Are You Earning Loyalty or Bribing?

A new study from Capgemini Consulting shows that the vast majority of companies have a somewhat of a warped view of loyalty. In a nutshell, most loyalty programs come down to “you spend money, we give you a perk.”

The research involved 160 companies in the retail, banking, consumer products, telecom, airlines, hotel and consumer electronics sectors. Here are some of the key findings:

89 percent of opinions expressed on social media about loyalty programs are negative, largely due to irrelevance, rigid program structure, poor user experience and poor customer service.

Translation: Nine out of 10 customers think loyalty programs suck. And the brands offering them aren’t much better.

97 percent of loyalty programs are based mostly on purchases. Only 16 percent reward customers for non-transactional activities (taking surveys, reviewing products, referring others).

Translation: Most companies don’t care what customers do or say. They only care about how much and how often customers buy.

Nine percent of loyalty programs are offered across all channels (store, online, social, etc.). 79 percent use mobile, but only 24 percent allow mobile redemption of rewards. 11 percent offer rewards based on an individual’s location or previous purchases.

Translation: Loyalty programs serve the needs of the company, not the specific preferences and behaviors of the customer.

The high-level takeaway from the Capgemini study is that “loyalty programs have not evolved with the digital age and are failing to engage consumers.”

To be clear, my reason for sharing this report and writing this post is not to discuss loyalty programs.

I want to address the bigger issue – how most companies define and try to earn loyalty.

Let’s start with the definition of loyalty that would apply to the relationship between brands and customers.

Synonyms include: allegiance, attachment, commitment, devotion and faithfulness.

The key word from that definition?

Feeling.

True loyalty has little to do with a purchase or transaction. A purchase is a happy by-product of someone’s strong feeling for a brand or company.

That strong feeling is developed by helping people. By solving problems, filling needs and making lives better. By delivering an exceptional experience and making it right if you don’t.

That kind of feeling that can’t be bought.

Sure, you can win a transaction by offering a discount or some other financial perk. But that transaction isn’t loyalty.

That’s bribery.

When customers are truly loyal, they won’t switch to a competitor to save a few bucks. They’ll pay a premium if necessary for your product, the experience of doing business with your company, and the results you deliver.

Wouldn’t you?

I find it more than a little crazy that rewards are slanted so heavily towards transactions when a survey, review or referral is capable of delivering so much more business value.

These kinds of interactions and engagement also happen to show far more loyalty than a simple transaction.

Customers are willing to take the time to do things that will help you improve your product, improve your marketing and bring you new customers, but only a purchase is recognized and rewarded by most companies.

As Kramer would say, it’s kooky talk.

The Capgemini report recommends that companies should create and reward customer engagement, use data to create relevant, customized experiences and rewards, and connect with customers across all channels and touch points throughout the customer journey.

Build a real relationship. Have a real conversation. Be curious. Listen and learn something about your customers besides their purchase history.

Be consistent. People won’t reward you with loyalty if you disappear for weeks or months at a time.

Use what you learn to provide your customers with products, services, offers or information that help to alleviate their specific pain points.

Get people to think of you and your company as real people they can trust, not salespeople waving coupons in their faces so they’ll buy something.

Loyalty is a two-way street. If you want customers to be loyal to you, you have to be loyal to them.

That’s how you build a strong feeling of allegiance, attachment, commitment, devotion and faithfulness – that close, emotional bond between brand and customer that can’t be easily broken.

That’s what true loyalty is all about.