About the author
|Denis Pombriant is CRM marketplace analyst and consultant. Founder and managing principal, Beagle Research Group, LLC. He is the author of several books including “The Age of Sustainability” and “You Can’t Buy Customer Loyalty, But You Can Earn It.”
If you’re confused about loyalty programs, it’s understandable. The vast majority of loyalty programs in the marketplace today are really nothing more than glorified discounting schemes. Whether it’s an active discount for a current transaction (the worst kind) or a promise of a future discount through accumulating points, miles or other tokens, it’s all the same. Such loyalty programs eat into profits without changing customer behavior, yet the objective is to get customers to return and buy more at a price you set without a massive discount. What’s wrong?
There’s ample research that shows when the discounts stop, so does the loyalty. So, is that really loyalty? You know the answer, but what do you do about it? I suggest taking a hard look at root causes and work forward. In this case I developed a small “equation” that illustrates the point:
I use the arrow as a substitute for “drives” as in customer experience drives customer engagement and it’s really engagement that we should be focusing on and not loyalty per se. Loyalty is a natural by-product of engagement which I’ve written about in one of my books: so, in other words if you nail the engagement aspect, loyalty comes along for the ride.
So how do you get to that point? Other research that I detail in a book, shows that it all starts with experience but not the kind that entertains the eyeballs, just the opposite in fact. A great customer experience is governed by serving customers’ needs as they see them. Often this means being prompt and accurate thus respecting customers’ time so that they can get on with their to-do lists. I know this sounds incredible but ask yourself this: Would you prefer to hear 10 minutes of your most favorite songs while on hold or to be able to get on with your life?
Once you have experience nailed think again about it because for the customer engagement is about a lot of experiences you are likely not supporting. For example, how often do you say thank you to a customer who demonstrates loyalty by endorsing your brand online or by helping a newbie to use a product correctly? It’s increasingly easy to discover these hidden acts of loyalty and if you do, saying thanks costs nothing but makes an impression that drives true loyalty.
Those hidden acts of loyalty can be encouraged and, if rewarded, can do much more work to promote loyalty in your world than all the discounts you can imagine. Think about it. A customer who displays a hidden act of loyalty might be out of budget or need and would likely not be ready to re-invest soon. But that customer can still be loyal and influence others’ behaviors to your benefit. That’s why rewarding them with discounts on future purchases often has little effect other than to function as discounting mechanisms that have no chance of resulting in observable loyalty.
So, the message is clear. To promote real customer loyalty, identify the experiences that really matter to customers and don’t forget praise, everyone likes praise and it costs nothing, unlike your expensive loyalty program. Promote engagement that matters based on your new thinking about experience. Then stand back and let loyalty happen as you reap the profits.