Customer loyalty is very much alive

Discussion
Feb 17, 2015

Through a special arrangement, presented here for discussion is a summary of a current article from the rDialogue blog.

The future of loyalty marketing starts with brands being loyal to customers, going beyond rewarding customers for their "loyalty."

Consumer expectations continue to be unmet, leading to a bigger question of whether true customer loyalty is dying or even dead. Customer loyalty for RadioShack died last century. RadioShack used to boast that it had a store within ten minutes of 90 percent of the U.S. population and a database to match. Among other flaws, it suffered from lost relevance and an aging, no longer addressable, customer base.

Even brands where customer loyalty is still alive face epidemics of discounting, which when used en masse effectively kills customer loyalty. When an industry, brand and loyalty leader like Nordstrom capitulates and moves from semi-annual to seven sale periods a year, they become "just like all the other stores."

[Image: rDialogue]

This lack of differentiation, exacerbated by merchandise commoditization, supports what a legendary retail CEO shared with us last week: namely, that he is not sure there is much, if any, loyalty left.

Yet in spite (and perhaps because) of such evidence, our view is that customer loyalty is very much alive.

The new loyalty leaders pursue strategies that align with the heart of our definition of loyalty marketing: that loyalty comes from paying attention to customers and acting accordingly.

These principles are reflected in some of the newest programs from favorite brands of ours like Kimpton Hotels & Restaurants and the Pittsburgh Steelers.

These brands, partners of rDialogue, are flipping the dated loyalty models from the 1980s toward today, where customers are challenged to be loyal to brands and be rewarded in return. The new loyalty leaders do just the opposite: they demonstrate loyalty to those customers who are, and will be, most deserving.

What brands do you feel are loyal to you? For me, here are three:

  1. Delta Air Lines, who thanks me for being a Diamond Medallion Million Miler by occasionally picking me up at the jet way in a Porsche, and always offers a great experience in-flight.
  2. Kimpton is a friend who welcomes me back, knows it’s my tenth stay at a property, and has a nice Scotch waiting for me when I arrive.
  3. American Express makes sure I remember my Card benefits and offers based on where I am, so that I take advantage of them.

They make my travel better, remind me of benefits and offers, and genuinely act as though they know I’m a valuable customer.

Which retailers do you think have the most progressive and effective loyalty programs today? Are any retailers particularly successful with driving customer loyalty to sell goods without discounts?

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15 Comments on "Customer loyalty is very much alive"

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Camille P. Schuster, PhD.
Guest
2 years 9 months ago
The people at American Express were helpful and pleasant with a recent credit card breach issue. Their ability to work with me and take care of the problems so efficiently went a long way to foster loyalty, especially when I did not expect it. Selling goods without a discount means that you understand your consumers so well that you can personalize products, service and experiences for them. Very few companies do that well. Some companies are working on the process but there is a long way to go. Personalizing coupons for me is nice and can foster return business, but… Read more »
Ralph Jacobson
Guest
2 years 9 months ago
Without naming names, I think we can all name the retailers and CPG brands that drive real loyalty, creating a certain level of “brand enthusiasts.” The winners in the marketplace will embrace the brand enthusiasts faster than the competition. Companies need to continuously stimulate this population through a strong combination of both reach and engagement strategies. Take advantage of their openness and willingness to share data by experimenting with new systems of engagement. Involve consumers directly in discovery and development activities for new campaigns. And with the future growth expected in digital channels, gain “mind share” by adopting two-way dialog… Read more »
Mohamed Amer
Guest
2 years 9 months ago

Loyalty is not a program, it’s a mindset and action framework the retailer needs to have about how they engage and treat their customers.

All that they do needs to be done with me, the customer, in mind. Make my life simpler and my experience with your brand enjoyable. Offer me value the way I define and desire it. Remember me if I give you permission, respect my time, and be consistent.

Do those things and you’ll not only build trust but will have my business.

Bill Davis
Guest
2 years 9 months ago

Amazon with Prime. While not a typical loyalty program, it absolutely ties people to Amazon and they spend two times or more as much as non-Prime members.

