The term loyalty card is a misnomer. It implies that the person in possession of the card is loyal. But the truth is the card doesn’t create loyalty. In fact, your customers take that loyalty card and put it in their wallet or kitchen drawer, with all the other “loyalty” cards they have — even your competitor’s.
Loyalty is an emotional attachment. We usually associate it with family and friends because of the bond you have with them, formed by blood and experiences with them. Little transgressions are not enough to break the bonds you have with those to whom you are loyal.
Customer loyalty is different than the kind you have with your family and friends. It is the result of consistently positive emotional experiences, physical attribute-based satisfaction, and a high perceived value of an experience, which includes the product or services.
Customer loyalty often involves making a sacrifice on their part. Loyal customers don’t comparison shop. Even when a better deal (read: lower price) exists, loyal customers don’t leave because it’s worth it to them to pay more.
Creating customer loyalty is difficult to develop. It certainly requires more than a 2 x 3-inch card with a logo and a 10% discount on Wednesdays.
Do Loyalty Programs Influence Buying Decisions?
Loyalty programs have less influence than retailers think they do. Back in 2010, researchers asked a little over 2,100 people that very question. While 62% of the respondents were enrolled in a program, only 26% said it impacted their buying decisions. In 2014, different researchers in the UK discovered that the influence is slightly higher when the respondent income was lower. However, higher income brackets did admit that “sometimes” the loyalty card affected their store selections.
Respondents might have been unaware how much influence the program may have had on their store-choice decision. However, it’s far more likely that respondents see a loyalty card as an enhancement for the offer. In other words, the upgrades, free 2-day shipping, points for free travel or hotel rooms become an extension of the product or service offering. It would be better to call them rewards cards.
However, one area where loyalty cards exert strong influence is in travel. In 2014, researchers at Collinson Latitude revealed that a whopping 74% of the respondents said that their travel purchase decisions were at least sometimes or often influenced by the loyalty program in which they participated. However, 67% of consumers are not satisfied with their loyalty programs, 64% of them describe them as over complicated, and 86% said more reward choices would improve their experience. Hardly a ringing endorsement, is it?
A Glimmer of Hope for Loyalty Cards
Experiential rewards could be an excellent tool to foster customer loyalty. Experiential rewards are events that make people feel special and range from VIP event access to concert tickets to flight awards. Experiential awards can form an emotional bond and create psychological links between your brand and your customer’s interests and passions.
Experiential rewards should be executed well. When the rewards experience is bungled, or not special enough, it won’t evoke the positive emotions needed to facilitate loyalty associated with your brand.
However, it is vital that your experiential rewards have a balance between accessibility and exclusivity. In other words, you can’t have too many rewards recipients at an exclusive event. Customers need to feel special. I flew Delta a couple of years back and when the overhead announcement asked for the Diamond, Gold & Silver Customers to board, three-quarters of the passengers waiting stood up to board. I didn’t feel all that special
The bottom line is loyalty is hard to create. It requires an emotional bond, which is more than a loyalty card can manage. Also, loyalty cards lack influence in buying decisions. They become an extension of the offer and nothing more. Worse yet, Consumers say they are disappointed, which is never the emotional bond you want to make with customers. The good news customers still think loyalty rewards are important, as long as they are the right ones.
Take a look at your loyalty program. Is it a discount your customers expect and don’t appreciate? Is there a way to reward your best customers with an experience that forms an emotional bond between your customers and your brand? Brands with an experiential reward experience that makes customers feel exclusive will deliver the Customer Experience that loyalty cards were meant to create. The only difference will be that it might work.
Interesting links:
- 3 Remarkably Simple Ways to Improve the Employee Experience
- Creating Customer Experiences Instead of Transactions: My Zappos Experience
- Fortnum & Mason: Building on 300 Years of Loyalty, Online