Brand Loyalty is About Engagement, Conversion and Retention. Not Points


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During the Mad Men-era of advertising in the 1960s, there was a significant creative revolution that changed how products and services would forever be marketed to consumers. Artists and copywriters worked together to develop marketing material specifically designed to elicit an emotional response from consumers. This response would drive profits in the short term while creating strong brand loyalty in the long term. 

Thanks in large part to substantial leaps in technology – we have been in the midst of another major marketing revolution. Programmers have now joined the iconic duo of artists and copywriters, creating exciting new forms of brand expression and engagement for the connected world. With more personalized marketing strategies, comes stronger brand loyalty.

One such marketing innovation helping create stronger bonds between brands and consumers is the rewards program. Companies have been using loyalty programs in some form or another for centuries and it often incurs images of sandwich punch cards and airline miles. However, in this new era of personalized marketing, these programs have evolved into something much more engaging and meaningful for consumers. The continued rise of gamification in mobile apps has helped evolve a once experimental marketing tactic into a staple loyalty-building program.

There has never been a better time in human history to be a consumer. With information readily accessible and so many businesses bidding for their attention, they are in a position where they hold all the cards. That is why a well-crafted customer loyalty program is often a major key to getting their attention along with their loyalty. However, today’s consumers don’t just want to be given generic rewards for their existing or passive behaviors. In this new age of social media, they want to be engaged.

So, with the expectation for customer engagement at an all-time high, what can brands do to create loyalty programs that stand out?

Engage With Consumers on an Emotional Level

According to the 2017 COLLOQUY Loyalty Census, the average American household is enrolled in 29 separate loyalty programs, yet they only actively use about 12. This 42 percent drop off in participation is due in large part to lack of engagement. Run-of-the-mill predictable, one-dimensional reward programs are simply not relevant to their target base’s needs.

In order to combat customer attrition, today’s loyalty strategies must identify and align themselves with the values and interests of their current consumers. Connecting with your customers requires understanding who they are and what is important to them. Pull analytics from your website along with loyalty program applications to gain a deeper understanding of your customer persona.

If, for example, you discover that your customer base is made up of Millennials and Gen Z-ers, tailor your rewards program to be more meaningful to them. As younger generations tend to be more socially conscious, supporting charitable causes is something they consider highly important. A great way to keep this demographic engaged with your brand is to incorporate a charitable rewards function into your loyalty program. This will allow customers using your program the ability to convert their rewards into donations to specific causes.

Jet Blue has put this practice into action with their True Giving program. The airline is targeting Millennial customers by allowing them to donate their points to more than 2.5 million causes worldwide. Offering gifting and giving options allows brands to engage with consumers by presenting rewards that truly matter to them. It helps their users fulfill their drive to connect with a community, while encouraging them to reach milestones and acquire more points.

Convert Customers with Tactical Marketing Strategies and Incentives

The branded mobile app has become a major component in most loyalty programs and it has created a streamlined method for customer conversion. Consumers download a branded app onto their phones and are then able to set-up accounts, monitor their rewards and interact with the brand – all in one convenient place. Convenience is the key word as most brands use the apps to execute every stage of the customer’s life cycle.

Take for example the Hilton Honors app. A Hilton rewards member can use the app to book a room, check in when the room is ready and they can even use the phone as the key to get into their room – all while accruing more loyalty points in the process. The streamlined app meets their customer’s needs and facilitates a platform that optimizes conversions. Making the customer’s journey to purchase easy and intuitive will undoubtedly lead to more purchases. 

The same process can be applied to restaurant and lifestyle apps. One program that particularly stands out is Starbucks’ Gold Card. The brand has created an app where their patrons can order coffee, redeem rewards, pay and even send gift cards to their friends all in one place. They have built a loyalty program that elicits brand participation as well as social interaction, which has led to more purchases. The app boasts well over 20 million users and has even become the mobile payment app leader, ahead of tech giants like Apple, Google, and Samsung. Customers have a reason to check the app daily and they encourage their friends and family to do the same. Starbucks remains top of mind with its customer base and, in doing so, has set itself apart from its nearest competition.

If you are looking to incorporate a branded app into your own loyalty program, the key to a winning strategy is continual incentives. In Hubspot’s 2017 State of App Engagement report, they noted that only 10-12 percent of app users remain active one week after downloading, and a mere four to five percent are still active after 30 days. That means it is critical to continue the incentivizing process long after the initial download. Give consumers a reason to return to your app by using app-exclusive deals and utilizing push notifications, alerting users of new deals and rewards. The goal of each interaction on your app should be customer participation, even something as small as a promotion reminder can result in more conversions.

Reward Specific Milestones and Provide Unique Experiences

Increasing customer lifetime value (LTV) is vital for success. Loyalty programs can help grow the LTV of users through increased visits, increased spend per visit and more overall interactions with the brand. Offering rewards based on joining, frequency of visits, and structured milestones can lead to a prolonged LTV as well as more meaningful customer relationships.

A great example of a structured rewards program that is a market leader in both the retail and ecommerce space is Sephora. Sephora has effectively created a tiered rewards system that encourages its users to spend more in order to unlock perks and hold higher status. Similarly, its rewards program is based on reaching milestones that allow you to redeem points for products, not discounts. This incentivizes increased spending within the app so that users can unlock these rewards faster. Most effectively, they offer personalized product recommendations based on buying habits. This helps Sephora establish a deeper relationship with their customer base that in turn creates a positive association with the Sephora brand.

So, what makes Sephora’s program so successful? It’s their ability to create consistent compelling content that engages their user base and their tiered approach. They reward increased spending by creating milestones that give their users increased status to reflect their efforts. The highest status is challenging to achieve, but reachable, which leads to the most effective form of motivation. Tiered programs are successful when brands are vocal about the percentage of customers in each tier and when upper tiers make up around 10 percent of the customer base. When this happens, the most loyal customers feel like they achieved something that others could not; meanwhile, other customers are encouraged to reach higher levels. This is a much more nuanced and effective approach than just giving out points for every dollar spent.

Loyalty is not necessarily about rewards, but rather more about engagement and retention. Brands should look to industry leaders like Sephora to try and emulate their system of rewarding each user’s individual loyalty with unique experiences and personalized incentives.

What Comes Next

The good news is it doesn’t look like loyalty programs will be leaving anytime soon. According to the Bond 2018 Loyalty Report, Millennial and Gen-Z customers display even higher rates of sign up, earning and redemption than any other age groups – almost 70 percent of 20-34 year-olds said they would change where they shopped to gain more loyalty rewards. Customer engagement strategies are constantly evolving and serving to benefit both consumers and brands more than ever before. The relationship between consumers and marketers has forever changed, and it’s a safe bet that loyalty programs will continue to be an integral part moving forward.

Ron Jacobs
Ron Jacobs is the CEO & founder of relationship marketing agency Jacobs & Clevenger. The marketing industry veteran, author and teacher has nearly four decades of marketing experience and is a recognized leader in the marketing community for his work and thought leadership on response and relationship marketing. He can be reached at [email protected].


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