This series revisits the basics of branding and marketing by answering questions marketers, entrepreneurs and small business owners face when growing their business. I hope this series provides you with knowledge to think smarter and a nudge to make stuff happen.
How Valuable are Loyalty Programs?
Most marketing activities from companies seeking to build customer loyalty are designed more to entrap customers than to enrich customers.
Loyalty cards from supermarkets entrap us into being labeled “loyal customers.” These customer loyalty schemes are based upon offering customers lower prices to gain greater loyalty.
But lasting loyalty isn’t earned by offering the lowest price. Businesses that gain sales solely by low prices are only as good as their latest, cheapest offer. As soon as a competitor can beat the price, all those “loyal” customers will chuck their loyalty cards and shop elsewhere.
Loyalty programs reverse the logic of great customer service: they ask customers to sign up for a card or buy a certain amount of product before they can enjoy the benefits of being part of the club. Do you really want to create two classes of customers? One that gets the “good stuff” at a good price, the other that gets a raw deal?
I’ve always viewed loyalty programs as either transaction-based or relationship-based.
Frequent flyer programs from airlines are an example of a transaction-based loyalty program. It’s designed to get you to buy a round-trip ticket in order to receive frequent flyer miles. However, it’s less about customer loyalty and more about customer entrapment.
The only reason I am loyal to an airline is because I’m trapped. I have too many miles on one airline not to use them. I use them not because I think they do a good job. I use them because I’m trapped.
However, I am a fan of loyalty programs that recognize customers with special attention more than reward customers with special discounts.
For example when the barista at your neighborhood espresso shop knows exactly how to make your drink, that’s is a relationship-based loyalty program. It’s the high-touch, low-tech way to developing customer loyalty because it requires a personal connection between the employee and the customer.
Customer loyalty works both ways. If you want customers to stay loyal to you, stay loyal to your customers—treat them as people, help them as individuals, offer them something extra, and they’ll come back for more.
REVISITING THE BASICS | archive