“Loyalty” vs. “Our product sucks, but here’s a bribe to use it anyway” programs. Which one is yours?

Nearly 75 percent of shoppers in the U.S. now belong to at least one loyalty program—but how well do they work? The short answer: not as well as they might.

Loyalty is defined as showing steady and consistent affection to a belief, person or thing to which one has allegiance. These days loyalty programs are a dime a dozen, and many times they are put in place solely to generate revenue for an organization versus truly rewarding that organization’s loyal following of customers, as any of their marketing materials would emphatically proclaim.

Of course, I’m well aware that any and every program launched by a large brand likely didn’t get there without some sort of viable business case to do so – “out of the goodness of our hearts” usually doesn’t fare well as a justification for hiring new resources or as a revenue projection. However, I don’t think that means that you can’t accomplish both if you set out to do exactly that. Unfortunately, no one seems to have mastered this… at least not yet.

I am beginning to believe that over the course of time, many of these loyalty programs have enabled big brands, specifically the marketers of those brands, to get lazy when it comes to actively seeking and defining true customer loyalty. If there’s a loyalty program in place (and someone other than us responsible for running it), then we breathe a sigh of relief, conclude “loyalty we have” and check that responsibility off of our list. We move on to focus on the next one-hit-wonder promotion, the easy wins, leaving our loyalty program managers to fin for themselves. And we expend immense energy and deplete huge buckets of short-term point grand prizes to drive a short-term spike, yet are ‘surprised’ when we see no lasting benefits after the promotion ends.

What might happen, instead, if we actually focused some of those efforts and utilized our marketing resources to improve our product’s customer service… or, stop the presses, improving the product itself, thus enabling our customers to earn more standard, consistent rewards by actually using our product happily versus begrudgingly giving into their theoretical brand jail warden, as they are too far invested in its loyalty program… What if we simply spent more time becoming better overall product marketers versus MarComm junkies? Unfortunately, that’s not the overwhelming trend.

We – I’m guilty of it too – brush off those tasks as “not our job” and continue to hammer home those one-hit-wonder promos, utilizing waves of loyalty points and other cash-laden carrots to drive a customer action that’s as fleeting as an empty Outlook Inbox and could hurt us more than ever help. Those crappy little spikes in performance aren’t loyalty. They are just signals reiterating the fact that your customers will only use your product if you, quite literally, pay them. And sometimes not even then. Yet, we will sell those results internally as though mountains were moved and loyalty goals reached. In the process we do a disservice to ourselves and our brand, while lulling senior management intocomplacency by showing them that spike they want to see without diagnosing the pitiful valley immediately following. In that case, our brand loses, our products lose and ourcustomers lose. 

I’m certainly not saying that all marketers take this approach or abuse/neglect their loyalty programs like I have suggested, but I do think there’s more we can do as marketers to help our loyalty program managers define and drive true loyalty instead of dipping into the points bucket whenever it’s convenient. Does our points per purchase ratio reward our customers in a way that gives them redemption opportunities on a consistent basis? Are there unique ways we could cross-utilize rewards to drive engagement across our product portfolio in a more holistic way?

There’s also so much more we can do to create products customers truly want to use and value using, and the revenue a loyalty program is intended to drive will organically increase as a result. And even if you don’t have any development hours to give to make some of the necessary enhancements, what else could you do to enhance customer service? How could your marketing strategy or communication channels help to improve in all of these areas? I guarantee there is something more you… more we could be doing to drive loyalty.

Unparalleled customer service and product quality should be what keeps your customers, at their core, coming back for more… and the loyalty program, long-term, will be the reason they stay. It should offer just enough icing on the cake to ensure they feel justly rewarded and thus continue to pledge allegiance to your brand… happily. Also known as the elusive concept of loyalty.

In 2010, I’m quite curious to see how geo-location products like Foursquare, Yelp, Gowalla begin to change this space altogether and create new challenges to tackle and opportunities to seize when it comes to defining and retaining customer loyalty as we move into what promises to be a unique decade of marketing, to say the least.

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