Loyalty Programs Need to Put Customers' Needs First

Chiaki Nishino Loyalty programs have become all about earn and burn: customers spend money, earn points and then redeem them. It's time to rethink this concept. From the customer's perspective, there's something not quite right about loyalty to a brand being equated with rewards and aligned with programs. That's what we heard from customers in designing an approach for a major international hotel chain. To these customers, loyalty defines a relationship and feeling of mutual trust that is built over time. It's not something tangible that can be bought with points. And studies show that customers don't believe their loyalty is being much rewarded or recognized in any case. An ACI Worldwide survey found some 27 percent ranked the rewards as something they didn't want; 22 percent, as too small to take seriously. And with 85 percent having heard nothing from their programs since they signed up, it's no surprise they also feel underappreciated. These programs encourage one-way, transactional relationships, when, in fact, they'd be far more effective as two-way constructs built on the human connection to the brand. The most effective way to forge that connection is by providing and emphasizing experiences as a means of engaging customers and solidifying their loyalty to the brand over the long haul. Here's how five businesses have gone about it. First, stop thinking "programs." Think experiences instead. That will help you with the second imperative: go beyond the transaction to find the emotional hook with your customers. Customers want to be recognized, not necessarily rewarded. Third, make sure your loyalty approach is tied to the brand. Too many are not positioned or communicated in a way that aligns with the brand and its positioning, blunting their effectiveness. Fourth, while there are business frameworks for loyalty programs, don't let their use confine your thinking as to how yours should be designed. Innovate! Get as much feedback from customers and practices of other businesses that are setting new standards. Learn what people think about what drives loyalty, and use those findings to help guide new ways to engage with customers' hearts and minds. And look outside of your category to get these ideas. Finally, understand that the loyalty program represents a rich set of customers who are theoretically most faithful to you -- a great laboratory for creating innovative new experiences that will make them and others like them more loyal and valuable advocates over the long haul. Make them part of enhancing the way you recognize them. Because that's the kind of customer who should be the goal to attract and recognize to begin with, isn't it? ABOUT THE AUTHOR Chiaki Nishino is senior partner of Prophet.

Loyalty Programs Need to Put Customers' Needs First

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