By anyone’s timeline, the loyalty industry has existed for at least 20 years, driving customer retention across industries as diverse as retail, hospitality, entertainment and financial services. Yet, most loyalty programs are still dependent on the industry’s original—and now decades old—formula for motivating consumers. This is not a good thing.
There’s an ongoing debate as to who gets credit for that formula—whether some long-forgotten owner of a general store or a clever marketer at a modern airline—but at some point, someone brought to life the first customer rewards program. At that primordial dawn of loyalty marketing, where would you have begun? Human nature suggests that most of us, probably like the creator of that first program, would start by thinking about Numero uno. What can I extract from this interaction? What rewards do I want? And what would I be willing to do to earn them? If that was the case, it reveals that the first loyalty marketer was all about one thing: getting a good deal. (Another essential question for all loyalty marketers to ask themselves is, “What is your favorite loyalty program.”)
Enticing customers with the promise of a thinly disguised discount was a logical starting point for those early programs. It provided a simple and easily replicated formula—do something, earn points, get a reward—by far the most common program model. But this same financially obsessed approach presents brands with several obvious issues.
First, the model offers your brand little differentiation; it’s easy for a competitor to copy a formula that entails earned points and “stuff.” Second, human science findings from the past decade prove it’s a woefully incomplete view of human behavior. People are driven by many motivators, not just financial gain. And third, marketers are painfully tied to this idea despite many programs being stuck with participation rates below 30%; rates that have recently been in further decline. Clearly, the traditional mindset is lacking and in need of rethinking.
Marketers can begin changing that mindset, and improving participation rates and customer retention, by freeing themselves from the idea that everyone wants the same thing. In a world where Crayola includes 19 different hues of blue, it’s time to recognize there’s not a one-size-fits-all approach for loyal relationships.
Customers are humans first, and humans have very different goals and values. The latest studies in the field of neuroscience, in particular the work of Paul Lawrence at Harvard, are revealing that humans are driven by a wide variety of motivators, including social connection, learning opportunities, status, creativity, choice and, yes, financial gain. Smart marketers will educate themselves on these findings and use them to develop richer customer personas that elevate the loyalty formula beyond the limitations of “do this, get that.” A sampling of personas that I’m using in my own work in the loyalty space includes:
World Changers: Socially conscious consumers who seek out politically active brands and are fiercely loyal to those who share their values. The World Changers are fulfilled by knowing they’re part of a cause greater than themselves.
Competitive Extroverts: Status-driven consumers who want to excel and eclipse their peers, primarily in the earning experience. Large accumulations of points and “leveling up” are status symbols for these customers, even more so, tangible rewards they’ve earned. They enjoy talking with others about how their mastery of program rules lets them earn in quantities and enjoy exclusive brand experiences.
Club Kids: Fun-seeking consumers who want a program that has a sense of play and is easy to use. The Club Kids only join programs for brands to which they already have a personal attachment. For these consumers, extrinsic rewards are much less important to them than the feeling that the brand is an extension of who they are.
Building an effective loyalty program for the savvy, complex consumer living in the “new normal” of 2011 means starting with the awareness that while we may not all be unique snowflakes, we do have differences as human beings. Programs that aren’t able to speak to the diverse values of today’s consumers will continue to see declining engagement. Those that succeed will do so by evolving the traditional loyalty model into a truly authentic customer engagement experience, one built on relevance and relationship.
Barry Kirk is solution vice president, consumer loyalty, Maritz Loyalty & Motivation. He can be reached at Barry.email@example.com.