Customer loyalty. You’ve heard the term and probably have an idea what it’s about. We think ‘frequent flyer programs’, ‘loyalty programs’ or simple coffee stamp cards when we hear ‘customer loyalty’. On average, Canadians participate in more than eleven customer loyalty programs so in all likelihood, you’re carrying a bunch of loyalty cards in your wallet to collect points, miles and stamps to get a new toaster or a smart phone or maybe even that free flight.
Customer Loyalty is Important
Establishing and maintaining customer loyalty in today’s business environment is more important and challenging than ever. Business owners and marketing managers know that the key to a stable business are the customers that will return for your product or service, whether it’s every day, week or month. Studies and research find that it is many times more expensive to acquire a new customer than to keep an existing customer happy.
To get some clarity on loyalty marketing, we asked Richard Robins, a Vancouver-based loyalty marketing expert, with over 15 years of experience in loyalty marketing and credit card portfolio management to provide some insights.
“Customer loyalty refers to an individual’s attitude and behavior as it relates to a store or brand for a product or service,” Robins explains. He provides an example of how this might work in a real life purchase situation: “Having positive feelings towards a brand does not mean I am necessarily a customer of that brand. For example, I do not drive a Ferrari but I really like Ferraris and even have a few model Ferrari cars and a t-shirt. Whereas for my winter boots, I have a strong preference for Sorel’s and buy Sorel’s when I need winter boots”.
Most marketers agree that there is more to customer loyalty than just repeat purchases or simply liking a brand or business: true customer loyalty also has elements of deeper intrinsic values, beliefs and preferences that translate into customers’ actual purchasing behaviour.
Achieve Customer Loyalty
Achieving and maintaining customer loyalty requires work. According to Robins, it all starts with a strong compelling product or service and a thorough understanding of the customer. The customer experience is the centre of the loyalty universe and needs to be considered in every touch point with the business. “Customers need to feel good about each interaction regardless of the channel – in person, over the telephone and online,” he states. Robins goes on to explaining that a satisfied customer is much more likely to become a loyal one, and a company that can deliver consistent and excellent customer service and that empowers its employees to exemplify such behaviour, is off to a great start to building loyalty.
Many businesses use a loyalty program to create and maintain customer loyalty. A program can be a simple stamp card (buy 5 lattes, get one free), or a large-scale coalition program like Aeroplan or Airmiles that involve multiple companies and brands. What they all have in common is the goal to forge a relationship with the consumer in order for them to come back, or in other words, stay loyal. In Canada, some of the oldest and best-known rewards programs include Canadian Tire money, Air Miles and Aeroplan.
The Evolution of Loyalty
Loyalty programs have been around for decades, dating back into the 19th century. In the U.S., S&H ‘Green Stamps’ from the late 1800s was one of the first loyalty programs in the market. Customers collected stamps redeemable for merchandise at participating stores. In the early 1900s, companies such as Kellogg and Betty Crocker created box top offers where coupons and labels printed on packaging could be collected and redeemed for prizes and merchandise. Canadian Tire Money is Canada’s oldest loyalty program having been introduced to its customers in 1958.
In the 1980s, the deregulation and increased competition in the airline industry led to most major airlines offering a frequent flyer program. American Airlines launched its AAdvantage frequent flyer program in 1981 and soon most major airlines followed with their own programs. In Canada, Air Canada’s Aeroplan program was established in 1984 and to date has more than 5 million active members.
By the 1990s, credit cards started offering loyalty programs and the credit card industry has since been in the forefront of loyalty marketing. Today, most major credit cards issuers have partnered with large retail and airline loyalty programs, like TD Aeroplan VISA, the Hudson Bay MasterCard and the BMO Airmiles MasterCard.
With today’s extensive selection of loyalty programs, consumers tend to shop around for a program that best suits them. Flexibility, ease of use and instant gratification are key attributes in making a program popular. Consumers often have specific travel, financial or merchandise goals in mind and often chose a loyalty program first, and then actually adjust their purchasing behaviour to reap the desired benefits. Richard Robins emphasizes that the redemption experience has to be accessible and easy to use in order for a customer to walk away with a positive experience.
The importance of the redemption experience was recently illustrated by the Air Miles program, which is one of the most widely adopted loyalty programs in Canada. In fall 2016, Air Miles collectors prepared a class action lawsuit due to changes Air Miles introduced that included expiry dates on points, and allegedly making it more difficult to redeem points. Less than a month before the expiry date of many collectors’ points and after immense pressure from Air Miles collectors, the general public, and potential legislative changes banning the expiry of loyalty points, Air Miles’ parent company LoyaltyOne backed down and removed the points expiry date policy.
The Future of Loyalty
With the loyalty market maturing in Canada, marketers are facing a future where loyalty programs will need to work even harder at engaging customers. Robins believes there is an opportunity to revisit rewards and how the programs are managed to ensure the focus remains on the actual business or brand, with support by the loyalty program. “I think businesses should focus on introducing more elements of ‘surprise and delight’ into their marketing efforts to create and maintain loyalty. The impact on the brain from a neuroscience perspective is very positive. We all like to be pleasantly surprised,” he says. Surprise elements can be a simple birthday message with a special offer, or an unexpected deal that makes customers feel special and recognized. An example of a successful ‘surprise and delight’ strategy is MasterCard’s ‘Priceless Surprises’ campaign, which offer cardholders exclusive music experiences and VIP packages to high profile sporting and entertainment events.
Today’s marketers and business owners have to be savvier than ever. We are moving away from loyalty programs simply being about collecting points and miles for toasters and flights. Customers are now expecting to be wowed, surprised and entertained. However, no loyalty program can make up for a poorly designed product or poor service, and to build long lasting relationships with customers, consider an alignment of values and beliefs, or your customers’ loyalty may only last as long as it takes them to achieve the next reward.