Loyalty is changing. I am not talking about loyalty programs here. I’m talking true customer loyalty. The type of undying brand devotion that makes consumers go out of their way, spend more of their hard-earned dollars, and preach about your brand from the top of social media’s highest hills. And there’s no doubt that it’s changing in a big way.
It’s a simple fact that more brands are competing for the customers you want to keep. Experiences that differentiated a brand as “best in class” yesterday are already antiquated and prove to be leading indicators of a brand on decline. You are being compared cross-industry, cross-device, and cross-continent. It’s a difficult landscape that can only be tamed by the most innovative organizations; the organizations that have an appetite to approach these types of opportunities differently. Simply put, you need to evolve.
The real question is “how?”
At West Monroe Partners, we spend a lot of time answering that question. And after completing many projects with an impact on customer loyalty, across many industries and clients, we’ve concluded one thing: true customer loyalty is not about points and rewards.
Sure, points and rewards are important in some industries (for example, travel and hospitality ), but I’d argue that even in the case of the travel and hospitality, points and rewards are by-products of the decision making process to become a loyal customer. Let me give you an example. When you first signed up for a hotel loyalty program, did you sign up because of that specific chain’s points and rewards program? Probably not. I’m guessing you signed up because you liked the “vibe” of a particular chain, or because that chain had broader geographic reach than one of its competitors, or because that was the chain you frequented when traveling for work or pleasure and you simply liked staying there. At the end of the day, you knew that all hotel chains had points and rewards programs. What differentiated one hotel chain from another was the experience it created when you booked online, used your mobile device, walked in the door, etc.
The point is, you didn’t sign up because of points and rewards. You signed up because of the experience.
But here is the problem. True loyalty has been watered down by points and rewards programs. Brands have put too much emphasis on points and have forgotten to create an unbelievable experience for their customers.
On top of that, these loyalty programs are being pulled apart by multiple opposing forces, each with a different motivation that makes it more difficult for a brand to achieve true brand loyalty. The end result is an ecosystem where few of the parties involved (consumers and the brands themselves) are happy with the outcome. Why?
Consumer expectations are higher. They want more points for their purchases, lower costs for rewards, and greater value.
Program liability is growing. There are more people in the system, each of them holding their points for longer periods of time due to rising rewards costs. As a business, you must carry those points on the books, creating liability.
Businesses have increased requirements for program efficiency. Organizational pressure on program efficiency is building, working to stretch Value Per Point and reduce Cost Per Point at the same time.
Guiding principles for building loyalty
So, how do you build customer loyalty without a points and rewards program? A good question and one that we think can be addressed through four guiding principles:
Achieving true customer loyalty
Your website is no longer just a website. The same goes for your in-store experience, your mobile experience, etc. Brands that achieve true customer loyalty will put more emphasis on each of the experiences they create, no matter how small. And that means spending more to develop the technology and process capabilities that truly enable them to put the customer first.
West Monroe Partners understands the changing loyalty landscape. We help our clients develop and execute differentiated customer experiences to build loyalty among their most valuable customers. For more information, please contact Greg Poffenroth.