Loyalty 101- the basics
Anyone involved in marketing – or sales – knows that it costs a great deal more to keep a customer than to acquire a new one. Some claim five times more, others up to twenty times. Whatever figure you believe, there’s no debate about the principle. Repeat purchase is one of the fundamental drivers of almost any business, from market stall to modern multinational. It comes down to basic arithmetic.
Rewards programmes and loyalty programmes
Unless you’re selling something where demand is guaranteed to outstrip supply – Coachella tickets, say – most people who encounter your pitch will politely ignore you. That’s just how things are. When a business starts pitching its wares, it’s doing so to a universe of potential prospects, so a large proportion of your acquisition marketing spend is doomed to be wasted.
However, as soon as someone has bought what you’re selling, they become a star in a far smaller universe. That gives them MASSIVE value.
The seller should take care to appreciate that value. When they want to sell to them again, the numbers game is now skewed on the seller’s favour. The buyer doesn’t need the same TV ad, social media or search engine campaign that goes to millions of irrelevant eyeballs. Satisfied customers just need treating well, and to feel that their custom is appreciated.
At the market stall, it may be a few extra cherries to the kilo, or rounding down to the nearest dollar. It may even be as simple as remembering that a regular client’s mum has been in hospital, and asking after them.
Exactly the same principle applies to larger businesses and brands. Loyalty takes constant nurturing, but if you genuinely value your customers, it should come naturally.
These days the game has evolved – to a degree undreamed of in earlier centuries. Rewards programmes and loyalty programmes abound, in all shapes and sizes. But for all the all-knowing data, smart algorithms and astounding creativity applied to a modern brand loyalty programme, it all comes down to the same ancestral truth.
Look after your public, and they’ll look after you.
As for how you go about marrying this ancient wisdom to the endless possibilities of modern rewards programmes and loyalty programmes, that’s what this blog is for. Step this way.
How customer rewards programmes work
Modern customer rewards programmes work in all kinds of ways, but they all come down to this: knowing your customer and giving them something that matters to them. We covered a lot of this in our blog about how to create emotional loyalty whilst engaging with customers but the below infographic shows some of the key elements involved.
From cigarette cards to collector schemes to stamps on a coffee shop card, business has been adding value to attract the public’s custom for centuries. We can reward repeat purchase, a one-off buy, referring a friend, or these days just posting about a brand on social media. It all works to the same basic principle: to add value is a better long-term bet than to discount. One is a race to the bottom, the other a generator of emotion. People remember rewards, even talk and post about them. The same can’t be said of a price cut.
The classic modern loyalty scheme has data at its centre. Learning about each customer’s profile pays dividends that can more than pay for the cost of running them. A retailer scheme like those at Walmart, Champion or Tesco, which give immediate discounts in return for scanning a card or an app, allows the retailer to know exactly what appeals, to exactly which demographic – with huge upsides for both the business and its public.
Loyalty programmes are now a gigantic sector on their own, with rewards – in one form or another – at the heart. Despite the name, these programmes don’t actually reward loyalty, just repeat visits. It’s entirely possible to be promiscuous with your custom, and carry cards or apps that suggest you’re ‘loyal’ to several competing stores or bands at the same time. Other schemes may reward the appearance of loyalty when in reality it’s just geography they’re rewarding – you’re my closest store, or have the best free parking on my way home from work, so I’d shop here anyway!
As long as we keep buying more than we would otherwise, and ideally offering data about our purchase or behaviour patterns, rewards programmes and loyalty programmes still leave both brand and consumer on the winning side.
Types of customer rewards programme
Gift with purchase
The simplest reward type is gift with purchase, where the added value is stuck on for all to see. That’s usually less a programme than a promotion, but in certain sectors – magazines, day – it can be a genuine driver of repeat purchase, especially if the rewards form a series. Classic examples of loyalty-driving GWPs were collectable cards, coins or stickers, making up a set such as your country’s World Cup squad.
One up from there in terms of complication is the free reward you have to claim, those days mostly online or via an app.
It’s not a great leap from there to offering a free experience with every purchase. Since you can’t strap a free hotel stay to box of cereal, there’s no alternative but to add a some kind of redemption journey. Adding the redemption element means you can offer a far higher value reward. That’s what TLC specialises in – a high-value reward that’s guaranteed for EVERYONE who chooses to accept it. How we mix the art of the offer with the science of the numbers comes down to well-established networks of reward partners across the globe, but. That’s for another blog post!
