How Retailers Can Overcome Key Challenges


As CTO of Engage People Inc. Len Covello helps companies differentiate loyalty programs to deliver a better experience for their customers.

Increased competition in the retail industry is forcing retailers to get creative with how to differentiate among a sea of brands that share the same goal: to draw in shoppers and keep them coming back. At the same time, they’re faced with the ongoing dilemma of driving efficiencies and keeping costs down.

In 2023, we saw a number of partnerships and acquisitions in an effort to increase market share, combine resources, extend reach and sell across channels. A few examples include L’Oréal’s acquisition of luxury beauty brand Aesop and SHEIN’s partnership with Forever 21. These brands took advantage of the opportunity to try new things to strengthen their brand presence and reach new customer bases while focusing on their bottom line.

While not every retailer has an eye on partnerships and acquisitions, they all could be focusing on how to make their brand stand out to attract and retain customers. One way for them to do this is by overcoming the basic challenges of increasing customer loyalty. And it starts with a solid loyalty program with a personalized and seamless customer experience as a foundation.

Let’s explore some of the challenges retailers are facing and how they can set themselves on a path toward success.

Inflation Has Consumers Keeping A Close Eye On Budgets

2023 can be summed up in one word: inflation. Forrester recently noted that the cycle of interest rate hikes we saw over the past year or so challenged retailers with consumer spending slowdowns and declining consumer confidence, among other things. However, the current economic environment also presents retailers with an opportunity to get creative.

A recent customer loyalty survey by PwC noted that, as inflation persists, more than half of respondents are motivated to keep buying from a business if they get good value for the price of a product or service. One way for retailers to ensure consumers feel they’re getting a good deal is to allow them to leverage their loyalty points at any amount to supplement their everyday spending at checkout.

For this to be successful and quickly adopted, loyalty points need to be integrated into a retailer’s current checkout flow. At Engage People, we recently launched an initiative where consumers could pay with points for fuel at the pump. The perk wasn’t marketed, and consumers received little education, but because the experience was seamless, the adoption was well beyond the financial institution’s projections. Retailers have the same opportunity to leverage technology to ensure consumers can leverage their loyalty points in ways that best fit their needs.

Retailers Aren’t Just Competing With One Another

If you look at December 2023 credit card rankings, it’s clear that banks still own the lion’s share of the most popular rewards cards. However, this doesn’t mean there isn’t an appetite for retail loyalty program participation. Nielsen indicates that 84% of customers are more willing to choose a retailer that offers a loyalty program.

Retailers can increase the adoption and popularity of their loyalty cards by first demonstrating a clear value proposition. Other considerations include setting up strong referral programs so consumers’ perks can go further, offering limited-time promotions and exclusive discounts and ensuring the sign-up and redemption processes are simple. In addition, leaning into technology like mobile apps and online platforms can ensure that consumers have easy and convenient access to rewards, fostering stronger connections and sustained loyalty.

Once the building blocks are in place, it’s time to market all the program has to offer. To do this, retailers need to invest in a promotional launch campaign, in-store signage or online advertising, a strong social media presence and employee programs to incentivize staff to promote the program.

Sometimes Customer Needs Aren’t Met By Loyalty Programs

Consumers join loyalty programs for perks, immediate value and cost savings, but if they don’t experience the benefits shortly after joining the program, they’re more likely to leave. According to Marigold’s State of Brand Loyalty in the U.S. in 2023 report, a third of customers leave because brands are not delivering on their needs.

That’s why any good loyalty program has a strong problem-resolution service set up from the beginning to ensure that customers’ needs are being met and that they are easily able to access and utilize their benefits. This can go a long way in building trust and long-term relationships with customers.

In addition, to ensure consumers feel connected to the loyalty program right away, retailers can market relevant information about the program to its loyalty base immediately, followed by tailoring personalized offers based on preferences and spending patterns. As benefits are shared, retailers can then measure the adoption to see what’s working and where pivots need to be made.

Over time, customer follow-up via testing and surveys helps retailers remain ahead of customer needs. This is true of all data derived from loyalty programs. The greater understanding and insights, the more compelling the offers will be—leading to stronger connections with customers. Loyalty programs are dynamic and organic and should always be evolving. Analyzing customer feedback, loyalty program data and spending patterns is the best way to stay on top of that evolution through competitive offerings.

My company recently commissioned a survey with The Wise Marketer to better understand various aspects of loyalty programs. The research helped shine a light on the hurdles retailers currently face with their programs but also reaffirmed our perspective that retailers have more opportunities than ever to enhance their loyalty programs to better deliver on customer preferences and meet their evolving needs.

By focusing on overcoming the hurdles outlined above, retailers will be in a stronger position to attract and retain customers well into the new year and beyond.

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