the trust of their customers. This trust can lead to increased loyalty and ultimately, increased revenue.”
Retail businesses are continually innovating to create deeper connections with their customers, particularly through enhancing their sense of belonging and community. To achieve this goal, retailers are deploying several strategies that fall under different themes such as the use of technology to create personalized experiences, building community ecosystems that offer support, and involving customers in the product development process. Below are some examples of these strategies:
Elevated Loyalty Programs: Retailers are offering tiered loyalty programs that reward their most loyal customers with elevated services and benefits. This enables retailers to build deeper connections with their customers while informing their promotions, pricing, and inventory management. Foxtrot Market's “Membership” program is an example of this trend. The program offers two tiers of exclusive merchandise, free delivery, and early access to products, with members and member+ customers receiving special pricing such as $1 coffee and tea, discounted house wines, and free delivery.
Community Ecosystems: Brands create community ecosystems that prioritize shared values, goals, and identities by offering physical member spaces that provide support, empowerment, and celebration for micro-communities. The Bentley Record Room exemplifies this trend as it is an exclusive lounge within Manchester's Co-op Live venue that offers members a luxury experience beyond traditional retail. Members enjoy designated parking, entrée through the VIP portal, and access to a space that reflects the shared values and identities of Bentley customers.
Embedded Perks: Retailers are offering embedded perks that add value to customers' purchases, such as additional items or credits for future purchases, without any extra cost. Rent the Runway is an example of this trend as it offers an additional item at no extra cost to subscribers as a way to maximize loyalty and attract new customers to the monthly service.
Token Technologies: Brands are using token technologies such as NFTs and blockchain to create unique, collectible experiences that offer exclusive privileges and incentives to build deeper connections with customers, enabling innovative approaches to retail. Shiseido is an example of this trend as it offers exclusive NFT ownership and access into their tight-knit community, in which enthusiasts can unlock rewards and build a more connected relationship with the brand.
Improved Product Development: Brands are engaging Gen Z customers in product development by getting input from their fans and rewarding them with royalties, collectibles, and early access to limited products. Scott & Soda is partnering with web3 loyalty management platform Flaunt to turn their Club Soda 3.0 community into a web3 loyalty program, offering exclusive benefits to NFT holders and co-creating with customers. By involving customers in the design of loyalty programs and benefits, Scotch & Soda hopes to expand the program to all of their top customers. In exchange for participation, customers receive exclusive benefits and rewards.
In today's competitive retail landscape, it's important for businesses to stay ahead of the curve by embracing emerging technologies, building deeper connections with customers, and prioritizing sustainability. As we've seen in this newsletter, retailers and consumer goods companies are leveraging unique strategies to create circular consumer relationships and enhance the sense of community and belonging among customers.
So, what can you do next to implement these strategies? Here are some idea starters to consider:
By embracing these strategies, retailers and consumer goods companies can stay competitive, meet the evolving needs of their customers, and build a strong sense of community and belonging among their customers.
Thank you for taking the time to read our newsletter. We hope that the insights we shared on the membership economy and the strategies for circular consumer relationships have been helpful in understanding the latest trends in the retail industry.
If you would like to learn more about these topics, we highly recommend downloading our report, “Belonging & the Membership Economy.” This comprehensive report delves deeper into the strategies and implications for retailers and consumer goods companies seeking to build deeper connections with their customers through membership and loyalty programs.
By downloading the report, you will gain access to more detailed insights and examples of successful membership programs in action, as well as further ideas and recommendations for building sustainable and meaningful relationships with your customers.