Going the Distance: Four Ways to Build a Better Customer Loyalty Program for Your Brand

It’s easy enough for a customer to join your loyalty program, especially when you’re offering an incentive such as discounts. All your customer has to do is give out some basic information, and voila! They’re in the fold, a brand new loyalty member with your company. From there, it’s happily ever after. You offer the perks; they stand solidly by you, bringing you their continued business. Simple. Or is it? In reality, just how many of those customers are act ively participating in your loyalty program? Do you know? Sure, loyalty program memberships are on the rise according to market research company eMarketer, having jumped 25 percent in the space of just two years. However, that figure may be a bit misleading. The truth is that, while loyalty program sign-ups may be more numerous, active participation in such programs is actually in decline. At the time of the study, the average US household had memberships in 29 loyalty programs; yet consumers were only active in 12 of those. That’s just 41 percent. And even that meager figure represents a drop of 2 percentage points per year over each of the preceding four years, according to a study by loyalty-marketing research company COLLOQUY.

When discounts just aren’t enough

So what’s a brand to do? How can you make your loyalty program worth your customer’s while—as well as your own? After all, gaining a new loyalty member doesn’t mean much if your customer isn’t actively participating in your program. Consider this: Does your customer loyalty program offer members anything different from what your competitors are offering? Chances are your program includes discounts. That’s a given. And what customer doesn’t appreciate a good discount? But when every other company out there is providing this staple benefit in comparable amounts, it becomes less and less likely that customers will remain loyal to any one particular brand. Frankly, it’s all too easy for customers to get lost in a sea of loyalty member discounts. They’re everywhere. In fact, just under half of internet users perceive that all rewards programs are alike, according to a 2015 eMarketer survey. The key to success, then, is to differentiate your business from the crowd. If you can offer your customers something unique and valuable beyond the usual discount, chances are they’ll be more likely to stick with your brand. Here’s some inspiration from companies who get it.

Virgin: Reward more purchases with more benefits.

That’s not to say you need to get rid of discounts entirely. In fact, nothing could be further from the truth. Customers still love a good discount. The goal is to be creative in terms of the loyalty perks you offer. Take the Virgin Atlantic Flying Club, for example. As part of its loyalty program, the airline allows members to earn miles and tier points. Members are inducted at the Club Red tier, from which they can move up to Club Silver and then Club Gold. Here, it’s not just a discount. It’s status. And people respond to feeling important, elite. Still, even where the rewards themselves are concerned, Virgin is motivating loyalty customers with some pretty attractive offers. At the Club Red tier, members earn flight miles and receive discounts on rental cars, airport parking, hotels and holiday flights. But as members rise in tiers, they get even more. At the Club Silver tier, members earn 50 percent more points on flights, access to expedited check-in, and priority standby seating. And once they reach the top, Club Gold members receive double miles, priority boarding and access to exclusive clubhouses where they can get a drink or a massage before their flight. Now that’s some serious incentive to keep coming back for more. Discounts are still part of the equation – but they are designed with innovation and personal value in mind, elevating them to more than just savings.

Amazon Prime: Pay upfront and become a VIP.

What if your customers only had to pay a one-time upfront fee to get a year’s worth of substantial benefits? It may not sound like the smartest business idea at first glance. But take a closer look. Amazon Prime users pay a nominal $99 a year to gain free, two-day shipping on millions of products with no minimum purchase. And that’s just one benefit of going Prime. It’s true that Amazon loses $1-2 billion a year on Prime. This comes as no surprise given the incredible value the program offers. But get this: Amazon makes up for its losses in markedly higher transaction frequency. Specifically, Prime members spend an average of $1,500 a year on Amazon.com, compared with $625 spent by non-Prime users, a ccording to a 2015 report from Consumer Intelligence Research Partners.

Patagonia: Cater to customer values.

