Loyalty Programs Suck Because Brands Are Selfish

How brands should change their relationship with customers

Loyalty. It is something our culture struggles with. Nearly 50% of American marriages end in divorce. The number of jobs an American has throughout life has increased to 15! So can we really expect loyalty to exist between a brand and its customers?

I believe the answer is an emphatic “yes!” But first, let’s agree on what loyalty means. Merriam-Webster defines loyalty as, “a feeling of strong support for someone or something.” Yes, that is how I feel about my wife (happily married 5 years!). But, as branders and marketers – we hate just feelings. We want actions: clicks, visits, shares, purchases and referrals. So my definition of customer loyalty is: a strong feeling of support that compels a customer to make a suboptimal, short-term choice for the right to long-term gain.

Customer Loyalty: A strong feeling of support that compels a customer to make a suboptimal, short-term choice for the right to long-term gain.

The same is true for brands. We all have those brands for which we will pay more, travel farther, and tolerate some inconvenience for (mine are American Airlines, Starwood Hotels and Vans shoes). But a quick word of caution: don’t overly correlate purchase and repeat purchases with customer loyalty. For example, there’s a Starbucks close to my house, and a few times a week I use the Starbucks app to pre-order my Trenta Iced Green Tea, no sweetener, light ice on the way to work. Starbucks thinks I am loyal. They give a free drink every couple weeks for all the points I acquired. However, if I have the time, I will always drive past Starbucks and go to Blackstone Coffee for a Large Peach Iced Tea, chat with the owner for a few minutes, check in with some of the locals and use the wifi to send a couple emails.

I clearly show up as a loyal customer for both Starbucks and Blackstone Coffee (who has an old school swipe card program). But if given a REAL choice, I will choose Blackstone (or any local coffee shop) over Starbucks every time. I will experience short-term strife – longer drive, higher price per ounce, slower service – if I have the time. I will only go to Starbucks if my location and schedule demands it. Starbucks hasn’t won my loyalty. They have won on the convenience of their locations. Blackstone is always my first port of call – the place I will always go first if I can because I love the total experience. But unlike my wife, who is my only port of call, Blackstone doesn’t always win – but they always win when I can choose. That is loyalty.

Some brands, like Cisco or IBM, need wife-like loyalty – an “only port of call” relationship – because promiscuous behavior is ridiculously expensive. Other brands, like retailers, especially high frequency retailers like coffee brands, can tolerate a little infidelity. However, they must innovate or are at risk of customers switching their first port of call to a fresher, more fun competitor.

Transactional Loyalty Program

Transactional Loyalty: Necessary Evil in a Big Data World

By now, you are asking how I have written so much about loyalty without mentioning points, rewards and “earn & burn.” To be honest, points suck. At best, they are a necessary evil in this big data world where we feel the need to measure everything. However, we often measure the wrong thing– transactions. Yes, the whole point of business is to sell goods and services, but measuring transaction is the lowest common denominator. Don’t get me wrong— if you are not tracking purchase transactions, you have much bigger issues than loyalty. However, the “purchase process” is such a tiny, short part of the customer experience and if you are only collecting data at that point, it isn’t enough to know your customer and create the experiences a loyal relationship demands.

Think about buying a pair of jeans. Less than one percent of your relationship with those jeans is in the store, let alone at the register as you swipe your credit card (or use mobile pay). The overwhelming amount of time spent with those jeans is wearing them as you experience life – going to work, attending a concert or going on a date. They make you feel good. Heck, sometimes you even take a picture of them and post how good you look on social media. The brand experience is melded with the life you live in those jeans, or using that iPhone, or even working on the Cisco network at work.

We are loyal to people, products, services, and brands that we perceive are positively contributing to the lives we want to live.Our loyalty is expressed not only across the whole “customer experience,” but throughout the entirety of our life experience. Now brands (with the customer’s permission) have the ability to track, measure and reward that loyalty far beyond the transaction.

As a result, winning loyalty experiences will recognize that consumers express their loyalty, and act as brand advocates, throughout every day of their lives. When I wear those jeans it raises awareness; posting a picture wearing those jeans on Instagram is advertising; bragging to a friend about how great my butt looks in those jeans is word-of-mouth marketing.

Customers will do all of that, if in return you show them a little recognition and reward them every once in a while – that’s called the “loyalty exchange.” Customers are happy to make short-term trade-offs because they know in the long term, you will be there for them when they need some exceptional customer service, a little deal on their next pair or just some social media love.

The more I think about it, the more I am appalled at how selfish current loyalty programs are. They only value customers when they buy something and give a discount customer’s already think they have earned. Let’s mutually agree to use the digital, mobile and social technology at our disposal to create an experience that is a more equitable and loyal relationship.

When asked who is doing it right, I struggle. I don’t think anyone has nailed it yet, but there are brands moving in the right direction. Walgreen’s Balance Rewards is still primarily an earn & burn program, but they award customers points for healthy behavior. Sephora is also primarily a purchase transaction program, but allows customers to choose the benefits (products) they want. And Nike – they don’t have a loyalty program but they do have several apps loyal customers use along their fitness journey, giving Nike amazing amounts of data to help them deliver a better customer experience.

So brands should not be asking “how do we innovate our loyalty program?” but “how do we deepen our loyalty experience?”

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