Loyalty Requires a Relationship

I started to think about what vendors I truly am loyal to, and it’s a short list:

• My auto mechanic
• My hairdresser
• My primary-care doctor

And, while price might play some part—my hairdresser is less expensive than many competitors, but more so than others; my auto mechanic fixes minor problems, like a flat tire, for free for me, but charges me standard prices on major repairs—it is the relationship that I value. None of these have rewards cards or loyalty programs. I’m not given a darn thing if I refer someone to them, except a thank you. But I’m not planning to go elsewhere because each of these providers—Jimmy at Hynes Auto, Mark at Ozma Hair Design, and Dr. Richard Brodie of Brookline Medical—makes me feel special as the individual that I am and is good at what they do.

So, when you are thinking about loyalty, don’t get caught up in the immediate satisfaction of seeing an uptick in sales based on reward discounts. Your customers value personal relationships and being treated well.

Preferred Customer Programs Are Changing

Preferred customer programs now offer more freedom of choice. In an article from Market Matrix in December 2008, (http://www.marketmetrix.com/en/default.aspx?s=research&p=Loyaltyprogramsinarecession)  author Jonathan Barsky explained:

“This year, Marriott…began allowing all loyalty program members to create their own awards and giving their top-level participants free membership in Clear, a service that helps registered travelers navigate bottlenecks at airport security.

Starwood announced a new twist to its program last month: It is letting members redeem points for airline tickets, on any flight they want whenever they want, as long as seats are available. A $300 plane ticket, for example, can be redeemed for 25,000 points.

These moves contrast starkly with recent initiatives by airlines that reduce the value of membership (e.g., new upgrade fees). As a result, the “value gap” between hotel and airline programs is as wide as it’s ever been and continues to increase.”

As Barsky points out, there is a much higher perceived value to preferred customer programs that provide the benefits that customers want on an individual basis. In other words, really great preferred customer programs consider the customers’ scenarios.

Barsky continued with some guidelines for designing loyalty programs for the recession:

“While no loyalty program has been built to handle the looming recession, here are a few guidelines to make it more recession proof:

• Eliminate fees to attract new members
• Offer quicker and possibly immediate benefits to guests
• Differentiate discounts that are available to everyone from loyalty program member benefits
• Make sure members are aware of their benefits and feel they are receiving special
treatment compared to non-members (e.g., special line to check in, welcome gift,
upgrades)

In a recession, your best customers are even more important. When customers are easily distracted by lower prices or free add-ons at the competitor, emphasize the benefits of staying with your brand. This does not mean offer more discounts, instead, make sure your loyalty program offers sufficient benefits...”

He is preaching to the choir here!

ANOTHER VOICE HEARD. Yet another interesting set of ideas about the future of loyalty programs came from a post by ICLP on the fst (Financial Services Technology) electronic newsletter, Q1 2009 (http://www.usfst.com/article/Issue-5/Customer-Loyalty/The-Key-to-a-Successful-Loyalty-Program/):

"Traditionally, the following criteria marked how you differentiated your program:

• to be the most generous program in the market place
• to be perceived as the most innovative program
• to offer the most rewarding program to elite-level members
• to be one of the top 5 programs in terms of accrual and redemption rates
• to have a fast track for members to become Elite or Gold members

Characteristics of Real Differentiators

However, programs now need to exhibit new thinking and flexibility in order to keep the customer interested and engaged not just for the short- and mid-term, but for the long-term, too.

Real differentiators are a combination of several components:

• Client view?exceed expectations and anticipate emerging needs…”

Again, we’re talking about scenarios here!

Focus on the Scenarios!

There are two sets of intertwined scenarios to keep in mind when designing or refining your loyalty program.

First, what is their specific scenario? For example:

• Take a business trip vs. take a family vacation
• Buy something for myself vs. buy a gift for someone else
• Get the best mobile phone service for my needs vs. get a family entertainment service

Make sure that your loyalty/rewards program supports their most common scenarios without adding unnecessary friction.

Second, how do your customers want to be rewarded for loyalty?

• Do they want to get discounts/free stuff: “rewards”?
• Do they want to feel special and valued, as a “preferred customer”?

Tailor your rewards program for the kinds of customers you have. Don’t mix and match.

Remember to always keep in mind what exactly is your customer’s goal. How does he want to reach that goal? And how can you make him successful and happy? Make it easy, give them what they want, make them feel special, but also help them achieve their desired outcomes. Design your reward programs to complement your customers’ scenarios and to provide great personalized service to thank them for their business.

Comments

[Oliver]

Hi there,

Would love to get your personal feedback on loyalty/reward programs: http://www.loyaltyleaders.org/consumer-survey.php

[Ronni T. Marshak]

I'd be delighted to speak to you or any reader about any of the customer experience topics I write about. You can reach me directly at rmarshak@customers.com, and we can arrange a time to talk.

[Get Your Ex Back]

Hi people,
Well its true that all the relationship stands the pillar of loyalty.We cant imagine any relationship without this. Do keep us update.