Sometimes, the draw for consumers isn’t saving money or getting a great deal. The eco-friendly outdoor clothing company Patagonia figured this out back in 2011, when it partnered with eBay to launch its Common Threads Initiative: a program that allows customers to resell their used Patagonia clothing via the company’s website. Why is this program important to customers? And how does it benefit Patagonia? The company’s brand embraces environmental and social responsibility, so it was only fitting that they create a platform for essentially recycling old clothing rather than merely throwing it away. The Common Threads Initiative helps Patagonia build a memorable brand and fierce loyalty by offering its customers a cause that aligns with deep personal values. OK, so their customers get to make a little money, too. Everybody wins.

American Airlines: Gamify your loyalty program.

If you’re going to offer your customers a loyalty program, why not make it f un? After all, engagement is key to building a strong relationship with your customer. And what better way to achieve that goal than making a game of it. American Airlines had this very thing in mind when it created its AAdvantage Passport Challenge following its merger with USAirways. The goal: find a new way to engage customers as big changes were underway. Using a custom Facebook application, American Airlines created a virtual passport to increase brand awareness while offering members a chance to earn bonus points. Customers earned these rewards through a variety of game-like activities, from answering trivia questions to tracking travel through a personalized dashboard. In the end, participants earned more than 70 percent more stamps than expected – and the airline saw a ROI of more than 500 percent. The takeaway: people like games.

Stand out from the crowd.

Your approach to your customer loyalty program should align with your overall marketing approach. Effective branding is about standing out, not blending it. Being memorable is key. To this end, keep in mind that loyalty programs are no longer a novelty. That means that yesterday’s strategies won’t work moving forward, so look for ways to rise above the noise, setting yourself apart from the cloying drone of countless other cookie-cutter programs.

---

The New Rules of Customer Engagement

The rise of the culture of the Web has revolutionized the nature of how businesses and customers relate to each other. Whereas companies could once shape and direct the perception of their brand through carefully crafted ad campaigns, direct mail and press releases, today the flow of information runs fast and free, and customers now own the conversation. And because whoever owns the platform dictates the culture, the world is a more human, less institutional place to do business. Today’s customers want to feel good about the products they buy, where they came from and how they were made. Moreover, they want to like the company behind the product – that is, genuinely like it, not just press a Facebook button. We are entering an age of emotive economics. Corporations have been forced to adapt to this new, people-centric culture by connecting with customers on their own turf in more casual, conversational ways. There’s little room or respect for old-school corporatism’s pomp and protocol. And those businesses that cling to traditional behaviors in the online community will earn its scorn very quickly. Those companies that have embraced this new landscape and its risks have enjoyed great reward. For this reason, the human face, rather than steal and glass, has become the façade of big business. Yet with style must also come substance. It is no longer acceptable to be about profit alone. Companies are expected to contribute to the world in ways that make their customers’ lives better. Consumers are demanding that business be done on their terms. It should come as no surprise, then, that human values – transparency, respect, conscientiousness, kindness, trust, generosity and the like – are the keys to engaging with customers in this brave new world of business. So how can you use this new dynamic to your advantage to grow your business? You must embrace the new rules of engagement, understanding that when you put people first, profit will follow:

1. Don’t treat customers like they’re stupid.

When Netflix bungled its attempt to change its pricing structure last year, the backlash in the online community was severe, with many customers threatening to cancel their accounts immediately. It was clear that customers viewed Netflix as a value-priced alternative to more expensive traditional paid media channels, and therefore many felt betrayed by the company’s sudden doubling of their fees. While the price increase itself wasn’t really so unjustifiable, what made it unpalatable for customers was the company’s lack of transparency in explaining the business drivers behind the rate hike – the rising operational costs of maintaining a physical DVD business and the growing licensing fees for content streaming. Instead, Netflix spun the move as giving customers a “choice,” offering the option to subscribe to a DVD-only service at its lowest price ever. Here's an excerpt from their ill-advised news release: To his credit, CEO Reed Hastings acknowledged the poor handling and chalked up the misstep to “overconfidence,” which still sounds like PR spin, but hey, we’re making progress. The lesson? If a change in product or policy may have negative consequences for your customers – even if only in perception – acknowledge them, express empathy over the inconvenience or added cost, explain the reasons if possible and then point out the benefits or offer alternative options. People understand that businesses must evolve and that profit is still part of the equation. Don’t assume that your customers are beyond reason or treat them like they’re too stupid to detect what’s really going on.

