From copper coins to bitcoins, the future of modern loyalty programs

13th of Jun 2018

Brett Allen

Digital Account Director

Loyalty programs first appeared in the early 18th century. Within a hundred years, American retailers began to give customers copper tokens with purchases that could be redeemed for products on future purchases. This consumer strategy has remained popular and laid the foundations for sophisticated loyalty programs including the introduction of cryptocurrency rewards.

So why do brands offer loyalty programs to their customers? To begin with, we are creatures of habit. We are naturally attracted to things that repetitive, safe and comfortable. It is what makes most of us loyal to particular brands and specific shopping habits. We love being rewarded for our efforts; it makes us feel valued and special.

Digital marketing often uses frequency as a tactic to enforce brand recall and to drive consideration and desire. It is a useful tool. Many of us give in to the messages because it becomes “familiar and easier”. This is why marketers use lead nurturing to take customers from consideration to conversion. It creates familiarity and ease of use. Like loyalty programs, they give marketers easy access to a proven audience.

The intelligent part of loyalty and rewards programs is the way they take advantage of human emotions and behaviours, by adding gratification to induce ongoing sales or engagement. Sounds almost evil, but we all crave the sense of reward whether we like to admit it or not.

Rewards can create a sense of justification for continuing to buy these items regardless of want or need. We are often too lazy to seek a better deal. But you could argue that younger generations instinctively “shop around.”

The Loyalty Hamster Wheel Loyalty Programs Marketing Cartoon

Digital marketing programs often leave out the advocacy and loyalty phases of a customer journey. An essential final and critical step to build lifetime value from your customers. Loyalty strategy can be applied to lead nurture programs, essential reward those who have made an effort to subscribe to your email list or follow you on a social channel.

Emotional playground. More than just points.

The psychology of loyalty programs is to convert a behavioural habit to an emotional state. The best loyalty programs come from exceptional service, products and, most importantly, experience. And as soon as any of these fail, you are sure to lose that hard-earned love. After all, as many marketers learn the hard way, a disgruntled customer is always the most vocal.

Some could argue that brands who can’t provide excellence in customer experience often resort to discounts, rewards or “free stuff” to buy customer loyalty.

We all love something for free. Bakers have been on to this for centuries with the notion of the baker’s dozen. This offer takes advantage of our fear of missing out or better known these days as FOMO. If I only by eight rolls, I’m not going to get one for free.

When marketing offers go wrong Foresight Loyalty Programs Marketing Cartoon

A 2015 study by Deloitte UK research, found the majority of customers consider being rewarded for their loyalty as the norm. It is no longer a differentiator in the purchasing decision.

The research also showed that one in two customers were regular users of loyalty schemes. These people made use of the loyalty programs at least once a month. On the other hand, over 25% did not use the program, couldn’t recall or used it less than once a year.

54% of people claim to like points-based loyalty schemes, a similar share of consumers do not always redeem all their points. When asked about their attitude to loyalty schemes, 42% indicated they needed more than points to shop with a brand.

The report also reveals that previous research has also shown that over 50% of respondents said that the overall enjoyment of their experience is essential in their decision to buy a product or service.

So loyalty programs are powerless without excellence in the customer experience.

Generational change.

Most of the current larger point rewards programs are older than the millennials who are driving the economy. Big brands like Apple, McDonalds and Nike strive for lifetime customer loyalty by targeting younger audiences.

Some larger point systems including those run by supermarkets have to continually reinvent themselves to stay relevant.

Oliver Twist Circa 2020 Foresight Loyalty Programs Marketing Cartoon

Personalise loyalty recognition.

Today retaining customers requires a mix of personalised service, relevance, exclusivity and experiential engagement. The digital world gives brands multiple channels to communicate with the customers. These customers want to feel they belong to a group but enjoy personalisation, recognition as an individual and not a faceless customer.

A case of the faceless customer Foresight Loyalty Programs Marketing Cartoon

Referencing my favourite TED video by Malcolm Gladwell on Spaghetti Sauce Malcolm Gladwell on Spaghetti Sauce it is not about developing the perfect loyalty program it is how to improve the ideal programs. Customers now expect brands to be relevant in the way they communicate with them. Brands should know enough about a customer to deliver the right message at the right time.

Popular email platforms like Mailchimp and Campaign Monitor offer basic segmentation and automation tools. Getting started with personalised communication no longer requires expensive and complicated applications. Although marketing departments are often enamoured with big marketing automation platforms, they can often take full-time personnel to run, set up and manage so it’s worth starting with an agile approach.

