Time to Rethink Customer Loyalty

Most businesses understand the tremendous value associated with highly loyal customers. That is why businesses of every size and shape have implemented loyalty programs to keep their best customers coming back again and again. Unfortunately, this traditional loyalty model has grown tired and provides little differentiation in the market today. As a result, it’s time to rethink customer loyalty.

The Loyalty Flood

Unfortunately for many businesses, any advantage that was originally gained through loyal programs has quickly eroded. While airline, hotel, and car rental agencies were the pioneers of mainstream loyalty programs, other businesses were quick to jump on the loyalty program bandwagon. The result is a business environment where every restaurant, gas station and pet store has some form of loyalty card or program.

As a result, having a loyalty program is no longer a competitive differentiator. It has become a mainstay of a business environment where loyalty programs have become a commodity and a potential detractor to the overall customer experience. They get in the way of business efficiency - often requiring an additional step in the customer experience process. They have become nothing more than another way to offer a price promotion. Loyalty programs can also create disdain for customers that can’t receive the benefits or special pricing offered exclusively to program members.

When Loyalty Programs Bite Back

Some loyalty programs miss the point entirely and can actually drive customers away. Hilton Hotels, for example, has a long-standing loyalty program called Hilton Honors that accumulates points based on the number of overnight stays at their network of hotels. For a career traveler, these loyalty points may continue to accumulate over a 10 or 20-year time span.

On the surface, Hilton’s loyalty program appears simple and straightforward; The more a customer stays - the more rewards they will receive. In certain circumstances, however, the fine print can really bite back. If changes to a customer’s travel habits keep them out of a Hilton property for 12 consecutive months, the customer will lost ALL accumulated points and privileges. This policy, in effect, erases 20 years of loyalty and any associated rewards or benefits.

The customer may have been loyal and may even have been an advocate for Hilton. Penalizing a loyal customer for lack of activity for 12 months will certainly damage any good will that may have been accumulated over the prior 10 to 20 year time span.

It’s time to rethink customer loyalty

If companies want to reap the benefits of true customer loyalty – it’s time to rethink what customer loyalty really means. Customer loyalty is not obtained by holding a card, accumulating points, or redeeming rewards. Furthermore, loyalty can not be measured simply by customer longevity, frequency, or purchase volume. Customer loyalty is not a one-way street; it cannot be determined solely based on what the customer has done for the company.

Instead, customer loyalty should be turned upside down. Perhaps more companies would get it right if they measured loyalty in terms of the degree to which the COMPANY is loyal to the customer rather than vice versa. Companies should strive to remember repeat customers, address them as individuals, call them by their name, and treat them special.

Think about the simple lesson of customer loyalty that was demonstrated each week on the 1980’s sitcom “Cheers”, the bar where everyone knows your name: At the beginning of each show, the bar’s best customer, ‘Norm’, would enter the bar and proceed to ‘his’ barstool. There was no loyalty program, no card to scan, and no ‘platinum’ level required to gain entry. Everyone indeed knew his name, he had his own seat at the bar, and the bar owner knew exactly what he wanted to drink. ‘Norm’ was indeed loyal, but the establishment was extremely loyal to him as well.

In order to create a competitive differentiation, companies should begin to rethink customer loyalty:

Old School: “What has the customer done for me lately?”
New School: “What have I done for my most loyal customers?

Summary

Individual customer loyalty is a simple concept that is often overlooked in today’s business environment comprised of multiple touchpoints, channels, and markets. When businesses get large and complex, the customer becomes nothing more than a number, a body, or an inconvenient commodity. When that happens, it becomes increasingly difficult to treat truly loyal customers differently.

With the overabundance of loyalty programs today that offer nothing more than price discounts, it’s no wonder that customers are becoming decreasingly loyal to any one brand.

With so much at stake, it’s time to rethink customer loyalty.

Invasion of the Loyalty Cards

Loyalty cards have invaded and have taken over our lives! It all started innocently enough. It seemed like no big deal when airlines and hotels embraced the ‘frequent’ traveler rewards programs. We consumers embraced the idea of earning rewards for our travel.

Little did we know that loyalty cards would band together and plot to overtake our lives! The momentum built slowly so that we wouldn’t notice. First we had one airline and one hotel loyalty card stowed safely in our wallets. Soon, we added other cards to make sure that we took advantage of our travel activities on all airlines and hotels that we might visit. Then, as if we wouldn’t notice, rental car reward cards snuck into our wallets. As we added airlines, hotels, and rental car cards, the number of loyalty cards that we held crept into the double digits.

Other businesses eager to cash in on the loyalty card phenomenon were quick to respond. One by one we added loyalty cards from restaurants, grocery stores, department stores, gasoline stations, coffee shops, video stores, and pet stores. Colorful plastic cards that beckoned us to use them more and more soon overwhelmed our wallets.

The invasion was on! Our wallets were completely overtaken and could take on no more new plastic cards. Like an aggressive parasite, loyalty cards looked for new areas to invade and quickly found our key rings an inviting target. Like something out of a science fiction movie, loyalty cards spawned a new breed of key fobs that crept onto our key rings and multiplied like rabbits. Seemingly overnight, plastic fobs overtook our key rings.

The quiet invasion of the loyalty cards continues today. New businesses enter the fray every day. Book stores, doctors offices, eyeglass stores, veterinarians, and home improvement contractors add to the mountain of loyalty plastic. I fear the day that my lawyer or doctor issues a loyalty card for proctology exams.

I know that I have reached the point of saturation; there is no more room in my wallet or key ring for even one more loyalty card. The overflow of loyalty cards that won’t fit have now assembled together and have begun an assault of various desk, kitchen, and dresser drawers in my house.

We could fight back by throwing them all away, but that’s like asking a life long cigarette smoker to quit cold turkey. Loyalty cards don’t necessarily encourage loyalty – they create a sense of guilt. When a shopper buys at a store without their loyalty card they feel guilt; guilt for not saving a few dollars or not earning their reward points. Loyalty cards are like an addiction; they’re hard to give up.

Loyalty cards are popular with businesses because it can help them to identify their customers, create a sense of exclusivity, and reward their best customers. The mountain of loyalty plastic, however, is creating a burden on today’s consumer to carry – and remember to use – their loyalty card.

To stop the invasion, businesses need to increasingly implement loyalty programs that allow the consumer to self-identify without the need of a physical loyalty card. For online businesses, this is easier to accomplish with cookies or simple online account management capabilities. For brick and mortar businesses, the challenge of consumer identity management is the holy grail of customer relationship management. Until then, the loyalty card invasion will continue to be well engrained in today’s business environment.

I just hope they solve the problem soon. I can’t carry any more loyalty plastic…

…and I shudder at the thought of loyalty cards invading my underwear drawer.