The Loyalty Program Is Dead, Long Live the Loyalty Program

handshakeLet’s start with this question: “Do traditional customer loyalty programs still work … why or why not?” The Answer: No, they are not as effective as they have been in the past. There are so many loyalty programs in the marketplace vying for the consumers’ attention, and many of them are not designed to meet the needs, preferences and desires of the customer. Rather, they are built on what the company can afford or support based on a business model or internal systems. The challenge is: How do you differentiate yourself to engender true loyalty? Loyalty is not something that brands create, but rather something that consumers generate based on the brand earning their trust.

Traditional loyalty programs don’t connect with the consumer emotionally. Today’s successful loyalty programs do connect with people emotionally, as scientific research has shown we make decisions for emotional reasons and then later justify them to ourselves and others with rational reasons.

Nor are traditional loyalty programs based on delivering on customer’s individual needs and behaviors, which is critical in today’s marketing environment. Points-based program typically require long timeframes to earn a reward, and these rewards may not meet the customer’s preferences. For instance, Keurig has a points-based loyalty program that only allows you to redeem points earned for their coffee machines and accessories. As a Keurig owner, I would like to redeem my points for free coffee but I’m unable to do so, so it is not meeting my needs and I have abandoned the program.

How Does Engagement Play Into Customer Loyalty?
Customer engagement is integral to building loyalty. Customers are in the driver’s seat. They have high expectations and are more empowered than ever in the purchase journey; influencing others, including brands, to meet their specific needs and behaviors. We are living in a social media and mobile world, and are surrounded by messages 24/7. Therefore, brands need to understand consumers (not only their transactions, but their preferences and attitudes) and deliver real-time information where they are, on their terms, in a personalized manner based on what you know about them.

The best loyalty programs both recognize and reward customers. The recognition part can be especially powerful in that it taps the social science principle of Exclusivity/Scarcity, in which people place more value on things that are not readily available. And, giving participants a “head start” can also be very effective, in that it triggers the Zeigarnik Effect — social scientists have found people are more apt to finish what they’ve started. So, in a very simple example, giving 2 punches on a punch card of 12 can be more motivating to make 10 more purchases than simply having a punch card of 10 with no boxes already punched.

Engage with your customers across multiple channels in a two-way dialogue that acknowledges who they are and reinforces and rewards the value that they bring to the brand. This requires continually asking for customer feedback, and responding to this feedback in real-time, throughout the customer relationship. Deliver information and experiences that are based on the customer’s previous behaviors and attitudes. This is called “smart” personalization and is based on the data that you have about your customers. However, the most valuable data is “human data” which is self-profiled, and thus can be used to further engage with your customers in a meaningful way because it is actionable and provides greater weighting since it comes from the customer.

Member preference centers are gaining in popularity and are a great tool to use as part of the onboarding process for new customers. This online portal allows members to indicate communications preferences, needs, and interests. These preferences, in combination with other customer data (demographic, self-profiled psychographic, and segmentation profiling) can be used to deliver truly personalized communications.

Lianne Wade is the Vice President and Account Director of the Westwood, Mass.-based Wilde Agency, an award winning integrated marketing agency that specializes in understanding and utilizing the science of human behavior to drive superior results for their clients.

Publish date: November 13, 2015 © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT