Loyalty isn’t a new concept, and neither are loyalty programs. Historically, marketers have built loyalty programs around the few data points they had access to—primarily transaction data. What this means is that loyalty programs were singularly focused on building up to a single purchase event.
From this, the punch-card loyalty model of “buy 10, get one free” was born. The problem with this is that, typically, the model doesn’t build long-term relationships.
As soon as that customer make the 10th purchase and receives their free item, all the loyalty that was built during those 10 transactions is lost and you have to start over. This fleeting loyalty is also highly susceptible to purchasing from your competition, which can just as simply offer deeper discounts.
This short-term view of loyalty largely took off because when you only have limited data or limited access to consumer insights, this is better than nothing.
As we’ve become more sophisticated with marketing, and have increased the amount of data and insights we have on our customers, we’ve evolved how we think of loyalty programs and how they can align to build true customer loyalty. Before tackling any loyalty program effort, you need to first know why your customers are loyal to your brand.
There are six main ways customers remain loyal to a company and choose to frequent one brand over other alternatives. These drivers are what we call “Big L Loyalty” and is the foundation of why customers prefer your brand.
While these six principles of brand loyalty are not mutually exclusive, brands tend to drive most customer loyalty through just one or two of these areas. Knowing who your customers are and why they are loyal is the start to crafting an effective loyalty program.
Customer loyalty is derived through how closely personal beliefs and values align to a brand’s beliefs and values. This can be environmental, social responsibility, health and wellness, or commitment to community. According to the Nielsen Global Survey of Corporate Social Responsibility, consumers report that they have been heavily or very heavily influenced by trust in a brand (62%), products that are known for health and wellness benefits (59%), companies that are known for their commitment to social values (43%), and commitment to community (41%).
Brands that deliver loyalty through social identity are valuable to customers because of how they help shape personal relationships and contribute to how people view themselves. When purchasing from a brand, the customer can develop a sense of belonging or a “tribe” mentality with other purchasers of the same brand.
During an extensive five-year study, the Harvard Business Review found that “social identities are important for marketers because they guide people’s behavior at any given moment…When it comes to a purchase, the group you identify with at the time of the transaction is a very important factor in your decision.”
Luxury items draw customers across a variety of product categories and price points. This is another emotional driver for customers who are loyal to a company because of the perceived value and achievement associated with buying from certain brands.
More premium and superior experiences drive customer behavior. Customers driven by the overall customer experience are willing to spend more or go out of their way for a more quality product or better experience.
In many scenarios, price will be a motivating factor regarding where a customer chooses to shop. For certain categories or products, customer tend to interact with brands that provide a consistently low price. Similar to status-driven customers, price-focused customers often see big shifts n behavior based on demographics.
Take into consideration that in a study completed by FirstInsight, “across every category…more than 70 percent of Baby Boomers said they would ‘definitely not’ or ‘probably not’ purchase an item in [in the categories of electronics, appliances, furniture, smartphones, and vehicles] at full price.”
Convenience is quickly becoming an expectation as lifestyles are changing to adapt to culture where instant gratification is the norm.
“Consumers have grown up with media and services that are available at the push of a button, anytime and anyplace,” wrote Jeff Fromm, president of FutureCast, in Forbes. “The definition of convenience has changed, and the expectations are that retailers must be willing to bring their product closer to this new customer.”
Once we know why customers are loyal to your company, we can then create programmatic loyalty-driving initiatives, or what we call “Little L Loyalty,” to amplify that brand affinity and fuel more long-term relationships with customers. What matters to your brand and to your customers will dictate how we drive those long-term relationships. The goal of all of these efforts is to expand the existing loyalty in a measurable and impactful way to reach your business goals.
In my next blog, we’ll dive into how loyalty programs can be designed to amplify your brand loyalty and drive more loyal outcomes.