The Loyalty Program Is Dead, Long Live the Loyalty Program
Let's start with this question: "Do traditional customer loyalty programs still work ... why or why not?" The Answer: No, they are not as effective as they have been in the past. There are so many loyalty programs in the marketplace vying for the consumers’ attention, and many of them are not designed to meet the needs, preferences and desires of the customer. Rather, they are built on what the company can afford or support based on a business model or internal systems. The challenge is: How do you differentiate yourself to engender true loyalty? Loyalty is not something that brands create, but rather something that consumers generate based on the brand earning their trust.
Traditional loyalty programs don’t connect with the consumer emotionally. Today’s successful loyalty programs do connect with people emotionally, as scientific research has shown we make decisions for emotional reasons and then later justify them to ourselves and others with rational reasons.
Nor are traditional loyalty programs based on delivering on customer’s individual needs and behaviors, which is critical in today’s marketing environment. Points-based program typically require long timeframes to earn a reward, and these rewards may not meet the customer’s preferences. For instance, Keurig has a points-based loyalty program that only allows you to redeem points earned for their coffee machines and accessories. As a Keurig owner, I would like to redeem my points for free coffee but I’m unable to do so, so it is not meeting my needs and I have abandoned the program.
How Does Engagement Play Into Customer Loyalty?
Customer engagement is integral to building loyalty. Customers are in the driver’s seat. They have high expectations and are more empowered than ever in the purchase journey; influencing others, including brands, to meet their specific needs and behaviors. We are living in a social media and mobile world, and are surrounded by messages 24/7. Therefore, brands need to understand consumers (not only their transactions, but their preferences and attitudes) and deliver real-time information where they are, on their terms, in a personalized manner based on what you know about them.