2. Over-serve your customers.

It’s always good business to go the extra mile for customers, but never more so than when trying to recover from a mistake. How you handle disappointment is what determines whether your customers write you off and tell everyone about it or trust you more and spread the good word about you. When Google decided to phase out Wave due to poor user adoption rates, they didn’t just shutter the windows and bury the technology as if it never existed. Instead, they gave users months to move their data off the service, converted Wave into an open-source project and gave the Wave community the tools to get involved:

3. Be humble and listen to your customers.

Building on the success of its breakthrough app Wunderlist, Berlin-based software firm 6Wunderkinder recently launched Wunderkit, a project collaboration and management tool designed around the social connections of today’s work environment. Wunderkit was made available in a “freemium” model, offering standard features to all users for free with additional functionality available for a small fee to power users. As the company analyzed feedback from its beta release of Wunderkit, they realized the community’s dissatisfaction with project collaboration between users – one of the platform’s central features – only being available to premium users. What follows is a fantastic example of how to demonstrate that you’ve heard your customers loud and clear, understand their feelings and are acting to resolve the issue:

The customer is king, and the king is here to stay.

Never underestimate the commitment required to engage with customers effectively in today’s marketplace. Human relationships are not managed well with rigid rules and policies but instead must be governed by human values like compromise, sensitivity and transparency. It takes much more than a Twitter account and Facebook page to win the hearts of customers. You must develop a culture that is focused on and driven by the customer through and through. Be purposeful in growing such a culture. Establish your own rules of engagement. Make sure every employee is encouraged to embrace and exhibit those values. Empower them to do whatever it takes to take care of your customers. The journey may be a bit rocky at times, but if you walk the line faithfully, you’ll earn something from your customers that can never bought with advertising dollars – trust, respect and even passion for your brand and what it stands for.

---

Prying the torch from the dead hands of old marketing

Today, there is freedom in marketing. No longer is the loudspeaker of the media controlled by a select few. As a result, so much more can be gained than ever before, all with fewer resources and less risk. The playing field has been officially leveled—and not a minute too soon.

Old Marketing is dead

Why? Our culture and means of information exchange have changed so much, so quickly from traditional conventions that have been used for so long. Today’s business must completely reshape and retool its approach to effectively market itself. The Old Marketing company—ingrained in these old systems for so long—simply cannot keep up with a culture that has transformed itselfBefore these drastic changes, our lifestyles and culture were based on a handful of media. Television, print, and radio were the anchors of mass information exchange and business promotion. If you owned a business or were charged with growing a company through marketing, then you were shackled to dealing with media and promotional entities such as television commercials, newspapers and the Yellow Pages. These industries are dying because they are being replaced by new systems. Remember the days of paying $2,500 a month for a lousy local, black and yellow ad in the Yellow Pages? Or tens of thousands of dollars for a local television ad, locked-in with a long-term contract and little measurables? That age is gone. The Old Marketing company—ingrained in these old systems for so long—simply cannot keep up with a culture that has transformed itself with the advent of the Internet and modern systems of communication. As a result, old, slow and expensive marketing companies are dying right along with those old systems. The ones that haven’t died yet are in a panic. They are scrambling to restructure business models, personnel, objectives and the sales pitches in order to reassure their clients that they now can pull off the new marketing ways.

The dirty little secret

In fact, this “scrambling to catch up” is a hushed truth among all marketing agencies. Marketing itself is not going to admit its own flaws in its business—that would be certain death. Agencies instead claim that they’ve been there all along. Nothing could be further from the truth. Need proof? This is easily evidenced by the marketing industry’s own publications and associations. Articles are rampant on how marketing agencies need to change to stay alive. On any given day there are a multitude of seminars for marketing firms to attend with subjects like, “leveraging web technology,” “selling SEO to your clients,” and “understanding social media,” as if these issues were still on the horizon waiting to be realized.

