Customer loyalty is very much alive
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]](/public/images/discussions/18085/rdialogue-still.jpg)
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:
- 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.
- 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.
- 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.
- Customer Loyalty is Very Much Alive – rDialogue
- Loyalty Marketing is at the Forefront – rDialogue
- Brands Fail To Keep Up With Rising Expectations – MediaPost
- Nordstrom Is Getting Rid Of Its Big Semi-Annual Sales – Huffington Post
- Kimpton Karma Rewards – Kimpton Hotels
- Get Connected. Get Recognized. Unite! – Pittsburgh Steelers
Discussion Questions
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?
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 that is not the same as loyalty. What makes me want to shop at the retailer or buy that brand’s products above and beyond a discount? That can foster loyalty rather than return business. Return business keeps me coming back until I see a better deal. Loyalty keeps me coming back even if I see a better deal somewhere else.
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 with consumers.
“Brand enthusiasts” represent the next generation of power consumers growing up in a digital, omni-channel world and they have new expectations. Leverage the insights they are willing to share otherwise, these innovation-craving consumers will go elsewhere. Still, traditional communication strategies will not likely work on this new consumer base. They are writing new rules of engagement. Once this process matures, fewer discounts will be required to retain these loyal “brand enthusiasts.”
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.
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.
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 does the same. They have a membership mentality and “membership has its privileges.” I pay for the Platinum card and the value I receive in discounts on shipping, lodging, refunds on airline change fees and excess baggage and more far outweigh the cost of the card. That makes me loyal.
Ace Hardware is one of my favorite companies in the world. Their loyalty is built through relationships and their amazing helpful service is what has customers coming back for years. Their pricing model isn’t about being the lowest, but simply being fair and competitive. Customers find the customer service and experience to be more valuable than the lowest price a big box store might charge for similar items.
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 Starbucks Gold Card and get a free latte—but only after you’ve first spent the GNP of a moderately-sized emerging nation.
The fact is they’ve built loyalty through price integrity as much as anything else and, in the process, charged a premium for products and services that could be obtained at a significantly lower cost.
And that’s the trick. Too many retailers have swum in swimming pools of their own Kool-Aid so long they believe they have to offer discounts and, after seven or eight decades of telling consumers that value equals reduced costs, the public has come to agree with them.
I wonder why not enough people look at the success of people who don’t ever play the game. You can’t be loyal to a price, just a brand.
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 me is having the friendly customer service added into the equation.
Big box stores have price, but some smaller stores offer great prices and great customer service, which will build loyalty, knowing that you can deliver on both fronts. With new technologies for retailers, the opportunity to engage with your customers is better than ever, and how you choose to build loyalty with them is critical, as price alone will not do it. Make the service extra special, and make the customer feel special when they patronize your store. This will go a long way in building loyalty in a very crowded marketplace.
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.
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 no matter how good you are, unless you are in a very special niche, early in the maturity cycle of your business, even your best customers are sourcing a significant portion of their share of requirements from somebody else.
The key is having access to a device that measures the strength of your customer relationships and allows you to do so frequently. Whether it’s called loyalty or customer engagement, you can be sure it’s a dynamic target that requires frequent and thoughtful recalibration.
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?
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!
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 think it hits the demographic they’re looking for. Might work for some, but the customer you get through price will leave you so as prices are better elsewhere.
To me, the ones who build loyalty the best still tend to be the independents—perhaps because they have to. They know you, you know them, and it’s the eternal and authentic stand-behind-your-product. So I love to get coffee at Global Peace Factory or get a drink from Budda Juice; or patronize my local bike store. My wife will say the same about the independant clothing stores.
But big chains? Still caught up in the card and big data trap, and that price is really the easy way to do it. The other stuff is hard because it’s personal, because it’s about the front line staff.
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 for their customers.
Other retailers who do not have traditional loyalty card programs are also cited as great examples of retailers who earn their customers’ loyalty by providing great service or experiences in-store. Names that come to mind in this regard are Publix, HEB and Whole Foods, to name but a few.
In many ways loyalty programs have two main objectives: one, to provide the retailer with an additional marketing vehicle to recognize and reward customers for their loyalty (if the program is well designed!); and two, to attach a customer identifier to each transaction to enable retailers to better understand individual customer needs. There are more mechanisms to achieve the second objective other than a card-based loyalty program (see some of the smartphone apps that have been launched recently) but unless retailers analyze the data to understand customer needs and then take actions across marketing and merchandising to consistently satisfy customer needs, then the vast majority of the value of such efforts will go untapped.
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.
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 you don’t have to spend to receive your rewards although naturally most people do because they buy sides and drinks to go with their free chicken, often in my experience splashing out a bit because the free chicken has saved them some money!
The accumulation is key here I think. Going back to zero is a turn off for many.
What more, Nando’s is super strong on their branding, has decent food and pricing, plus plenty of very convenient locations and a family-friendly menu. Combine this with rewards that feel very within reach and they seem to really have cracked the consumer loyalty nut!
Another loyalty program I like, for a coffee shop/bakery, has the same structure. Every sixth visit you get a reward, and they keep getting better as you accumulate points. This consistently drives me back to that shop (of course combined with great quality coffee and food!), but I want to complete my card and get the big final reward!