Here's why loyalty needs to break the rules

Loyalty providers produce programs that are so cookie-cutter and permanently standardized that it’s nearly impossible to tailor these programs to individual brands. Marketers are following a misguided standard that has been left behind and no longer differentiates itself or resonates with members. 

We look over our shoulders, follow the leader and copy, instead of pioneering and focusing on areas to build unique programs that accomplish each brand’s specific needs and goals. 

The fact is, loyalty has no rules; it only has leaders and followers. And followers will always be two steps behind.

What does loyalty mean to you?

The unfortunate consequence of loyalty’s success is that it’s now synonymous with points -- a tit-for-tat rewarding system designed to increase purchase behavior. It’s a good model, produced by the airline and hotel industries, that has had a profound and lucrative effect across many industries.  But there is more to loyalty than just points.

Every brand has unique elements and their programs should reflect those traits. Yes, rewards are always important, but they don’t need to be cut-and-dry, and the benefits don’t need to always be redeemable for a simple dollar certificate.  Surprisingly, one of the leaders in point redemption is the credit card space. 

Chase’s Sapphire Reserve credit card is a prime example of a loyalty program providing many ways to redeem points. It offers the standard point redemption for gift cards and airline points, but it also offers VIP access to events and unique experiences, access to luxury hotels around the world and a host of other benefits that simply help customers such as auto rental damage, emergency assistance services and trip cancellation protection, as well as a free credit for TSA Precheck.

Many of those benefits seem eclectic and random, but from a Chase customer perspective, those additional benefits align to members’ penchants for travel. Chase knows what loyalty means for its brand and what will resonate with its customers.

Follow the data and understand your customer

Surveys and focus groups are useful tools, but they’re often surrounded by pretense and leading questions, and they aren’t usually useful for taking confident action. That being said, there’s an extremely accurate method to identify what your customers think and want.

Data analysis offers a clear and concise opportunity to understand your customer. Surveys will always say one thing: we want discounts! And that’s true -- most loyalty programs need a monetary benefit -- but when we look at a customer’s actions, we can understand that his or her behavior is far more nuanced than that.  Just as every brand is unique, customers operate differently based on which brands they’re shopping. They behave differently as they interact with different brands’ cultures, products and lifestyles. 

We need to look at the data, identify how customers are shopping with us and develop benefits based on those interactions in conjunction with our brand images. 

Here are two very different examples, but, in both cases, it’s clear these brands let the data tell a story and help them understand their customers’ wants and needs:

Consider Amazon. It doesn’t really have a brand image. The first thing that probably comes to mind is “fast and convenient.” Well, that’s either the greatest branding in history, or the company is somewhat agnostic to branding based on its pragmatic approach to operational excellence.  Even so, Amazon knows what its customers want -- Prime provides free, two-day shipping, which is Amazon’s version of a monetary benefit -- but it gives members so much more.  Top-rated streaming video, music, cloud storage and a host of other benefits directed at highly segmented customers from parents to book lovers.

Next, let’s take a look at the Nike Plus membership. Nike has heavily invested in new store models and Nike Plus is a large part of the brand’s methodology. Their clout in branding and lifestyle doesn’t allow them to simply offer discounts because their customers aren’t as price-elastic; they love Nike because it aligns to their personal image. So, Nike took a very hard look at its program and customers, and the result was a highly experiential program to take advantage of their new stores.

Nike Plus members get truly unique guidance and advice from experts; the new Nike flagship store in New York has an entire floor dedicated just to Plus members. Nike has also produced some amazing in-store experiences for members from courts to race tracks. Plus members also receive a 30-day wear test, which might be the best benefit of all.

So, what do Amazon and Nike have in common? They both have an in-depth understanding of what their customers want and how those wants are unique to their brands. Secondly, they broke the rules of loyalty. Not a single one of those benefits are points-based, yet both of those programs are two of the most successful loyalty programs in the world. 

Follow your goals, not the market

Marketing is a copy-cat industry. Marketers see someone doing something different and everyone immediately races to be second in line. It’s a disjointed approach that often causes so many loyalty programs to fail -- and the majority of programs do fail.  Every industry is littered with the remnants of failed programs, trying to revive or revamp them with little success because today’s environment isn’t conducive to standardization. Customers have options and choices abound, and no brand is safe unless they provide real value to customers. Standard programs are built not to lose, but ironically, they usually fail.  For brands to be successful, they need to take a long look at their goals, really dive in and understand their customers and be fearless enough to try new ideas that give their customers what they really want. 

Evan Magliocca is Brand Marketing Manager for Baesman Insights & Marketing, a full-service agency that partners with retailers to create highly-targeted, data-driven customer marketing, loyalty and CRM programs. Baesman is headquartered in Columbus, Ohio, with partnerships across the United States, including: American Girl, DSW, Rag & Bone, Shoe Carnival, Stanley Steemer, Rite Rug, and many more.

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