The New Tenets of Customer Loyalty

Jul 18, 2018

Some marketers are buying into a pervasive — and incorrect — belief that loyalty marketing is not as effective as it once was.

However, cultivating customer loyalty is actually more important than ever. Competition within all consumer industries is high and driven higher because price comparisons are so easy to do—just open an app or ask for an online price comparison. This increases price matching. When everything is effectively the same price, customers won’t hesitate to turn to your competitors if they can get a better experience for that same price. That is where a quality loyalty program can be your secret weapon to gaining a competitive edge.

The stakes are high for your brand to create engaging and exciting experiences that keep customers returning — which means loyalty programs need to provide more than just a discount. The kernel of truth to rumors about program effectiveness may be due to stagnant results from “set it and forget it” programs that haven’t been updated in years.

Kobie Marketing conducts ongoing research among loyalty program members to determine what motivates shoppers most. The research revealed three tenets that dominate the loyalty landscape: convenience, savings and status. And while customers have always appreciated these perks in a loyalty program, they expect more nuances from their favorite brands’ programs. In the age of the connected consumer, here’s what shoppers crave in a loyalty program:

  • Ease and convenience
    If you pause to think about it, when you are shopping online you still can’t touch what you’re buying and you have to wait a few hours or a few days for it to arrive. Yet we live in a world where it has become more of a hassle to go to a store. Amazon Prime (a paid loyalty program) thrives on its promise to give members free expedited shipping. They have gained so much engagement from customers by addressing the potential pain points in their experience. Any brand can do this by making shopping experiences easier and more convenient.Loyalty programs — especially those that require a downloaded app — will fail if they require more effort than what they’re worth to consumers. The key to driving long-term customer loyalty is making life easier and solve problems for your loyalty members.
  • A new idea of status
    Consumers still crave having the feeling of receiving an elite experience — or status — from loyalty programs. But what they define as elite status appears to be changing.Shoppers consistently say that having a gold card is not what makes them feel valued.  And they aren’t necessarily looking to show off their status in traditional ways. Instead, the focus is on “doing” rather than “being.”

    But what does that look like? In most cases, it means more personalized experiences: early access to products they would like, invitations to events where they can bring their friends, and special information they can use. You can’t just send an email that says “Dear Valued Customer” and expect the customer to feel valued. Today’s savvy customers, who are used to product recommendations based on past behavior, can instantly see through pitch that has not been tailored to their individual needs and preferences.  When they can feel that the experience has been customized for them, that is what makes them feel that they have status with your brand.

  • Value received
    It’s no surprise that saving money consistently emerges as a top-three loyalty benefit. Everyone will tell you they want cash back. But while it’s easy to provide loyal shoppers with straight cash back, it’s harder to make it memorable.  At the very least, you need to tap into the dynamics of earning and accomplishment. One of the fascinating dynamics to a loyalty program is that companies often find that the same offer – say $5 off – will have ten times higher redemption when it is a $5 off reward the customer earned in the loyalty program than the same $5 off sent to as a promotional discount.There are even more ways to ensure that a customer recognizes and remembers that they are receiving value from your brand that they didn’t get from others. Rather than giving a flat discount, some brands such as Sephora, have moved to offering a rotating selection of free products or experiences. The customer then has the memory of interacting with the free item or experience which can be more differentiating for your brand.

The key: Know your audience

While overarching trends might help brands refocus and refine loyalty efforts, it ultimately comes down to knowing your customer as an individual and acting on what you know in ways they will find meaningful. Remember, an effective loyalty program can’t be all things to all people.

These differences illustrate the importance of understanding your customers, and tailoring your loyalty program accordingly. That way, your loyalty program will truly differentiate your brand in an increasingly competitive marketplace.