When you think of customer loyalty, what comes to mind? I’d think some responses would be a specific brand name, a punch card, being a frequent customer, earning points, feeling or being recognized, a favorite mobile app, the list goes on. There are no wrong answers, since loyalty can mean something different to each customer. However, one thing to recognize when thinking of this question and how this answer can vary, is how much loyalty has changed over the years. It used to be about the customers who always showed up and stayed true to a brand. That then turned into brands recognizing that loyal behavior with a reward. If you come in X amount of times, you will get Y; the more points accumulate, the more free stuff you’ll get. This simple give/get between a brand and customer has remained the standard for years, and has helped companies acquire & retain business (to a point). In Mastercard’s Report with Harvard Business Review, Beyond Rewards: Raising the Bar on Customer Loyalty, they highlight that “5 years ago rewards were the top determinant of a loyalty strategy’s success” but today, “Only 42% say reward values are a top driver of success, behind exceptional customer service (51%), digital and omnichannel access (48%), and ease of use (45%).
As time has gone by, the more standard points programs have popped up, and their effectiveness has gone down. According to a 2019 Forrester report, 89% of online US adults belong to some form of loyalty program, and more specifically an average of 3.7 loyalty programs each. Brands have to compete for a customer’s loyalty, and have to come up with creative ways to do so. Rather than focusing on launches, enrollments and initial redemptions, brands have to become more tailored, personalized, and real-time. In this blog, we’ll walk through this shift in loyalty from rewards to relationships, why it has happened, and how to shift your strategy along with it to be successful.
1.The Why Behind the Loyalty Shift
When looking at this loyalty shift from rewards to relationships, in actuality it is a response to a shift in consumer behavior. Customers used to be content with a simple reward, like buy 10 coffees, get 1 free, or sign up for our loyalty program and you will get “special” (generic) discounts. Yet if you look at what customers want today, that’s where the loyalty shift comes from. According to our SessionM loyalty infographic, about 49% of millennials stopped using a loyalty program after receiving irrelevant communications, and 44% of household members don’t use loyalty programs because of a lack of engagement or relevancy. They want their experience to be more personalized, more relevant, trustworthy and easy.
So what should brands do? They need to respond by trying to be more engaging, simple, and experiential. In the past year, 30% of Mastercard’s HBR’s survey respondents say they’ve updated or refreshed their loyalty strategy, and 55% have in the past two years. Brands are seeing the data behind consumer needs, and that if a consumer feels engaged with a brand, they will buy 90% more, spend 60% more, and tend to be 5 times more loyal (SessionM Infographic). Therefore, in order to get your customers to stick around, brands need to adapt and respond to what they are looking for.
2.The How Behind the Loyalty Shift
As you can see from the data points above, (and especially if you read the reports) there is alot to back up why loyalty has shifted from focusing on rewards, to customer relationships. The more tailored, and personalized of an experience you deliver, the happier customers you have, and the more ROI for your business. However, a traditional loyalty program is a lot easier to execute. How does a brand even form a relationship with their customers? And measure that?
At SessionM, we spend a lot of time creating and executing strategies that enhance customer relationships for Retailers, Restaurants, Consumer Goods companies, Airlines, and Hotels. As a reminder from above, this loyalty shift is because consumers are asking for a more personalized, trusting, simple, experience. So how can you deliver?
Starting with personalization, this all comes down to your customer data. How do your customers currently interact with you? What channels do you utilize? Is there more you can be doing through those channels? Do they connect to one another? Use those forms of communication to your advantage, and listen to every point of customer interaction to then inform your next. With a customer engagement & loyalty program, you have the ability to break your customers into segments, send offers based on certain purchase categories, and trigger campaigns off of behaviors.
For the experience portion, this is where you can get creative. I’m including ease of use within this section, because that’s part of the experience, right? Make it simple and intuitive – easy as that. When it comes to making your loyalty program an experience however, there are a few things you can do. Between all of the brands we work with, no one loyalty program is identical. Rather, they are unique to the brand. Some have defined tier programs, challenging customers to get to another level for a certain reward. Others have below the line loyalty programs with hidden tiers customers can unlock for more of a surprise and delight experience. Others utilize gamification to keep customers engaged. In the end, it comes down to delivering a consistent and relevant message across your channels of engagement, to motivate loyalty as a behavior.
When it comes down to it, there is never going to be a perfect loyalty program structure or design, as these consumer preferences and expectations will always be changing. However, you can do your best to shift with the loyalty landscape overtime, and focus on creating relationships with your customers, over the generic rewards model. As time goes on, you’ll learn from your consumers, and develop a program that stays relevant, and true to your brand. If you’re interested in chatting about how you can enhance your loyalty experience to be more in line with your consumer’s needs, give us a call!