Smiles Matter, but the Real Loyalty Win is Staying Relevant

By Rabih Farhat , Founder & Managing at Related Inc.

As a father of a seven and five-year-old boy and girl, I can only be intrigued by this rising request from my kids and their friends to access more LEGO packs, bundles, and themes. Last weekend alone, we spent two days building and playing the latest Super Mario Pack while ignoring any sort of screen time addiction from TV to video games.

As a seasoned marketer and a loyalty programs expert who has been in the industry for more than 23 years, I find the rise of the LEGO Group brand loyalty a unique phenomenon in a digital-first and tech-driven business world. This is a living truth of how a brand can retain its customers for decades, stay relevant to them, and attract a whole new generation.

Staying relevant is key

Brand loyalty is about creating an emotional bond between customers and brands. While retaining customers is a key marketing objective or KPI, the ultimate challenge lies in remaining pertinent and understanding customer needs proactively, anticipating their desires before they even recognise them. In the case of LEGO, the brand nurtures a big loyal fanbase of parents with a 27% chance of returning to a LEGO store after a first purchase, 49% after a second visit, and 62% after a third.?

LEGO’s evolution into a brand that resonates with Gen Z results from embracing the latest technologies, including apps, augmented reality (AR), and connectivity, which have become integral to their product offerings. Furthermore, strategic partnerships with iconic pop culture like Harry Potter and Star Wars have sustained LEGO’s relevance among Gen Z audiences, with these themed sets alone contributing to a 17% revenue growth in 2022.

The magic formula to build customer happiness!

Each touchpoint along the customer journey is an opportunity for brands to deliver unique and memorable experiences. Brands need to ‘be right here’ to delight customers with experiences that they’ll remember.

Sephora Beauty Insider program is the perfect example of how rewards and loyalty programs help create moments of delight across the customer journey. By offering members exclusive perks, personalised experiences, and rewards for their behaviour, Sephora builds strong relationships with its customers and encourages them to return for more. These perks include:

• Free samples of a new product are in the mail before it is released in stores.
• Invitation to a private shopping event where they can meet their favorite beauty influencers and get exclusive discounts.
• Personalised birthday gifts, such as lipstick in their favorite shade or a gift card for a spa treatment.
• Automatically upgrade them to free shipping on their order, even though they didn’t meet the minimum bucks spent requirement.

How to Measure Customer Loyalty

While sometimes a big smile on a customer's face or a repetitive purchase is enough to measure customer loyalty, quantifying these metrics is essential to assess how loyalty initiatives impact the brand.?

When it comes to brand equity, the Net Promoter Score (NPS) and Customer Satisfaction Level (CSAT) are key to monitoring the relation between customer loyalty programs and the increase in customer satisfaction level or how likely the customer is willing to recommend the brand to his friend. Based on best practices and our clients’ historical data, Loyalty programs, when well designed, can increase CSAT levels to 92%.?

My favorite KPIs directly influence business revenue and profitability, such as customer

retention rate, lifetime value, repeat purchase rate, and upsell ratio. A study by Bain & Company has demonstrated that a 5% increase in customer retention can lead to a substantial 65-95% boost in revenue and profits.

What is the role of tech in all of this?

Technology is a key driver for building successful and highly engaging customer loyalty programs. New strategies and tools like gamification, Generative AI, immersive experience and Web3.0/NFT drive the evolution and high efficiency of loyalty program platforms.

Consider Starbucks’ Digital Flywheel program, which seamlessly blends digital and physical customer interactions, focusing on rewards, personalisation, payments, and orders. Every interaction with the end user generates quantifiable data, offering insights on creating new value and leveraging it in the next round of innovation. That is how the brand was able to drive tremendous value from a relatively small portion of customers, and it is the reason for its eventual widespread success. With 13.3 million active reward customers in contrast to approximately 75 million unique customer visits to their stores each month, it’s evident that loyalty programs, when smartly executed, can yield substantial returns.

The beginning of a new era

With a 12% year-on-year increase in investments in revamping and launching new customer loyalty programs across various industries, the Middle East is experiencing a loyalty program renaissance. In a region where 65% of the population is under 30, innovation and technology are set to dominate these transformative initiatives.

Additionally, consumer happiness Indicators will be monitored closely as GCC countries strive to be ranked at the forefront of the happiness indicators in the world. Have you thought about your loyalty program yet? Now is the time to embrace this increasing consumer demand and the evolution of technologies to create moments of happiness for your customers.