When considering why consumers actively choose one brand above another, some would say it's because of a product they love, or perhaps exceptional customer service, or that the brand is ingrained in their mind through some other positive association, according to Tim Williams, planning director for eCRM agency Underwired, who here examines why loyalty cards are still seldom cited by consumers as the main reason for a brand choice.
How many brands are represented in your wallet through loyalty cards or on your phone via a loyalty app? Are you committed to those brands? Would you stay faithful to them even if a competitor appeared with a better service, price or product? It's doubtful.
A few years ago neuroscientist Antonio Damasio made a ground-breaking discovery. In a study of people with damage to the part of the brain that generates emotion, he noted they all had something peculiar in common: they couldn't easily make decisions. Emotions are the backbone of the purchases we make and brands we choose.
Loyalty programmes are typically designed to stimulate functional behaviours that support an underlying business objective; drive purchase frequency, influence tenure, increase LTV. All of which are tangible objectives with quantifiable success measures. But this type of programme tends to overlook the importance of an intervening phase - emotional engagement. As such, the most effective way to promote customer loyalty does not start with a loyalty programme.
If you have to buy it, it isn't loyalty
A traditional 'loyalty programme' that serves to 'buy' desired behaviours or pseudo loyalty can provide short-term gains but is just not sustainable as you find yourself having to out-gun the schemes of your peers.
From simplistic points mechanics to value exchanges, loyalty programmes breed copycats as they are easy to imitate and easy to exceed. If one brand can buy your loyalty one week, so can a competing brand the next, schemes that fall into the growing pool of undifferentiated commodity.
What's the real value?
Given the cost of such programmes they can dilute profit and drain resource with no positive effect on consumer consumption habits whatsoever, simply mirroring existing behaviours amongst existing customers. Furthermore, loyalty programmes can encourage brands to waste huge volumes of rich data - viewing customers in blunt, generalised groups valued only by the swipe of a card.
Having said this, there is certainly a place for a loyalty programme and, if executed thoughtfully they can encourage spend, increase frequency and establish habit. They can enhance the fundamental drivers of loyalty and supercharge a great customer strategy through rich customer insights. But don't put a loyalty programme ahead of true customer loyalty. Or pursue it at the expense of investment into the core customer experience, and the elements that will truly differentiate you from your competitors.
Loyalty is the outcome
But let's approach this from a different start point. Begin by viewing loyalty not as an objective, but as an outcome of a wider customer strategy. True loyalty is the natural result of ensuring your customer experience is strongly aligned with the needs and motivations of your consumer and understanding what they value most.
"True loyalty is earned, not bought, is difficult to replicate, is enduring, and is emotional (not simply functional)," concluded Williams. "That's why we start with the insight rather than the tactic when we design effective customer strategies to achieve emotional engagement, desired functional behaviours and the holy grail: customer loyalty."