Shep Hyken
Guest
2 years 9 months ago
First, and I’ve written about this before in these discussions, a good loyalty program is not just a marketing program. If the only reason a person does business with you is because of the discounts or perks, and if those discounts and perks go away, then so do the “loyal” customers. Amazon charges a fee to be a Prime Member. People have referred to this as a loyalty program, but it really is a membership that gets you access to discounts, specials, etc. The value far exceeds the fee paid and therefore the member becomes loyal to Amazon. American Express… Read more »
Ryan Mathews
Guest
2 years 9 months ago
I suppose there are a lot of examples we could debate here but I’d like to look at one that isn’t examined too much and that’s Carhartt. Wait. Wait. Before folks start writing in telling me that’s a brand, not a retailer, let me hasten to add that they are about to open their first store in Detroit—so I’m counting them. And while I’m at it, I might throw in Apple and even Starbucks. What do these “retailers” have in common? Well, these brands have built loyalty largely (note the qualifier) without resorting to discounting. Sure you can carry a… Read more »
Tony Orlando
Guest
2 years 9 months ago
I have to agree with many of the above comments, BUT IMO loyalty to price is not necessarily a bad thing. Before I pull out the arrows from my back, let me explain. There are stores built on the expectations of great values, in any shape or form, whether it is extra coupons from Macy’s rewards, or Jo-Ann Fabrics always having that extra savings when you go into the store. If it consistent in the delivery of extra value, and the customers can count on it, you have a loyalty program without jumping through extra hoops. The one caveat for… Read more »
John Karolefski
Guest
2 years 9 months ago

Best-in-class loyalty programs are creative, personalized and loyal to the customer. Hard to do, but leveraging shopper data is the key. Such programs result in trust which leads to loyalty which leads to repeat business.

Mark Heckman
Guest
2 years 9 months ago
I suppose we all could list a significant number of retailers who use an experiential or convenience differentiator to engender loyalty, or at least repeat business. As Phil Rubin states, it is the retailer’s ability to create and maintain a relevant point of distinction in its offering that determines both the strength and the longevity of their customer relationships. I could cite Southwest Airlines as an anecdotal example of an airline that does just that for me. However, the term “loyalty” has a ring of misleading “unconditionality” in its implicit definition. Today it is more about customer engagement: Knowing that… Read more »
Kai Clarke
Guest
2 years 9 months ago

Aside from the major airlines, and hotels, there are no retailers which come to mind that have a loyalty program that is very strong. Certainly there are no retailers that are strong enough to drive customer loyalty without discounts. The real question seems to be, what are customer loyalty programs for?

Cathy Hotka
Guest
2 years 9 months ago

Trader Joe’s, for having checkers at the ready to speed me through. (The grocery store nearest me is always surprised—shocked!—that customers have arrived.)

Chipotle, for letting me choose every aspect of my meal.

Sephora, for unlimited sampling.

New York & Company, for catering to those of us who are unusual sizes.

Thank you!

J. Kent Smith
Guest
2 years 9 months ago
Loyalty is a great question with different answers, I think. I used to count Target as a great not because of any loyalty program, but because they consistently delivered just what I expected on price, assortment, and experience. So it was the go to choice; not so sure anymore, and it’s not because of the internet, discounters, or others…but because…of them. Harbor Freight runs a great program—price focused for sure, but it’s dead easy to use, and when you do purchase, it’s easy to employ. And while the deals tend to rotate, it’s so frequent and over the top I… Read more »
Graeme McVie
Guest
Graeme McVie
2 years 9 months ago
There are a number of well-known examples of retailers earning the loyalty of their customers, some of whom have a visible loyalty program and others who approach loyalty in different ways. Many retailers receive accolades for their loyalty programs with some retailers, such as Kroger, Safeway and Target, frequently cited as prominent examples of retailers who have great loyalty programs. What sets leading loyalty programs apart is that they go beyond the loyalty program itself and leverage the treasure trove of customer data to understand customer needs at detailed levels and then use that understanding to deliver more personalized experiences… Read more »
Mark Price
Guest
2 years 9 months ago

If customers were polled, their greatest need would not be fancy perks, but superior customer experience both in and outside the store. Customers want their needs anticipated and met, whether those needs include a transaction or not. When retailers only reward transactions, they are saying that all they care about is the $, not the customer.

The most effective retailers at loyalty are Apple and Amazon, who have very strong service focus. They don’t need loyalty programs (although you might argue that Prime is one); they need customers to feel cared for.

Martina Olsen
Guest
Martina Olsen
2 years 9 months ago
Have to mention the U.K.s Nando’s (Peri peri chicken restaurant) here, probably the best loyalty program I have come across for several reasons: It offers rewards fast. It only takes three visits before you get rewarded with something that offers real value: a quarter chicken. And you build on that reward. Rather than going back to zero and reaching the same award again, the next reward comes after seven visits (three, then four=reward, then three) and it is a half chicken. After 10 visits you get a whole free chicken. So three rewards in ten visits is pretty generous, and… Read more »
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