Did you know that over 90% of companies have invested in some form of customer loyalty program?
To give you a bit of background, companies like Dallas luxury retailer, Neiman Marcus, have experimented with rewards programs to drive loyalty since the 1960s. Airlines then joined the party in the 1980s with their version of loyalty rewards via “frequent flyer” type programs.
Today, companies now offer customers the ability to earn loyalty points to redeem for several rewards, such as free products, merchandise, gift cards, magazine subscriptions, movie tickets, and many other incentives. As you can probably already tell: the loyalty rewards industry is more competitive than your family playing monopoly on games night!
Loyalty programs are tricky. Due to the commercialisation of rewards, customers are now acquiring and redeeming points for similar, or the same, rewards in every program. Unique factor: 0.
Since there has been a diminishing element of differentiation, it has led customers to fly on whatever airline or eat at whatever restaurant. Being loyal isn’t as important as it once was, but it’s still there if you know how to harness the power of driving an emotional relationship between brand and customer.
Feelings and emotions are core to the experience
The purpose of customer loyalty is to bind customers to brands based on their feelings; towards the brand, and when they use it. Loyalty is an ongoing emotional relationship between businesses and customers. Just like what you hope to get from your significant other, there must be an equal give and take.
What makes you feel valued? Is it being offered just anything? Or do you relish in receiving something personal?
When targeting emotions, there is nothing greater than bespoke, personalised experiences to tug at customers heartstrings. Custom experiences are hard to compare.
The power of personalisation
Customers know how much a watch or iPhone costs (the internet has given us very dangerous powers), and it’s easy to compare how much they cost across rewards programs.
Wine tours in the Barossa, hot air ballooning in the Hunter Valley, or a VIP tour behind the scenes are feel-good experiences that make it hard to compare. Experiences connect us with others and build relationships.
A great business example of this is Virgin Australia. In 2017 they invited Gold and Platinum members of its Velocity Frequent Flyer program to a cocktail party to try their launched Business Class seats. The experience allowed frequent flyers to connect with each other and rub elbows with other VIP customers.
There’s no loyalty without trust
Customers buy from companies that they trust. After a relationship is formed through a series of positive interactions with the company or brand and its products and services. Experiences like this build trust and drive loyalty.
We look forward to unique experiences, which often creates the best memories in years to come. According to research by Fast Company, experiences result in longer-lasting happiness than material possessions.
Here’s a fun fact; satisfaction from possessions actually decreases over time while happiness with experiences increases. How’s that for perspective.
In 2010, a study in the Netherlands was published in Applied Research in Quality of Life which found that people who planned vacations experienced their highest level of happiness in the weeks and months leading up to a holiday. Some even have speculated that the lead up to vacation may have a higher effect on overall happiness than the vacation itself.
So, the next time you’re thinking about which rewards to offer in your loyalty program, remember this 2010 Cornell University study: The satisfaction we get from buying vacations and other experiences grows over time, but the high that we get from buying a big screen TV diminishes fast.
Final words of wisdom
Well-designed bespoke experiences are a better investment to drive loyalty. They are unique, so customers find it difficult to compare them and calculate their value.
Material rewards become a cost of doing business. They drive up cost of sales for the business to buy, which leads to higher prices for customers. They have little value building trust and driving loyalty. Bespoke experiences connect customers to each other and brands. They allow customers to look forward to something and reminisce. These are important ingredients to delight customers and bind them to the brands they love.
When a loyalty program values their customers, good things happen, so keep the good vibes rolling.