Luxury retailers do not typically offer loyalty programs, with regular point-based price discounting schemes going against the high-end and aspirational style of branding that the luxury sector is known for.

For brands striving to be competitive, however, reputation alone is simply no longer enough to inspire loyalty, and with demand for omnichannel on the rise, neither is a single focus on in-store customer service. 

So, how else are luxury brands inspiring loyalty?

Investment in digital clienteling tools

The Covid-19 pandemic saw many luxury retailers invest in omnichannel capabilities, as companies strived to connect with customers who could no longer shop in-store. Virtual consultations are one widespread trend, with the technology enabling sales associates to connect with customers in real time. 

For luxury brands, digital clienteling tools also add a more exclusive element to the customer experience, enabling sales associates to offer one-to-one communication alongside a range of personal shopping services. Some big retailers have invested in their own technology to deliver this. Last year, for example, Neiman Marcus launched NM Connect, a section of its app that allows store associates to access a personalised view of each customer, and customers to complete a “stylist match” exercise that will connect them with a dedicated Style Advisor.

According to a press release, Connect drove $60 million worth of sales within the first 90 days of launch. Katie Mullen, Chief Digital Officer for Neiman Marcus Group, explained that the platform “was designed to inspire clients, from offering personalised look books, to completing transactions remotely and instantly.” With 40% of Neiman Marcus’ business reportedly stemming from customers that spend more than $10,000 per year, this personalised communication strategy is now a key part of how the brand fosters relationships with repeat customers. 

Elsewhere, a number of new tech platforms are helping retail brands create 360-degree customer profiles (based on omnichannel data), and enhance brand clienteling services. Seer is one company gaining traction; the platform helps sales associates create shoppable product suggestions that look like magazine layouts, as well as deliver the content across channels, such as email or video chat. Alpha is another tool, one that aims to differentiate itself with its notion of ‘connected clienteling’, i.e. providing a single platform that both retail brands and customers can use, joining up formerly disjointed data.  

While these digital tools can help to naturally foster customer loyalty, luxury retailer Farfetch uses the opposite tactic, by only offering its clienteling and personal styling service, via its partner Wishi, to Platinum and Gold members of its Access loyalty program (as well as its Private Client tier). According to Fashion United, Farfetch says that the service – which offers personalised virtual styling tailored to customers – is “proven to ensure that customers make more purchases that they are satisfied with,” ultimately allowing them to buy “smarter and with high-intent.”

Incentivising interaction and engagement

While tier-based systems such as Farfetch’s are popular within luxury, brands are thinking outside of the box when it comes to how customers can earn rewards (and the type of rewards they receive). Experiential methods are coming to the fore, as demonstrated by The North Face and its XPLR Pass. 

Instead of earning points through purchases, XPLR Pass members can earn points through activities such as checking in at a National Park or National Monument with the mobile app, as well as sustainable initiatives like bringing a re-usable bag when shopping at The North Face store locations. Both feed into The North Face’s ethos, which centres around nature and exploration. In turn, members can redeem points for similarly themed rewards, such as unique adventure experiences like climbing with professionals. In addition, members gain access to exclusive to new items (which they can test and return if they don’t like them).

Speaking to Retail Week, Michael Horsch, President for Product and Marketing EMEA says that the loyalty program aims to balance “both emotional and functional benefits, matching simple things like free delivery with more emotive elements such as exclusive access.” As reported in the company’s Q4 2021 earnings call, throughout 2021, “the North Face’s digital business increased 63% including 49% growth in new paid customers via adding 1.6 million in new loyalty members in the Americas.”

Using NFTs to enhance exclusivity and drive engagement

NFTs, or non-fungible tokens, are a growing trend within all industries, but particularly within luxury retail where exclusivity and individuality is of high importance. 

NFTs, which are unique cryptographic assets on the blockchain that represent digital files (usually art or collectibles), feed into this notion of exclusivity – hence why some have sold for millions of dollars. In turn, luxury retail brands are recognising how NFT’s can act as incentives for customers, and are increasingly incorporating them into products, as well as loyalty programs.

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Cinique was one of the first brands to do the latter, giving Clinique Smart Rewards members the chance to win free products for 10 years along with one of three editions of an NFT artwork. By offering an NFT to an already loyal customer, the brand is both rewarding loyalty (which will serve to enhance it) and incentivising other customers to sign up. What’s more, with Clinique automatically making its logo a collectible, the brand is positioning itself as something worth investing in (with the NFT theoretically increasing in value over time), thereby creating a value exchange for loyal customers.

Hugo Boss is another example of brand using NFTs as a reward for customers – and their social content. The brand offered up five unique Boss x Russell Athletic NFT collegiate jackets, alongside a physical twin for each, as the prize for a TikTok challenge. The social media challenge went on to gain some of the highest social media coverage in Fashion Week history, generating a total of 3.9 billion impressions in just four days.

In order to enhance loyalty, luxury brands also have the ability to add on additional perks for NFT owners, transforming the collectible into its own form of brand membership, and essentially turning NFT owners into brand ambassadors. As Vogue Business explains, animation-based product and entertainment company Superplastic, which partners with Gucci, has added on perks for NFT owners such as exclusive access to online and physical stores and restaurants.

Delivering value-based rewards and the democratisation of luxury

One consequence of luxury brands embracing NFTs and digital goods is that the sector is becoming more appealing to the younger generation of consumers that these products are aimed at. That doesn’t necessarily mean that physical luxury goods are becoming less expensive or exclusive, but rather, that retailers are finding ways to make luxury brands more accessible to a wider audience (for example, targeting through gaming or social media).

Additionally, many luxury brands are going to lengths to ensure that loyalty schemes represent something other than pure commercialism. Take Sephora, for example, which launched Charity Rewards as part of its Beauty Insider loyalty program in 2020 to enable loyal customers to redeem points in exchange for charitable donations, in turn creating a more meaningful and emotion-driven connection to the brand.

With concerns about sustainability becoming more widespread, particularly among younger generations, luxury brands are also looking for ways to drive circularity. One way is through mystery boxes online, which help luxury brands sell unsold or leftover stock to customers who do not know what they might receive.

LVMH Luxury Ventures recently contributed to a £5m investment round for mystery box start-up Heat, which targets Gen Z through a combination of AI-driven personalisation, gaming, and sustainability benefits. Julie Bercovy, Founder and Head of LVMH Luxury Ventures told Vogue Business that this combination is already driving repeat purchases from customers, fuelled by social media interest. “We are very impressed by the ability of Joe and the team to build such a robust and wide fan base in a short time frame,” she said. “The loyalty and enthusiasm of the Heat community demonstrates the relevance of this approach and the desirability of Heat’s curation.”

In other words, this example shows that – with even more younger consumers buying into luxury – retailers need to re-think the value of their loyalty programs in order to stay relevant.

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