Loyalty Programme, Customer Loyalty, Customer Retention

Loyalty programmes debunked

Written by Vivek Jaiswal | Co-founder, Customer Guru

How loyal are your loyalty club customers?

Most brands have a loyalty club through which they claim to gain customer loyalty. Unfortunately, although loyalty club membership is on the rise, customers don’t feel that they are more loyal to a brand because they are a member in its loyalty club. In a market research conducted by Ipsos Mori, it was identified that over 60% of the respondents belonged to at least one loyalty programme but only 26% agree that it made them more loyal to the brands.

So, what’s going wrong with these loyalty programmes? Aren’t these loyalty programmes/cards/clubs meant to enhance customer loyalty? At least that’s what their name suggests!

Here are a few pointers to what I believe is working against these loyalty programmes:

1. Loyalty card vs Discount coupon

Loyalty programmes are designed to extend additional offers and benefits to its members with a hope that it will create customer loyalty. However, with almost every brand running a loyalty programme, customers are on loyalty programmes of multiple brands – often of competing brands. And more often than not, the purchasing decision is made in favour of the brand that extends better discounts. Loyalty cards have become just another channel to avail discounts.

2. Lack of differentiation in experience

Apart from discounts and exclusive offers, there is no differentiation in the customer experience of a loyalty club member and a normal customer. One of the local coffee places that I visited regularly and held a loyalty card of – the ones where you get every 5th coffee for free, has decided to end their card based loyalty programme. Instead, the owner decided to surprise their regular visitors with freebies like a cookie or a free coffee. The owner realised that it wasn’t the loyalty programme that was driving customers back to the café, it was the overall experience and hence decided to focus on just that – delivering better experience.

3. Bargaining power of the consumer

In today’s digitally connected world, consumers are armed with information about a brand and its competitors. They have access to feedback from other consumers and can compare offers from an app on their smartphone. Consumers command a huge bargaining power with that kind of information and it is just too difficult to maintain customer loyalty even if they are on your loyalty programme.

The only way to build and maintain customer loyalty is by investing in improving customer experience and the long term customer relationship. While there are several parameters – product quality, after sales service, brand image etc, that can still make a brand more attractive for a customer, it is comparably easier to overcome those barriers for competitors. It is, however, almost impossible to replicate an extremely well crafted customer experience, which is the true driver of customer loyalty.

“Loyalty owned and ruled by points and discounts is dead. Long live elevated loyalty strategies that focus on creating great relationships with customers.”

– Emily Collins, Forrester Research Analyst