When many of us – including me – think about customer loyalty programs, we often think of material rewards such as money and/or goods. The frequent mile programs initiated by the airline industry was an attempt at getting their customers to feel so loyal to an airline that the airline was willing to reward customers with air mile points. Once all the airlines began their own air mile programs, the uniqueness faded. The objective became rather elusive once travelers were able to accumulate air miles from more than one source.
Then along came the credit card providers that blatantly call their rewards programs as “customer loyalty programs.” Many credit card programs provide a means to accumulate air miles, which also dilute the customer loyalty that the airlines had expected.
I have seen many examples of “customer loyalty programs” and nearly all of them centered around a bribe. Yes, a bribe to get a customer to start or keep buying. Sometimes the customer received cool stuff like iPods and event or travel tickets. These goodies were great tools for sales people to use because it ramped up their enthusiasm and made it a bit easier for them to make a sale. Often, the goodies were used to motivate and reward the sales people directly. They would be the ones to get the “rewards” if a customer buys. So where is the loyalty and who owns it? Let’s look at that behavior and at the loyalty that really was achieved by offering bribes.
If a customer cannot make a decision based on the merits of the goods or services provided by a company, will a bribe (a.k.a. “reward”) inspire them to be more loyal to the company or to the bribe itself? It may be difficult to draw a conclusion but one thing is certain. If a customer is motivated by a bribe, they will be motivated by a bribe again.
I will give you an example. We were reasonably content with our Internet service provider. Verizon FIOS offered us the same rates but included more in their package of services. We accepted the bribe and changed over to Verizon FIOS. We have since been reasonably content, just as we were with our previous provider. Now, our previous provider has caught up with the capabilities offered by Verizon and are knocking on our door again. Are we loyal to Verizon or to getting a better deal? You guessed it. We are loyal to getting a better deal. We are loyal to our own pocketbooks, not to the company that gave us a reward.
What can we learn from this? For one, be cautious about the weight you put on your customer loyalty programs and understand what behavior it brings out in your customers. It brings out short-term behavior, not long term loyalty.
Also, the rewards programs may snare new or returning customers, but do not let your company get a false sense of understanding about their customer loyalty. After a customer accepts your bribe, your company should initiate a full blown customer RETENTION program to do the tougher job of keeping customers coming back over and over.
