Last Updated on 7 July 2021
We all want our customers to return to us. In a moment of choice, we hope they would choose us again over a competitor. That they’ll be loyal to us.
Google will provide you with thousands of ideas for both reward and loyalty programs. You’ll find the terms Reward and Loyalty used interchangeably. This creates confusion as rewards don’t drive loyalty. And, if we’re calling our reward program a “loyalty” program thinking we’re building loyalty – we’re doing the wrong things.
Rewards are typically based on games, points, and providing incentives to drive customers to meet purchase thresholds. If customers behave like we want – visit more frequently, increase average ticket – we’ll reward them.
Loyalty, done properly, involves understanding our customers by collecting information and using that information to personalize their experience. Loyalty is perceived as expensive and not easy to track, so we settle for rewards.
Reward Example: The Starbucks Card
Let’s look at the Starbucks Card. At its core, it is simply a form of currency. You give Starbucks money in advance, and they hold it for you until you swipe your card to spend it.
After you register your Starbucks card, you earn “stars” for each transaction. Earn enough stars and you earn discounts and free drinks and food.
This is a digital punch-card program. It rewards heavy users and creates a bit of status for regulars. You feel appreciated for giving your business to Starbucks. The star system encourages frequency and a bit of urgency – like airline miles – if you don’t earn enough you lose your status and rewards drop. Buy 12 get one free.
They do give you treats on your birthday – which is nice!
Earning Loyalty by Giving It
Loyalty is defined as faithfulness or devotion to a person, country, group, or cause. A strong feeling of support or allegiance. We all want this from our customers, but are we offering it to them?
Are we faithful to them? Devoted? Do we support them and pledge our allegiance?
The secret to shifting from rewarding customers to making them loyal is… to be loyal to your customers first.
Like A Good Friend
A good friend is loyal. They remember your birthday. They know your favorite color, your ring size, your shirt size. They buy you great Christmas presents that are a perfect fit for you – because they know you.
The Starbucks Card could be easily turned into a Loyalty Card if Starbucks used data to better understand customer likes and preferences at Starbucks.
For example, let’s say you typically buy a mocha or caramel-flavored latte at Starbucks. Starbucks would know this from your purchase habits. The holiday season arrives and they send a personalized message to you announcing the Gingerbread Latte is coming soon! Or perhaps they provide you a cardholder-only taste preview of the new flavors Cherry Jubilee Mocha or Chestnut Praline Latte based on your preferences, not just what their promotion is.
Starbucks sees you purchased a Verismo brewer this past summer. Knowing this, they could email and offer a trial pack of the holiday blend pods. Starbucks benefits in creating a sampling opportunity of these coffee flavors, and may drive an incremental visit. But, the real reward is being highly relevant to customers.
Like that loyal friend, they would understand customers enough to know what they like and prefer.
Hotels Have The Right Idea
Ritz-Carlton hotel staff take notes about guests’ preferences – likes and dislikes – from a choice of wine to how many pillows are preferred, and they tailor the guest experience accordingly.
Starwood’s W Hotels have systems to document customer preferences. For example, if a guest expresses a love for a certain sports team, the Welcome Desk staff from property to property will provide a game schedule and a list of local channels so the guest may watch the games.
Low Tech, Too
So far I’ve only mentioned expensive computer-based tools. But, you could launch a system tomorrow for the price of a stack of index cards and file box.
A coffee shop I used to frequent in Jacksonville, Florida would store customers buy-5-get-one-free punch cards in a 3″ x 5″ index card file box. They would also make notes about customers on 3″ x 5″ cards. While this manual system sounds archaic… it was cheap, quick, and allowed any employee to access information in moments. Organized by first name, they also learned our names much faster, making it a more personal experience.
If you want to drive long-term loyalty from your customers, consider the programs you now have in place, and what needs to be added to first be loyal to them!
More than simply rewarding frequency or ticket, whether you use high- or low-tech tools, loyalty comes from understanding and being loyal to your customers.