A number of loyalty programs have operated the same way for decades. Customers buy a favorite product. They are rewarded with points. In time, they cash in those points. The objective of the loyalty program is, in theory, ‘achieved’. Given that there has been no fundamental change in the process for years, it is no surprise that 50% of consumers worldwide are dissatisfied with the quality of loyalty programs and their features . Fatigue and stale familiarity have set in: only half of households that belong to loyalty programs are active participants.
It’s time for a re-think. Brands are simply rewarding a transactional behaviour in the most basic way. The program space is also saturated: customers are lost in the swathe of different loyalty programs on offer. Loyalty programs need to be redesigned from the customer back and to stand out from the crowd. They need to have strong ambitions, such as cementing customer loyalty, attracting new customers, and retaining existing ones.
From transaction to engagement
The answer is to move from transaction to engagement. Transactional loyalty programs need to be enriched through a personalised approach that adds depth and meaning to the relationship with the customer. Fashion Retailer Nordstrom has launched the “Fashion Rewards Program”. Members receive tangible benefits that are tailor-made to their specific needs. Benefits may include private shopping parties or style experiences.
GHA Discovery is another example. This is a three-tiered rewards program from Global Hotel Alliance (GHA), a group of independent luxury hotel brands. To compete against global brands like Marriott and Hilton, GHA worked with its guests and staff to understand what international travellers like and don’t like about loyalty programs. They arrived at a clear answer: customers were suffering from “points fatigue”. Hotel guests wanted personalized experiences over the usual – and increasingly tedious – discounts, freebies and room upgrades.
GHA engaged with its hotel staff across the globe via a private, online community to rethink its reward program. The team created more than 2,000 “Local Experiences”, such as a private dinner and sunset cruise on the Arabian Sea, or a day with pandas in Hong Kong. In less than four years, the program saw membership rise to over 4 million members worldwide, with an average new member sign-up rate of 2,000 per day.
A display of emotion
Brands also need to use loyalty programs to build an emotional connection with the customer. These are important because they affect the length and the strength of a customer relationship. Research has demonstrated that consumers with strong emotional connections to retailers will visit their stores 32% more often and spend 46% more money than those without emotional bonds. Galeries Lafayette, a French department store, rewards its best clients with a bottle of champagne at the end of the year. According to Karine Vierucci, Director Customer Marketing, “For us, our loyalty programme is not an end in itself. It is a great opportunity to interact with one’s clients at a selfless and emotional level”.
Coherent connections in a digital world
Winning and retaining customer loyalty is a mixture of personalization, exclusivity and emotional connection. However, in the digital age, it is also essential that the loyalty relationship is consistent across all touch-points: store, website, social, from FaceBook to Instagram, and on to mobile apps. A connection that is made in-store needs to be consistent with the connection made online.
Customer loyalty, like trust between two people, is hard earned and easily lost. But it is worth the effort. Long-term customer relationships are the lifeblood of a brand. It is time to reinvigorate tired and transactional loyalty programs for a personalized, digital age.