Marketing sold its soul long ago

The Internet may have been the axe, but it actually didn’t take the dynamic of the rule-changing Internet to bring the marketing industry to its knees. They sold out long ago. Marketing agencies have been on the gravy train for a very long time. This is what happens when media and information systems are few, with few in control. A few deals made here and there with the few controlling mass-media, local media, even the Yellow Pages—all with enough middle men in place to get their cut—eventually makes an industry so fat that it won’t forgo those systems, even when the walls are torn down. Bottom line: the money’s just too easy when you’ve got that kind of control. Marketing agencies employed tactics to pull clients in and lock them in. They knew the middle-men in all of the processes of print, television and radio. They knew who to kickback to. They even employ “media buyers”—a term that, as the years tick by, becomes more and more indicative of an era long gone. Can you believe a person—or even an entire department—employed in the position of “media buyer”? What were originally “creative agencies” became agencies only good at selling themselves to their clientsEven then, marketing's problems were deeper. What were originally “creative agencies” who served to shape, grow and represent the spirit of their clients brand, evolved into companies who simply became greedy—good at only selling themselves to their clients, but no longer about the work of their clients. Don’t believe me? Let’s talk about Leo Burnett. Leo Burnett Inc. is one of the most renowned agencies in the world. They earned their reputation serving one key philosophy: that nothing could replace the marketing firm’s charge of “being the spirit of the client’s brand.” Coupled with a firm understanding of what it took for each client to get and keep their customers, Leo Burnett was also known for the quality of their creative work and eventually earned the responsibility of brands like Kellogg's and McDonalds. Founder Leo Burnett recognized that the industry was in danger of selling its soul out long ago. One of his famous speeches, “When to Take My Name Off the Door”, delivered on December 1, 1967, was based on that very fear: He knew where the industry was going. And sure enough, it’s there—probably worse than he thought it could be.

What's the right way?

Traditional marketing companies identify that their own competition is no longer their peers in the same market, but the budding, New Marketing company that is web-based from the ground up. Why? They’re faster, smarter and more experienced in today’s systems. They also don’t have the burdens of expenses and bloat that Old Marketing firms have. They can turn on a dime. They move quickly. The New Marketing company that is web-based from the ground up is faster, smarter and more experienced in today’s systems.Today, successful marketing begins with the knowledge and experience to create exposure, build awareness, harness interest, and position business and all supporting systems within today’s web universe. Your marketing firm needs to understand why things work they way they do, and how people and prospects come to know and trust a brand in today’s world. Also, today’s New Marketing company is one that hasn’t forsaken the principles that are timeless, but is one that takes advantage of all that’s afforded in today’s business world to shave off unnecessary expenses.

• OUT: are deals with a select few in a position of control. IN: is the reality of true, choice-based media, entertainment and communications via the Internet and the technologies that are used by choice because they offer more and make better sense.
• OUT: are expensive payments to old, big, slow agencies—all carpet bombing to grow your business. IN: are fresh and nimble development firms who know how to surgically target the necessary areas to build a brand, position it and construct a network around today’s communication systems to promote and grow business.
• OUT: are paying for enormous overhead expenses in big buildings, expensive furniture, and lavish offices. IN: are virtual and hybrid marketing firms that work fast and don’t pass on the bloat of unnecessary expenses to their clients.
• OUT: are working through layers of costly production managers, account executives, supervisors and managers before you get to the real people that do the work. IN: is the successful marketing company that establishes access to key architects and creative producers who are integral in the ideas, concepts and the details essential for success.

So, as traditional marketing firms continue to pass on the overhead of their expensive offices, furniture, lifestyles and worst of all, the cost associated in how to figure out this "Internet thing," the New Marketing company has an inherent understanding of what works and what doesn’t in today’s culture. They are still marketers, founded in the purpose-driven goals of growing a business—however, the New Marketing firm, knows how today’s business is grown and built.

---