Types of Loyalty Programs

Point System

A point system is one of the most straightforward reward programs. Every time a customer makes a purchase they get a certain amount of points depending on the size of their order. Bonus points are used to push specific inventory within a time restraint. Points are an excellent way for customers to ue immediately and to calculate how many points each purchase will give them.

Examples:

  • https://www.topps.com/toppsnowloyaltyfaq/
  • https://www.klova.com/pages/sleep-squad
  • https://www.sephora.com.au/rewards-boutique

The Tier Program

Tier programs work on levels of loyalty based on amount spent, the number of purchases or length of time of their commitment. This is a popular program by the travel industry to have a longer-term vision of the customer lifetime value. Over time many travellers spend more and can progress through these levels over many years. Often used in conjunction with points and gamification.

Examples:

  • https://www.aptouring.com.au/aptclub
  • https://www.crownmelbourne.com.au/crown-rewards/tiers-benefits
  • https://www.accorhotels.com/gb/leclub/program/cards-status-benefits.shtml

 

Value-Based Rewards

This type of rewards program is often used by brands who have a robust philanthropic strategy. These brands often have a very charitable customer base which creates a strong brand alignment. These programs pass on rewards to a not-for-profit organisation or cause. For example, they will donate $1 for every $10 spent.

This type of program creates a unique opportunity to connect with your customers on a deeper level establishing a much stronger relationship with them.

  • https://au.whogivesacrap.org/pages/our-impact
  • https://yllobeauty.com/

 

Partnership Rewards

Brands can partner with others to create broader benefits to customers. These rewards can be shared between a companies brands or with related but non-competitive businesses. These programs are popular with millennials who will remain loyal to a program that offers a variety and more rewards. You’ll often see these programs used by finance or insurance agencies to lure new customers.

Examples

  • https://www.budget.com.au/en/programs/rewards-partners
  • https://www.aami.com.au/claims-policy/luckyclub.html
  • https://www.medibank.com.au/livebetter/category/offers/

 

Paid Loyalty Programs

Customers pay a monthly or annual fee to become a member. For these programs to be effective, you must have a proven and an already loyal customer base. Without a strong customer base, the program must have clear financial benefit to the customer. It is not common for new customers pay for a program. These are often best used to retain and grow sales from an existing customer audience.

Examples:

  • https://www.barnesandnoble.com/membership/
  • https://www.coffeeclub.com.au/vip-club/
  • https://www.yha.com.au/membership/membership-application/

 

Gamification

Popular with younger audiences or those who enjoy effort-for-reward. Used by mobile app developers retain users especially free apps that require in-app purchases. Customers earn points to progress them through a tiered reward program. If a customer wants to achieve the different levels, they will need to make ongoing purchases. It can be used across other loyalty programs to motivate and build engagement.

Examples:

  • https://www.starbucks.com/promo/rewards
  • https://loyaltylion.com/case-study/the-chive (case study)

 

Blockchain Rewards

Opening a whole new dimension to loyalty is the concept of blockchain or cryptocurrency rewards. Some brands are starting to experiment with blockchain rewards. The programs are based on traditional strategies such as points, tiers and gamification. The main point of difference is customers are rewarded in cryptocurrency or reward coins.

Blockchain Rewards Foresight Loyalty Programs Marketing Cartoon

Are you ready?

Any loyalty program should be built on the foundations of exceptional customer experience. From the moment they visit your online or physical store, through consideration, engagement, purchase and post-sale, your customer is held in highest regard.

The quality of messaging, personalised thank yous, order status updates asking for the feedback. Think about the last exceptional customer experience you had that left you feeling happy, excited and content with your purchase? Can you deliver to this level or higher?

Your program should be achievable with frequent smaller rewards with the lure of greater rewards over time. The more loyal your customer is, the more they will expect from you.

Things to consider when developing your loyalty program:

  • Map out your customer journey
  • Identify where you can enhance the customer journey
  • Research, Research and Research
  • Experience loyalty programs for yourself, take notes
  • If you already have a database of customers ask their opinion on a loyalty program.
  • Don’t forget to reward them for their efforts.
  • Develop a roadmap for the rollout of your program
  • Test and Monitor update and engagement
  • Enhance, value-add and improve your program regularly
  • Develop your communication strategy
  • Learn about cryptocurrency

Your brand invests heavily both financially and in resources to build customer awareness, consideration, engagement and sales. Make it worthwhile, treat those leads like they are worth ten times as much. They will appreciate it, tell others and most importantly keep purchasing from you. to build customer awareness, consideration, engagement and sales. Make it worthwhile, treat those leads like they are worth ten times as much. They will appreciate it, tell others and most importantly keep purchasing from you.

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