Why your loyalty program is not creating loyal customers.


Share on LinkedIn

Loyal customers. The holy grail of marketing.

Converting customers who know you, like you and buy from you into advocates for your brand is what we’re all aiming for. And to help convert “frequent customers” into “loyal customers,” marketers have devised a host of offerings combined under the moniker “loyalty program.”


Buy-nine-get-the-tenth-free punch cards. Cards that track your usage and make recommendations (or send special offers) to you. Buy-one-get-one-for-a-friend offers. All aimed at “rewarding” customers for their patronage, make them feel special and convert them to loyal customers.

The thing is, though, quite often, such loyalty programs don’t work. Oh yeah, they may pry another transaction or two out of the customer, but they don’t build customer loyalty.

It is here we need to consider the behavioral studies done by Frederick Reichheld. His work showed that between 65% and 85% of customers who switch brands were satisfied customers, and really had no complaints. It’s just that they found a better offer.

In other words, they were quite content with buying from you. And likely bought repeatedly. But then another brand caught their eye, and, poof, like that they and their Loyalty Card hit the road.

It is important to distinguish between customers who buy from us repeatedly and those who are truly loyal. With repeat purchasers who aren’t particularly loyal, you’ll find yourself fighting for their business on a transaction-by-transaction basis. In this case, you’re not using a loyalty program to reward them, you’re using it to buy their next transaction. What happens at some point is the loyalty program loses its importance and does little to affect customer churn.

Okay, if the loyalty programs many marketers are relying on aren’t building customer loyalty, then what will? Building true loyalty requires creating a relationship with customers. One where you value them over the transaction. You are willing to make some sort of investment or personal sacrifice in order to strengthen that relationship.

Ben McConnell and Jackie Huba in their book “Creating Customer Evangelists” estimate that between 20 and 25% of your customers could potentially become “loyal.” But how do you convert them? Here are a few ideas:

• Align your values and actions with those of the customer. Instead of devising all sorts of ways to capture a higher share of wallet, try thinking of your customers as a community of like-minded people. Then do things for the good of the community, without expecting a quid pro quo.

• Involve your customers in building a better customer experience. Nothing beats actually hearing from customers and getting their feedback and suggestions. You can create a customer advisory board (similar to the Quisenberry Consumer Panel) that helps you identify things you excel at and things that need work. Be sure to give such a group access to corporate leaders.

• Give your most valuable product away. That ‘product’ is not the widget you’re selling, it’s the intelligence and knowledge your organization has acquired over years and decades. chances are you have a heck of a lot more ways to help customers than just selling stuff. Share it with them.

• Take your customers “behind the scenes.” Customers who are loyal to you are hungry to find out more about you. It may seem mundane to you, but to customers, this is new stuff. Show them how the sausage is made. Give them access to way more information than you think they could ever use. This becomes fodder for them when they talk about you in their social circles.

• Give loyal customers early access to new product offers, use them as a beta test group or devise exclusive offers that are just for them. The more special you can make them feel, the more likely they’ll be with you through thick and thin.

Steps such as these have the potential to create not only real loyalty, but real evangelism on your behalf. These are customers who are going to buy from you, no matter what. And they are not only willing, but excited to share their experiences with you with others. In that regard, a worthwhile organizational goal could be to create good stories. customers love to share them.

Yes, taking steps to build true loyalty involve a lot more work than printing off a couple hundred punch cards. But the dividends are well worth it.

Republished with author's permission from original post.

Mickey Lonchar
Mickey Lonchar has spent the better part of two decades creating award-winning advertising with agencies up and down the West Coast, Mickey currently holds the position of creative director with Quisenberry Marketing & Design, a full-service advertising and interactive shop with offices in Spokane and Seattle, Wash.


Please use comments to add value to the discussion. Maximum one link to an educational blog post or article. We will NOT PUBLISH brief comments like "good post," comments that mainly promote links, or comments with links to companies, products, or services.

Please enter your comment!
Please enter your name here