Paid loyalty programmes
Other popular types of customer rewards programmes are paid loyalty programmes, where you pay a regular fee for perks such as free shipping (e.g. Amazon Prime) or subscriber-only offers. The idea is that the outlay more than pays for itself over time, as long as you keep using the service – so such schemes are trusted ways of turning casual shoppers into regular visitors.
Points based rewards programmes
Points-based rewards programmes are popular with retailers, as shoppers can see their tally rise and redeem in-store or save for a big event like Christmas.
Tiered rewards programmes
Another popular type of loyalty programme is the tiered rewards programme such as the British Airways Executive Club, with its Blue, Silver and Gold membership levels. Most airline loyalty programmes operate in a similar way.
Value-based loyalty programme
Another increasingly popular type of loyalty programme is the values-based loyalty programme, where a brand or business will make donations on their consumers’ behalf to a cause that resonates with the target market. What works especially well here is dialogue: survey your customers on which causes they’d like to support, and offer a choice.
When to add a loyalty program to your business
As the old Chinese proverb says about planting trees, the best time to start was 20 years ago. If you didn’t quite manage that, then ‘right now’ makes for a pretty good second-best bet.
The same applies to loyalty and rewards programs. The simple answer here is ‘as soon as possible.’ Your competitors are doing it, and your public is invested in schemes from any number of brands and businesses.
Get it right, and you build your brand at the same time as offering added value. That makes it an amazingly cost-effective win-win.
We’ve prepared some more blog posts that go into loyalty programmes across these sectors
11 inspiring customer loyalty programmes with consumer insights
Delta Airlines SkyMiles, USA
Most airlines offer their version of miles, but Delta’s Skymiles was one of the first. It’s a shining example of a loyalty program that’s well structured, easy to understand, quick to earn and easy to spend points. VIP-level Medallion Status members have it especially good, with free hold luggage and other perks thrown in. No wonder it’s such a well-loved carrier.
Starbucks, Global
A daily coffee habit is pretty much the ultimate repeat purchase, and the Starbucks Rewards program is the gold standard for rewarding loyalty.
Each cup gets the customer closer to unlocking access to exclusive benefits such as ordering ahead, exclusive treats, free coffee, wifi access and birthday surprises. Simple, but disarmingly effective – and very, very well run.
Amazon Prime, Global
With over 200 million subscribers, Amazon has the most successful loyalty program in the world – and it’s one people are happy to pay for.
Prime leads on customer convenience via fast deliveries, easy returns and regular perks. It also allows access to Prime Video, special supplier discounts and more. As long as it keeps ahead of the pack and offers palpable value, this is one loyalty programme that looks set to just keep on growing.
BodyShop Love Your Body, Global
The long-running Love Your Body loyalty programme, offers members points for every purchase made. Other perks – like a birthday discount, exclusive special offers, new product sneak peeks, and personalised skincare consultations and workshops – are offered regularly, and communication kept up well. Membership also aligns members with the BodyShop values, so it’s a brand-building scheme as well.
Pets At Home, UK
This long-established loyalty programme gets a paws-up from almost everyone – the excellent Pets At Home VIP Club (no prizes for guessing what the P stands for). That’s no surprise given the emotional connection involved. People tend to be very forthcoming when it comes to their precious pets, which is a gift to those running the scheme.
They’re also extremely good at regular communications and targeted offers, incentivised via discounts that kick in when you scan your card in store or link it online – meaning they know exactly what smaller family members you’re buying for, and how old they are and what they like to eat, wear or play with. Add in a charity donation with each purchase where members can choose the destination, and it adds up to a win-woof-win.
IHG One Rewards, Global
The International Hotel Group’s long-standing loyalty programme helps members feel at home all over the world. With special member rates and promotions, fast-growing points, different tiers and a choice of lifestyle rewards beyond just hotel stays, it’s a great way to keep business travellers loyal to the brand – and even extend the relationship to family vacations.
ABSA Student Silver program, South Africa
It’s always hard to generate an emotional connection with a financial service. Research showed that what was really on student minds was not their bank but budget-stretching things like getting home for the holidays, free internet, leisure and food. Accordingly, the Student Silver campaign offers 48 rewards each year, ensuring an ongoing connection to their bank.
