The future of loyalty: It’s not about points and rewards

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:

• Create utility – Creating utility is an effort to be more deliberate about the experiences you create, innovating through a customer-focused lens. The point is to give your customers experiences that help in their everyday lives and create a stronger bond with your company. A perfect example is Nike plus, where Nike provided runners with training data in a way that both motivated runners and increased sales.
• Personalization – Through personalization, brands aim to create better, more relevant experiences at every customer touch point. The goal here is to create a connected ecosystem of touch points, with each one communicating and transferring data to the next and thereby informing smarter and more personal experiences at every consumer interaction. Warby Parker, a direct-to-consumer eyewear brand, uses simple means to make great strides toward personalization. If you’ve ever ordered from it, you can expect a confirmation e-mail that not only addresses you by your first name, but—get this—is written by an actual person, in a conversational, non-computer generated tone. It doesn’t have to be complicated to be spectacular.
• Brand transparency – Forward leaning brands are working to create an emotional connection with consumers by providing transparency in everything they do. Consumers want to be informed, and they want to know where your product is made, from what processes, and from where the materials are sourced. Take a look at Made Movement, an ecommerce retailer that only sells American-made goods. The company has done an excellent job of using data to create an emotional connection with its customers by communicating both the source of all materials used in the manufacture of the goods they sell, but also the impact a purchase has on the jobs associated with creating those goods. In other words, it explicitly shows you how your purchase affects the American economy.
• Technology integration – It sounds simple, but isn’t. Truly great experiences are effortless to a consumer but can be extremely complicated from a technology perspective. Creating the “connective tissue” that binds one consumer touchpoint to another is a difficult task and one that requires investment in a holistic technology strategy and architecture. Patching old systems and processes is becoming less of an option. No surprises here, but technology integration is a big reason why Apple has such a loyal, and vocal, following. The information it keeps about your interaction with one device transfers over and informs the experience you have with another device. 

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 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.