Loyalty Shouldn't Be Your Customer's Problem

Not all loyalty programs are created equal: some work like super glue to keep customers coming back again and again while others can backfire. Loyalty programs can backfire when they put too much of a burden on the customer for participation. In order to do it right, companies should look for ways to make their loyalty programs as convenient and transparent as possible to the customer.

WHEN LOYALTY PROGRAMS GO BAD

Customers may visit your business for a variety of reasons. They may love the convenience, quality, price, or experience. But when they know that they won't get their "reward", it can sour even the sweetest customer experience. In some cases, the customer may shop a competitor to get that little item just to avoid the perception that they'd be paying too much without their loyalty card.

Our neighborhood grocery store has a discount program that is activated when I scan my frequent shopper key fob. I've been a loyal customer for years and have spent piles of money at this store. However, I recently ran in to buy a few items and forgot my frequent shopper card. Despite my loyalty, they refused to provide me with the frequent buyer discount: no card - no discount. The entire experience was tainted by the fact that I felt like I paid too much and wasn't treated like a loyal customer.

In the case of club membership cards, it can be even more black and white. Consider how a few of the larger membership-only retailers such as CostCo or Sam's Club require physical proof of membership: no membership card - no deal. Personally, I don't carry my CostCo card with me unless I'm planning a trip to their store. If I'm out without my membership card, I have no choice but to shop elsewhere for items I could get at CostCo.

Loyalty programs are intended to treat your best customers - better. They are intended to create barriers to defection, increase shopping frequency, and improve the customer experience. But when the customer forgets their loyalty card, the customer is the one that is penalized. As a result, the customer pays the price and the relationship can be damaged. When that happens, all of the good intentions of the loyalty program can backfire.

Love the Card or Love the Experience?

In my experience, I have seen companies launch loyalty card programs with the hopes that the card itself will build loyalty. It doesn't work that way; customers don't become loyal just because of a loyalty card. Sure, frequent flyer programs that are synonymous with airline and hotel chains can influence customer choices and behaviors, but that doesn't mean that the card was the sole reason for loyalty.

Let's not lose sight of the primary driver of customer loyalty; it's about the experience. I once heard a story about an airline company that was contacting its most loyal customers based on participation in its frequent flyer program. They asked one customer why he liked their airline so much and were taken aback when he replied, "I don't like your airline. The only reason I fly on your airline is that it's the only connection between point A and B." Make sure that your customers are loyal to your company because of the experience, not because of the loyalty program!

Buy 10 Get 1 Free

Another popular and low-tech loyalty program is the reward punch card. You've probably run into a business somewhere along the way that offers one of these reward cards. Each time you make a purchase, they punch a hole in the card. After your tenth purchase, you get the next one free. The idea, of course, is to increase the frequency of the customer visits and increase loyalty. Again, too often the punch card gets lost or forgotten - and so do the benefits intended for the loyalty program.

If we've learned anything, it's that customer behaviors and habits are hard to change. If Joe gets his hair cut once very four weeks, a punch card probably isn't incentive enough to change that behavior. A 2006 study conducted by Assistant Professors Wesley R. Hartmann and Brian Viard at the Stanford Graduate School of Business supports that theory. Their study indicated that such programs had only minimal - if any - effects in increasing buying frequency. Too often, companies that utilize a punch card reward program may not be getting the intended return on investment. Customer behaviors are hard to change; just try to get them to carry around another punch card in their purse or wallet.

HOW TO DO LOYALTY RIGHT

Today's customer is already burdened with a dizzying array of offers, promotions, coupons, and loyalty programs. Asking the customer to add your company's loyalty card to the pile is only exacerbating the issue. Instead, companies should look for ways to make loyalty programs as convenient and transparent as possible to the customer. After all, customer loyalty isn't about the card - it's about delivering a great customer experience. You can do loyalty right by considering a few methods for making your loyalty program as convenient as possible.

Keep a Customer Database

Let's go back to a time when customer loyalty was personal. A time before cards, tokens, or key fobs permeated our purses, wallets, or glove compartments. There once was a time when personal relationships really mattered. In the local neighborhood store the owner knew everyone personally. He knew you by name, probably knew your kids and where they went to school. It was this level intimate familiarity that created a loyal bond between customer and store that was nearly unbreakable.

If you want to build loyal customers, treat them like you know them. Don't put the burden on them to bring along their collection of reward cards with the hope of finding yours. Managing a customer loyalty program should be the company's problem - not the customer's.