Carrefour + Quotidien, France
Since the cost of living crisis started to bite, several French supermarkets have been experimenting with a ‘subscription discount’ loyalty programme of the kind once popular in certain electrical retailers in the US and beyond. The Carrefour scheme offers 15% maximum reduction on 7,000 Carrefour brands for €5.99 per month – great value if you’re feeding a family, as the benefits keep rising the more you spend. You can add fresh produce for a little more per month, making it nicely tailorable. It could catch on…
Alibaba 88VIP, China
In China, number 8 is believed to be the luckiest number, as it sounds like the Mandarin character for “rich”. That makes 88 a great name for the top tier of online sales platform Alibaba’s loyalty programme. The scheme offers exclusive benefits to members across the Alibaba ecosystem covering commerce, entertainment and local services. Like Amazon Prime, it works on a paid subscription, with the added feature of pricing that rewards the most active users
The program incentivizes customers to review and shop across a product categories, and interact with other Alibaba customers in Q&As, enhancing trust and rewarding loyalty on an emotional as well as a financial level. It’s an excellent programme.
Uber Rewards, US/Global
The ride-sharing world has always worked on points, in its way, and now Uber has added a tiered loyalty program to the mix. Uber Rewards members earn points with both rides and UberEats orders. The points add up to Uber Cash Rewards and perks such as priority pickup and flexible cancellation.
More points unlock higher membership levels, with more rewards and benefits. It’s the classic win-win.
Hungry Jack’s UNO, Australasia
We’ll end with an example of a scheme that pops up from time to time as opposed to being ‘always on’.
‘UNO™ at Hungry Jack’s’ was featured across the brand’s 440 restaurants, rewarding customers with an exciting prize pool of quality brands that would resonate across a broad demographic. Having such an established gaming property on hand to be rolled out annually is a huge asset for the brand, and a deliverer of ongoing brand preference, word-of-mouth and genuine, lasting loyalty.
Conclusion
If you’d like to discuss, suggest others or interact in any way, we’re always here – and can usually guarantee that at least one of our global offices will be open to deal with your enquiry.
Loyalty rewards programs FAQ
Q – What attributes do successful rewards programs share?
A – The best customer rewards programmes tend to put the customer first – in a way that reflects positively on the brand making the offer. That takes experience – both of your customers and of human psychology. TLC, for example, has over two decades of real-world data on what gets the best take-up among which demographics. We’d be delighted to share it with you on a call, but in the meantime, here is how our Agency Director of TLC Marketing Africa, Preneshen Munian, put it in a recent Johannesburg marketing conference: “Ask not what your customers can do for you. Ask what you can do for your customers”.
As one of his Golden Rules of Loyalty, it takes some beating. Having established that basic rule, he went on outline how it needs to work in practice: “To avoid a price race to the bottom of the barrel, loyalty programs need advanced segmentation, highly relevant targeting and an enriched customer experience to set them apart”. It’s impossible to take issue with any of that.
Q – Do people respond to loyalty programs the same all over the world?
A – While people are basically people, and we all like to be seen and appreciated, our responses differ quite widely across cultures. In France, Spain, Belgium and the Netherlands, only around a third of people claim to be swayed in their purchase decisions by rewards schemes. China, India and the UAE repot similar take-up. Australia and Japan put it around double that, while in South Africa, Brazil, Germany, the US and the UK it hovers at just under half. That’s still a LOT of people in each territory who place rewards high on their list of personal persuaders!
Q – Are rewards programs worth it?
A – Considering how over 70% of shoppers across the world say that customer loyalty programmes are a core aspect of their relationship with a brand, we’d say that was a resounding yes! Even more important to us at TLC is the fact that over a quarter of customers say they tend to spend more when they feel an emotional connection to the rewards on offer.
Q – Who has the best loyalty rewards program?
A – That all depends where in the world you’re starting from. Some are international, such as those run by airlines, hotel chains or fashion brands, while most are market-specific. Each country has its own star schemes, and it often comes down to how long they’ve been running and how involved people are with the sector.
It’s worth quoting our Loyalty expert Preneshen again who emphasizes that brands need to ensure that their loyalty scheme suits their clients’ needs. He puts it like this: “it’s less about the customer being loyal to you, than you being loyal to the customer”.
Q – How can I improve my loyalty programs?
A – An easy answer is to make your rewards social-media friendly rather than just offering savings on things they would have bought anyway. TLC;’s (Pii™) data reinforces this: in a recent survey of participants in one of our schemes, a whopping 89% of respondents said they would be more likely to share an experience on social media if it came from a brand. When last did you see an influencer – unpaid – sharing a social media post about the cash they’d saved on a discount offer?
Global experience over decades has shown time and again that delivering experiences as rewards retains customers, as they truly feel the additional value that a brand has taken the trouble to offer them.
