Transactional loyalty models are good. Transactional / relational customer loyalty models rock.
By Mike Giambattista
Loyalty marketing is a funny thing. For one thing, as a marketing niche it has exploded in the past couple of years with new technologies, new players and now with the advent of Google’s and Apple’s forays – even new ecosystems. For another thing, and this is worth thinking about for a moment, loyalty – the actual meaning of the term – is getting lost (and is in danger of disappearing altogether) in the morass of omni-channel, transactionally-based systems that are only designed to enhance one side of the customer/vendor relationship. And that’s a problem – which I’ll get into later.
We’re asked on a continual basis to help a huge array of companies design, develop and manage their loyalty programs and in the process, we see a lot – and I mean a LOT – of different spins out there. At one end of the spectrum are programs that are designed purely to create additive transactions – to get another sale rung up, and that’s it. We see a lot of those and, and there are definitely places in the marketing world for such, but I’m not sure they’re really “loyalty” programs in the true sense of the word.
They’re transactional upsell mechanisms – and let’s be really clear, properly implemented and managed, they can add dramatically to the bottom lines of many types of businesses. But do they do anything to build a real bond with your customers over the long term? That’s debatable. Beyond the opportunistic desire to get that eleventh sandwich for free, most “buy-10-get-the-11th free” mechanisms don’t do a whole lot to deepen the bonds with your brand.
Which brings us to the questions – what exactly is loyalty? And if it’s different from the above, is it something worth investing in?
At its root level, before us marketers got ahold of the term, loyalty was an expression – a feeling – of bondedness to someone or some thing. Your dog is loyal to you because he feels loyal. He’s not in it to get the 11th free sandwich (although if you have my dog this whole analogy falls apart when he climbs onto the kitchen counter and snags your lunch). But bear with me - your dog is loyal because in his view of your relationship, you do nice things for him. In the animal world, that makes you the king – and that makes him your loyal pup.
In any relationship where loyalty is present, there is an exchange. There is an offering of something of value – of perceived substance, from one party to the other – which creates a desire on the part of the recipient to feel good about the giver – and thus, a certain amount of loyalty is born.
To be sure, loyalty can be achieved through different means. It can be bought, it can be bribed, it can be blackmailed or it can be earned. Each of the above avenues to loyalty comes with a proportionate amount of depth, depending on the value of what was exchanged to create it.
In the first example above, the kind of loyalty engendered through transactional loyalty programs fits pretty squarely into the “bought” category. I will take your punch card, I will put it in my wallet and I will use it with some consistency to get my free 11th sandwich. But how far will I go beyond that to prove my loyalty to you? We’ll let that question hang there.
If my loyalty to you has come through less magnanimous methods, say through bribery, the depth of my commitment to you extends only as far as that thing you’re holding against me and not a millimeter further. It is a loyalty born out of despair. Remember Willie Wonka and the golden tickets? Those kids, the winners, would go to any length to obtain a ticket because of the promise offered them (bribery) but not a bit further. Their loyalty had some very definite limits. In the retail world we’re pretty sure they would have had a limited lifetime value.
If, on the other hand, my loyalty to you has come out of a sensible introduction, followed by a sensible series of exchanges (the important word here is series), and things of value to me have been proffered and accepted, then you can bank on a handful of things here:
- I appreciate this relationship.
- I anticipate our future exchanges.
- I will probably blab about this to my circle.
- I will begin to take progressively greater steps toward you.
- I am open to a widening variety of exchanges with you.
- My feelings of loyalty toward you are very real to me.
- I want your company to do well because that reflects well on me.
- I actually like spending my money with you.
I can count on one hand the number of brands that I would say I’m actually “loyal” to. And as I’m thinking through the list, it’s worth noting that brand affinity needs to be measured separately and distinctly from brand loyalty. Affinity for a brand comes from the fact that the brand identifies with my personality, values and interests.
Brand loyalty is a brand I’ll do something with.
Take a quick moment and do that same exercise for yourself. How many brands are there that you would say you are truly loyal to? To the point of taking some sort of relational action? Probably very few. That’s the point. Those few brands that have your actual loyalty, have probably invested something significant and creative into the relationship – beyond the transaction.
A recent article in Inc. magazine quoted two separate studies that indicated, perhaps not so surprisingly, that millennials are actually the most brand-loyal generation in history. Huh??? It actually makes sense if you think about what millennials are looking for in their preferred brands. http://www.inc.com/geoff-smith/millennials-becoming-more-loyal-in-era-of-consumer-choice.html
“… (one) study found that nearly 50 percent of respondents wanted socially conscious benefits like charitable giving or one-of-a-kind rewards and experiences as a result of brand interactions. Essentially, what customers are responding positively to are personal, authentic connections. By engaging one-on-one via social media or building in socially responsible aspects to the customer engagement strategy, brands are building strong, emotionally driven relationships that will stand the test of time.” Ahem.
So where does this leave us if we have invested in transactional loyalty models and systems? Does that mean that our customer-relational value is limited? Not hardly. It just means that you have room for new layers of richness between you and your customers.
Mike Giambattista is Managing Editor at The Wise Marketer and is a Certified Loyalty Marketing Professional (CLMP).