4 Ways To Build A Better Loyalty Program

Article by Ernan Roman
Featured on CMO.com

Millennials and Gen Zs view traditional loyalty programs as “manipulative,” “hierarchical,” and “built around exclusions.”

image courtesy of CMO.com

Those are highlights from VoC research conducted by ERDM for Detroit-based watchmaker Shinola, which was looking to revamp its loyalty program. These points also underscore findings from similar research done for other brands, whose customers, across all generations, have knocked loyalty programs for tying rewards to the number of transactions. They emphasized the betrayal they feel when brand love evaporates if they stop purchasing for a while.

These findings point to a need for brands and marketers to flip the concept of loyalty. The onus is on brands to demonstrate their long-term commitment to their customers, not the other way around. As one person said in the research: “Be as loyal to me as I have been to you. Do that, and I will continue to buy from you.”

New approaches to engagement are in order. The voice of the customer research has found four essential and interconnected requirements for building and sustaining effective loyalty programs:

1.   Recognize Me

Loyalty members appreciate and deserve a “thank you” for helping to make a brand what it is today. This must occur not only at the moment of the sale, but throughout the entire customer journey, starting at the point of welcoming a new customer.

“Recognition of members should be done across all touch points, including front-line staff and customer service,” said Kevin McCarthy, VP of customer engagement at Macy's. 

Key takeaways: From the very first interaction, rethink your sales and marketing strategies. Stop thinking in terms of “closing a sale.” Instead, think of each new customer as a unique opportunity to begin a relationship.

2. Include Me

Loyalty members want to be part of your brand’s story. They are very willing to take part in experiences that deepen their relationships with your brand and grow the experience.

“Don’t make your loyalty program about hurdles, tiers, and spending levels,” said Shinola President Shannon Washburn. “These do not reflect a brand’s long-term customer commitment. Focus on delivering powerful brand experiences.”

In the case of Shinola, research findings indicated that customers wanted to be invited to special in-store events and meet the craftspeople who were creating the beautiful products, as well as local craftspeople from the neighborhood. These events could also be broadcast via video links to geographically distant customers.

Key takeaways: Today’s consumers value experiences. Therefore, think about the experiential ROI and word of mouth that results from high-value experiences. 

3. Show Me

Brands need to demonstrate to customers what they are doing to keep the brand relationship alive and dynamic. What is the differentiating ingredient about your brand, and how do you showcase it across the omnichannel mix?

For example, BMW differentiates itself with the advertising tagline “The Ultimate Driving Machine.” But it's more than just words. BMW keeps the phrase fresh and tangible by inviting customers and prospects to road rallies and skills improvement days at locations throughout the country.

Customers also need to see that companies care about them. If companies see a decline in website visits, for example, they must proactively reach out to see how they can help solve problems or answer questions. This proactive effort goes a long way in customers’ eyes.

“It’s important to create programs that are multidimensional and incorporate hard and soft benefits,” Macy’s McCarthy said.

Key takeaways: Your brand has to be about more than transactions and discounts, and customers must be viewed as more than the sum (or lack) of their transactions. Engage people across the omnichannel mix to experience your brand in different and creative ways. 

4. Surprise Me

Loyalty members want brands to build a relationship with them by going out of their way to show appreciation at the right time and in the right way. A surprise gift that is relevant to a purchase they previously made or relevant to their lives is extremely impactful. Remember, it’s not about the gift itself. It’s about the fact a brand is demonstrating appreciation.

Two examples we've heard: “It meant a lot that we were upgraded to a nicer room when you learned that we were celebrating our anniversary!” and “How nice that you sent the package to us via FedEx instead of ground because we were leaving on the trip soon.”

“Members love surprise and delight. Receiving something that is unexpected creates stories that are shared,” McCarthy said. 

Key takeaways: A special, personal surprise goes a long way in maintaining the value associated with your brand and its products or services.

Loyalty programs continue to be a powerful way to engage customers, but they can no longer be thought of in terms of rewarding customers who buy the most. Rather, the onus falls on brands to show customers they're in it for the long haul. By recognizing, including, showing, and surprising their customers, brands will be the ones to reap the rewards.