How to Create Brand Evangelists with Your Loyalty

With all the data being col­lect­ed today on cus­tomers and how chal­leng­ing it is to cap­ture their atten­tion, it is easy to see why loy­al­ty pro­grams are so pop­u­lar for mar­ket­ing. Devel­op­ing a loy­al cus­tomer base is the Holy Grail of every busi­ness, yet achiev­ing an effec­tive loy­al­ty pro­gramme can be challenging.

It is gen­er­al­ly believed that the con­cept of a loy­al­ty pro­gram began in Ger­many in response to the government’s pro­hi­bi­tion of sell­ing the same prod­uct to dif­fer­ent cus­tomers at dif­fer­ent prices. Ger­man mar­keters were forced to devel­op loy­al­ty pro­grammes that cre­at­ed loy­al­ty with­out finan­cial incentives.

In the 1950’s, the US com­pa­ny S&H Green Stamps offered stamps at gro­cery stores and gas sta­tions that cus­tomers put in books and redeemed for prod­ucts. In 1981, Amer­i­can Air­lines launched what might be looked on as the first mod­ern-day loy­al­ty pro­gram that was quick­ly copied by every airline.

Loy­al­ty pro­grams can be a sig­nif­i­cant ele­ment of a busi­ness. While only 12 to 15 per­cent of cus­tomers are loy­al to a sin­gle brand, that small group can gen­er­ate 55 to 70 per­cent of a company’s busi­ness, says the Cen­ter for Retail Man­age­ment at North­west­ern University!

Today’s dig­i­tal­ly sat­u­rat­ed world requires a dif­fer­ent kind of loy­al­ty pro­gramme than its pre­de­ces­sors of the last cen­tu­ry. Today’s cus­tomers may have mul­ti­ple devices and they are demand­ing more and more that their dig­i­tal expe­ri­ences be high­ly per­son­al­ized, con­tex­tu­al­ly rel­e­vant, and in real time. With today’s devices, one fin­ger swipe can elim­i­nate your offer and bring up that of your competitor.

The basic prin­ci­ples of a loy­al­ty pro­gram are still pret­ty much the same as they have always been:

• Acquire new customers
• Retain the best, most prof­itable customers
• Recon­nect lapsed customers
• Increase the spend­ing of exist­ing customers
• Improve the nat­ur­al churn rate of customers
• Shift spend­ing to high­er mar­gin products

But the fun­da­men­tal rea­sons that cus­tomers choose to par­tic­i­pate in loy­al­ty pro­gram has changed dra­mat­i­cal­ly, affect­ing the design of your program.

1. MEET HIGHER EXPECTATIONS
   Cus­tomers are look­ing for VALUE, RELEVANCE, and MEANING. Gone are the days when you could just say what you were offer­ing was big­ger, bet­ter, faster, and eas­i­er. Today’s cus­tomer is look­ing for EXPERIENCES that are of VALUE. They base their choic­es on reviews and are look­ing for more than just a discount.
2. ESTABLISH RELEVANCE
   LOYALTY is not just pro­vid­ing REWARDS. Mar­keters often make this mis­take. A loy­al­ty pro­gram is designed to gen­er­ate advo­ca­cy and com­mit­ment, not just a one-time pur­chase. The size of the reward is less impor­tant than the per­ceived val­ue of the reward. A cus­tomer who you have had to sub­si­dize with con­stant offers of a low­er price is not nec­es­sar­i­ly loyal.
3. **REDUCE COMPLEXITY
   **A good loy­al­ty pro­gram reduces the customer’s deci­sion-mak­ing and rein­forces the right­ness of a choice.
4. **CREATE AN EMOTIONAL CONNECTION
   **You have to posi­tion your prod­ucts and ser­vice in terms that make the cus­tomer see the val­ue and rel­e­vance. To do that, you have to map out the com­plete cus­tomer jour­ney with your brand at every touch point on every chan­nel. You have to make it clear how you want to be perceived.
5. **GO MOBILE
   **While many cus­tomers are OK with plas­tic cards, an increas­ing num­ber of users want their smart­phones and oth­er mobile devices to be used. Going mobile also give you the oppor­tu­ni­ty to use geolo­ca­tion capa­bil­i­ties, wear­ables, near-field com­mu­ni­ca­tions, and games to incen­tivize cus­tomer behaviour.

The Scan­dic Friends loy­al­ty pro­gram, launched by Scan­dic in 2008, is the biggest loy­al­ty pro­gram in the Nordic hotel indus­try. The pro­gram is con­sid­ered the most ben­e­fi­cial and pop­u­lar loy­al­ty pro­gram in the indus­try, offer­ing cus­tomers points towards free or upgrad­ed stays, but also spe­cial activ­i­ties and offers tai­lored to the spe­cif­ic customer’s interests.

Alpine des­ti­na­tion own­er SkiStar has a dynam­ic loy­al­ty pro­gram. When a cus­tomer pass­es through any of the lift scan­ners at any of their facil­i­ties, it reg­is­ters on their SkiPass. By con­nect­ing their SkiPass num­ber to their account, they can track their ski­ing and sta­tis­tics like the lifts’ height and length. Much more data is auto­mat­i­cal­ly cal­cu­lat­ed depend­ing on how well you ski. The more infor­ma­tion you fill in about your­self, the more detailed the sta­tis­tics you receive. It can even tell you how many calo­ries you have burned!

It is also very impor­tant to take into account region­al pref­er­ences. For exam­ple, Nor­we­gian con­sumers are more con­cerned with food safe­ty and ani­mal wel­fare issues than prices.

To devel­op a qual­i­ty loy­al­ty pro­gram that jus­ti­fies the return on your invest­ment, you would be advised to make use of the plen­ti­ful ana­lyt­ic data avail­able. But as I said in a pre­vi­ous post, the data you choose has to be used care­ful­ly and thought­ful­ly. Once you are sure that you are com­ply­ing with legal guide­lines, you want to make sure you are doing things that don’t stretch the com­fort lev­el of your cus­tomers too far.

A loy­al­ty pro­gram can dra­mat­i­cal­ly improve your busi­ness, but you must update it and make it rel­e­vant to today’s dig­i­tal world.