In the back corner of my desk drawer is a stack of dusty, neglected loyalty program membership cards. They're tokens that demonstrate that each company once offered me something that convinced me to sign up for their loyalty program. Some are also reminders that those companies have failed to provide me with compelling benefits since. I’m not alone. The average consumer is a member of dozens of loyalty programs, all of which are fighting for customers’ limited attention and share of wallet.
The intent of loyalty programs (which I loosely define as to reward customers who purchase frequently), is a noble one. And in many cases, companies have succeeded in creating a rewards structure that motivates increased purchase behavior. However, loyalty program membership doesn't automatically generate loyalty.
Take this example. We once conducted research for a client where the majority of purchases were made by members of the loyalty program. On the surface, the program seemed to be a success: it had millions of members driving tens of millions of dollars in sales. However, we soon discovered that roughly half of the members had no idea they were in the loyalty program. Worse yet, many of the “aware” members couldn't explain the benefits of being in the program. When measured by transaction volume, this program was thriving. Yet, when measured by customer engagement, it was a dismal failure.
This isn't a downfall of loyalty programs themselves — it’s an example of how leadership didn’t actually understand what drove the brand's customers’ loyalty. There are two types of loyalty: small and big. Small loyalty is the loyalty program itself, which plays an important role in the consumer decision-making process, whereas big loyalty is the type of trusted relationship that you earn after continuously delivering on your brand promise. Loyalty program membership is only one step along the path to true loyalty.
4 Tips to Build Big Loyalty
- Map the customer journey. Have your customers share how important every type of brand interaction is and how they feel at each so you can prioritize where to invest in building engagement over time.
- Keep benefits simple. Although you may be tempted to create a gigantic list of program benefits, it’s a better bet to stick with fewer, more high-impact perks that customers are likely to remember.
- Inspire aspiration. Whether inside or outside a loyalty program, you can still identify promotions or perks that appeal to your most valuable customers. The trick is to identify customer goals, then position your product or service as a way to get there.
- Don’t punish members. Loyalty programs should make things easier. Make customer experiences faster (e.g., Starbucks’ order and pay in app) or better (e.g., early access to sale pricing or private events) to make membership feel like a blessing.
There are a number of ways to generate loyalty, some of which leverage the construct of a formal loyalty program and some that don’t. True customer engagement comes from understanding what customers value, and using that information to make their experiences better. If you get it right, your loyalty program cards will no longer sit unused in your customers’ desk drawers.
Related story: How Poshmark Creates Loyalty Through Influencers