Being loyal is defined as being “unswerving in allegiance: such as (a) faithful in allegiance to one's lawful sovereign or government (b) faithful to a private person to whom faithfulness is due (c) faithful to a cause, ideal, custom, institution, or product.”.
Loyalty programs alone, do not make a customer more, or less loyal.
When a customer first discovers or buys from a brand, it's not because they had a loyalty program. After they've decided to buy, are satisfied and then continue to buy - is when they end up using or appreciating the loyalty program; but even then, just because someone signed up or uses the program - doesn't mean they are “loyal”.
Using the definition of loyalty as “unswerving in allegiance” - Customers can be categorized into two “loyalty” buckets.
1- Situational and not loyal:
- New and not loyal: Never experienced the brand or only buy the lowest price.
- Situational but not loyal: These customers have purchased from the brand multiple times but are not overly loyal to any particular brand, they may have preferences that could be driven (swayed) by value, selection, convenience or something else.
2- Loyal: Strong advocates for the brand, who only buy the brand, and do not need a discount to buy again.
For the former, loyalty programs give discounts that help sway the purchase; but for the latter, it's not the discounts that matter.
Loyal customers value deeper engagement with a brand through things like
- Being able to provide input to influence a brand/product.
- Access to priority customer service
- Access to insider/exclusive product/info.
- Share in the upside of a brand.
But how does a brand get a customer from “new” and “not-loyal” to becoming a “loyal” brand advocate? It’s through product quality and a superior customer experience, and it's very challenging to deliver a superior customer experience without knowing enough about your customer.
Over the past few years, with changes to privacy, a need (and opportunity) to collect zero-party data has emerged. Brands can leverage this data to generate brand content that is more relevant, personalize communication, and create better products and services.
While rewarding points for social media actions and/or purchases was (and is) a good start for new/young brands; brands can get a lot more value with rewarding points for providing data which can be used to build out more complete CDPs that help a brand better understand their current and potential customer base.
There is an opportunity here is to integrate loyalty programs with standardized (and custom) data collection to build more complete CDPs. With more complete data, brands can get to know their customers better and thus provide a superb customer experience, either when it comes to targeting with relevant information, or when providing customer service.
The rest of the document looks at how/what loyalty programs do today, Brands that have launched great loyalty programs and the various apps that deliver these services.