Take on the responsibility of identifying your customer's enrollment in your loyalty program. A simple and effective way of doing this is to keep a customer database that is easily accessible from your storefront or point of sale. For example, I am currently a member of Rimann Liquor's wine club and my reward for being a member gets me 10% off wine purchases. Thankfully, there is no physical loyalty card required. When I check out they simply ask if I am a member - look up my information at the register - and I get the discount! It's a very simple and convenient loyalty program. They take on the burden of the program - not the customer.

Surprise!

Sometimes, the best way to build loyalty is to surprise your customers. Most loyalty programs are very predictable - to the point of being downright boring. I know, for example, that I'll get a small discount every time I visit my local grocery store and flash my loyalty card. The fact is, I would go to that grocery store with or without the loyalty discount; I value the convenience more than the few dollars that the loyalty program might offer.

I might think differently about my neighborhood grocery store if they surprised me now and then. Let's say the next time I stop in to buy a gallon of milk they surprise me by saying, "Mr. Howard - for being such a great customer - we're giving you a free gallon of milk!" Surprise rewards can make a customer feel special, shows that the company was paying attention, and demonstrates that they truly care about individual customers.

Predictable loyalty programs are fine, but think about ways to give your best customers a special surprise now and then. Don't wait for your customer to get that tenth hole punched in her loyalty card - just surprise her. A simple and heartfelt surprise can create a more lasting impression than a boringly predictable loyalty program. Furthermore, a surprise reward - if done right - can create a lasting impression that lasts well beyond any promotion or transaction.

Get the Experience Right

Building customer loyalty should begin with a great customer experience - not the loyalty card. Although buying behaviors differ between customers and industries, it is more likely that customers will place experience factors ahead of loyalty programs when making a choice where and when to buy. As a result, getting your customer experience right can have a bigger impact on customer loyalty than a simple loyalty card or program.

McDonald's, for example, has experimented with various loyalty reward programs, but they don't rely on them to drive their business. They don't have to; McDonald's has established a strong brand that delivers a consistently good customer experience. Customers visit McDonald's - not because of some loyalty program - but because it offers the experience that they want or need.

Get the experience right by developing a deep understanding of your customer's wants and needs. Then focus on customizing the delivery of your products and services to stand out from the crowd. When it comes to customer experience, average just won't cut it. You need to deliver your products and services in a manner that is special. If your customer values convenience, make it easier for them than ever. If your customer values good service, provide the most complete and robust customer service possible. Get the experience right and customer loyalty will follow.

The Universal Loyalty Card

We may never truly get away from the plethora of cards, key fobs, and other devices that are used as loyalty program identifiers. But what if there was an alternative that consolidated all of these things into a single device; a device that could be a credit card, a debit card, and store any number of loyalty programs. This universal device would certainly help to minimize the problems associated with having a unique card for each loyalty program.

Although a widely accepted universal loyalty card may sound futuristic, the technology is here today. In fact, the concept of a universal payment solution has already begun to take shape online. Paypal, for example, provides an effective way to tie multiple customer payment sources into a single account. Customers can then execute financial transactions using their universal Paypal account rather than entering their credit card information on each web site they visit.

The universal loyalty card concept is also making the leap to the bricks and mortar world in the form of an electronic wallet. One such example is the Pocket Vault(TM) from Chameleon Network. In this case, multiple credit, debit, ATM, and loyalty cards can be consolidated into one device. Although the universal card concept has not yet been widely adopted, it may indicate the future of loyalty programs.

Regardless of which payment solution wins the customer adoption battle, the loyalty program landscape will certainly change. Make sure that your loyalty program can adapt to take advantage of these emerging technologies.

CONCLUSION

Loyalty programs have become commonplace among businesses everywhere. Unfortunately, customers are often overwhelmed with loyalty cards, rewards programs, key fobs, and other physical items that are required to identify their participation in the program. Instead, companies should look for ways to make loyalty programs as convenient and transparent as possible to the customer. Potential solutions include the utilization of a customer database, implementing a customer surprise program, and improving the underlying customer experience. As a result, companies can reduce the customer's burden and get better returns from their loyalty program. After all, loyalty shouldn't be your customer's problem.

About The Author-- Robert G. Howard is an experienced business advisor with over 20 years of experience. He founded ClearBrick LLC in 2006 to package world-class professional advice into convenient do-it-yourself solutions. Learn how you can solve your own business issues at ClearBrick.com.

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