Consumer Loyalty Requires Much More Than a Rewards Program

written by Lindsay Malone, Digital Marketing Manager at Prophet

Many companies pursue customer loyalty, most fail to receive it. More than 55 percent of marketers planned to increase consumer loyalty budgets this year and many are investing heavily in the development or revival of loyalty programs. As companies seek new and interesting ways to drive consumer loyalty, they should look beyond rewarding transaction frequency and instead use the allocated resources to identify and bolster the factors that influence consumer preference for their products and services.

Transaction-based loyalty programs are common among top brands, but as my colleague Dan Morrison says, “Don’t overly correlate purchase and repeat purchases with customer loyalty.” He supports this statement with an example:

Starbucks vs. Blackstone

Dan visits Starbucks a few times a week. He uses the app to order and he cashes in on his free drink when he earns enough stars. But, although Starbuck’s model would find him to be loyal, he says his loyalty is elsewhere. While he goes to Starbucks routinely out of convenience, if he had the choice he’d drive right past Starbucks and straight to Blackstone every time. Blackstone earned his loyalty with great service (interactions directly with the owner), local presence and overall experience.

Consumer Loyalty:  the measure of commitment based on obligation, consumer preference or degree of satisfaction.

Dan challenged brands, saying they should ask “how do we innovate our loyalty program” and “how do we deepen our loyalty experience” so they can earn consumer preference.

The Brands with Unwavering Customer Loyalty

In a quick-poll, I asked my peers to share which brands they’re loyal to and why they will pay more, travel further and/or ignore similar products and services. There are many things we can learn about loyalty by looking at the list of brands that their responses generated. Many of the brands were mentioned repeatedly and the rationale centered around a few essential traits:

Quality Products

A 2015 consumer survey by Support.com found that the two leading factors that determine brand loyalty are price and value (73%) followed by quality of product and service (66%). Some of the brands that were named for providing a quality product with the right price and value are: Apple, Spotify, Costco, Levi’s, Dr. Martens, Glossier, Carhartt, Kate Spade, MeUndies, Craftsman, Tieks, Dawn Dish Soap, Tide, JifWhole Foods, Qdoba and Outdoor Voices.

While the majority of these brands are not the least expensive option, they are preferred because they have the highest perceived value in their category. Interestingly, there’s little category overlap among these brands. Before seeking other means of generating consumer loyalty, brands need to focus on the product quality and value they offer because without excelling in these areas, all other factors are pretty irrelevant to consumers.

Superior Experiences

In the past year, 52 percent of consumers surveyed said they have switched providers due to poor service and once a customer has switched, 68 percent won’t go back. In the U.S., the estimated cost of customers switching due to poor service is $1.6 trillion! The overall customer experience is more important than ever; it must be seamless, persuasive and delighting.

The brands who have loyal customer bases as a result of the customer experience they offer include Dyson, Wegmans, Rigby & Peller, Chick-fil-A, Spotify and First Merit Bank. Those who listed these brands were most motivated to tell the story of their positive experience. Customers are loyal to these brands because they:

  • Offer fast, efficient service from a real person when they need it (Dyson)
  • Provide an overall stellar experience with smiling service, clean stores, easy-to-navigate store layouts, appealing community events and a great selection (Wegmans)
  • Go above and beyond to wow their customers. After losing their luggage on a trip, a customer returned to the store to replace their lost undergarments. The customer was surprised and thrilled when soon after she received two more complimentary bras in the mail. (Rigby and Peller)
  • Have customer service representatives that care about their customers and exceed expectations by remembering details from previous visits. (First Merit Bank)
  • Deliver a great experience even in a crisis. They respond, keep their customers informed and use their products in innovative ways to delight customers. (Spotify)

Convenience

There is one company that received more love than any others: Amazon. Why does this brand have such a loyal following? Convenience. They provide their customers with access to just about any product they could possibly need quickly, inexpensively and with minimal effort. Convenience is an area which Amazon continues to innovate as they explore drone delivery and brick-and-mortar stores.

Amazon’s about the best example out there of well-executed consumer loyalty tactics. Customers pay to be part of the loyalty program (Amazon Prime), returns are painless and competitors are ruled out because customers can give back to organizations they care about through the  smile.amazon.com initiative when making a purchase on amazon.com.

Distinctive Features

30 percent of the general population says they like to “change brands often for the sake of variety or novelty.” Brands who constantly innovate and offer unique products have a competitive advantage and earn loyalty based on obligation – they provide something that competing brands just don’t offer.

The brands who customers are loyal to because of uniqueness are Colorscience Powder Sunscreen, Blinc Mascara, Vionic Flip Flops, Tesla, Chipotle, Open Table and Samsung.

Incentives (values/rewards)

For some company’s the best way to keep customers coming through the door is through loyalty programs. Consumers are 81 percent more likely to continue doing business with the brands that have a loyalty program. The average consumer is enrolled in 13.4 loyalty programs.

The brands who have loyal customers based on the rewards they offer are Sephora, Overstock, Chevrolet, Capital One, Southwest, Nordstrom and Kroger.

Though many of these programs are transaction-based, they go far beyond just offering a freebie or a discount as a reward. Many of them use and interpret the data that they receive to better understand their customers and continue to innovate the customer experience. Some examples:

  • Sephora knows when a customer is running low on their favorite lipstick and will offer a discount when they return to purchase.
  • Overstock remembers what products caught your interest and will send subtle reminders with coupons via email
  • Kroger uses its loyalty program to understand its shoppers buying habits and offer personalized coupons based on what they routinely purchase

If building customer loyalty is high on your list of organizational priorities this year, start thinking about the overall customer experience you offer. Get to know your customers, understand what they value and learn what makes them tick. By deepening the customer experience and innovating loyalty programs, your company could become the preferred brand in your category.