Going the Distance: Four Ways to Build a Better Customer Loyalty Program for Your Brand

It’s easy enough for a customer to join your loyalty program, especially when you’re offering an incentive such as discounts. All your customer has to do is give out some basic information, and voila! They’re in the fold, a brand new loyalty member with your company. From there, it’s happily ever after. You offer the perks; they stand solidly by you, bringing you their continued business. Simple. Or is it? In reality, just how many of those customers are act ively participating in your loyalty program? Do you know? Sure, loyalty program memberships are on the rise according to market research company eMarketer, having jumped 25 percent in the space of just two years. However, that figure may be a bit misleading. The truth is that, while loyalty program sign-ups may be more numerous, active participation in such programs is actually in decline. At the time of the study, the average US household had memberships in 29 loyalty programs; yet consumers were only active in 12 of those. That’s just 41 percent. And even that meager figure represents a drop of 2 percentage points per year over each of the preceding four years, according to a study by loyalty-marketing research company COLLOQUY.

When discounts just aren’t enough

So what’s a brand to do? How can you make your loyalty program worth your customer’s while—as well as your own? After all, gaining a new loyalty member doesn’t mean much if your customer isn’t actively participating in your program. Consider this: Does your customer loyalty program offer members anything different from what your competitors are offering? Chances are your program includes discounts. That’s a given. And what customer doesn’t appreciate a good discount? But when every other company out there is providing this staple benefit in comparable amounts, it becomes less and less likely that customers will remain loyal to any one particular brand. Frankly, it’s all too easy for customers to get lost in a sea of loyalty member discounts. They’re everywhere. In fact, just under half of internet users perceive that all rewards programs are alike, according to a 2015 eMarketer survey. The key to success, then, is to differentiate your business from the crowd. If you can offer your customers something unique and valuable beyond the usual discount, chances are they’ll be more likely to stick with your brand. Here’s some inspiration from companies who get it.

Virgin: Reward more purchases with more benefits.

That’s not to say you need to get rid of discounts entirely. In fact, nothing could be further from the truth. Customers still love a good discount. The goal is to be creative in terms of the loyalty perks you offer. Take the Virgin Atlantic Flying Club, for example. As part of its loyalty program, the airline allows members to earn miles and tier points. Members are inducted at the Club Red tier, from which they can move up to Club Silver and then Club Gold. Here, it’s not just a discount. It’s status. And people respond to feeling important, elite. Still, even where the rewards themselves are concerned, Virgin is motivating loyalty customers with some pretty attractive offers. At the Club Red tier, members earn flight miles and receive discounts on rental cars, airport parking, hotels and holiday flights. But as members rise in tiers, they get even more. At the Club Silver tier, members earn 50 percent more points on flights, access to expedited check-in, and priority standby seating. And once they reach the top, Club Gold members receive double miles, priority boarding and access to exclusive clubhouses where they can get a drink or a massage before their flight. Now that’s some serious incentive to keep coming back for more. Discounts are still part of the equation – but they are designed with innovation and personal value in mind, elevating them to more than just savings.

Amazon Prime: Pay upfront and become a VIP.

What if your customers only had to pay a one-time upfront fee to get a year’s worth of substantial benefits? It may not sound like the smartest business idea at first glance. But take a closer look. Amazon Prime users pay a nominal $99 a year to gain free, two-day shipping on millions of products with no minimum purchase. And that’s just one benefit of going Prime. It’s true that Amazon loses $1-2 billion a year on Prime. This comes as no surprise given the incredible value the program offers. But get this: Amazon makes up for its losses in markedly higher transaction frequency. Specifically, Prime members spend an average of $1,500 a year on Amazon.com, compared with $625 spent by non-Prime users, a ccording to a 2015 report from Consumer Intelligence Research Partners.

Patagonia: Cater to customer values.

Sometimes, the draw for consumers isn’t saving money or getting a great deal. The eco-friendly outdoor clothing company Patagonia figured this out back in 2011, when it partnered with eBay to launch its Common Threads Initiative: a program that allows customers to resell their used Patagonia clothing via the company’s website. Why is this program important to customers? And how does it benefit Patagonia? The company’s brand embraces environmental and social responsibility, so it was only fitting that they create a platform for essentially recycling old clothing rather than merely throwing it away. The Common Threads Initiative helps Patagonia build a memorable brand and fierce loyalty by offering its customers a cause that aligns with deep personal values. OK, so their customers get to make a little money, too. Everybody wins.

American Airlines: Gamify your loyalty program.

If you’re going to offer your customers a loyalty program, why not make it f un? After all, engagement is key to building a strong relationship with your customer. And what better way to achieve that goal than making a game of it. American Airlines had this very thing in mind when it created its AAdvantage Passport Challenge following its merger with USAirways. The goal: find a new way to engage customers as big changes were underway. Using a custom Facebook application, American Airlines created a virtual passport to increase brand awareness while offering members a chance to earn bonus points. Customers earned these rewards through a variety of game-like activities, from answering trivia questions to tracking travel through a personalized dashboard. In the end, participants earned more than 70 percent more stamps than expected – and the airline saw a ROI of more than 500 percent. The takeaway: people like games.

Stand out from the crowd.

Your approach to your customer loyalty program should align with your overall marketing approach. Effective branding is about standing out, not blending it. Being memorable is key. To this end, keep in mind that loyalty programs are no longer a novelty. That means that yesterday’s strategies won’t work moving forward, so look for ways to rise above the noise, setting yourself apart from the cloying drone of countless other cookie-cutter programs.

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The New Rules of Customer Engagement

The rise of the culture of the Web has revolutionized the nature of how businesses and customers relate to each other. Whereas companies could once shape and direct the perception of their brand through carefully crafted ad campaigns, direct mail and press releases, today the flow of information runs fast and free, and customers now own the conversation. And because whoever owns the platform dictates the culture, the world is a more human, less institutional place to do business. Today’s customers want to feel good about the products they buy, where they came from and how they were made. Moreover, they want to like the company behind the product – that is, genuinely like it, not just press a Facebook button. We are entering an age of emotive economics. Corporations have been forced to adapt to this new, people-centric culture by connecting with customers on their own turf in more casual, conversational ways. There’s little room or respect for old-school corporatism’s pomp and protocol. And those businesses that cling to traditional behaviors in the online community will earn its scorn very quickly. Those companies that have embraced this new landscape and its risks have enjoyed great reward. For this reason, the human face, rather than steal and glass, has become the façade of big business. Yet with style must also come substance. It is no longer acceptable to be about profit alone. Companies are expected to contribute to the world in ways that make their customers’ lives better. Consumers are demanding that business be done on their terms. It should come as no surprise, then, that human values – transparency, respect, conscientiousness, kindness, trust, generosity and the like – are the keys to engaging with customers in this brave new world of business. So how can you use this new dynamic to your advantage to grow your business? You must embrace the new rules of engagement, understanding that when you put people first, profit will follow:

1. Don’t treat customers like they’re stupid.

When Netflix bungled its attempt to change its pricing structure last year, the backlash in the online community was severe, with many customers threatening to cancel their accounts immediately. It was clear that customers viewed Netflix as a value-priced alternative to more expensive traditional paid media channels, and therefore many felt betrayed by the company’s sudden doubling of their fees. While the price increase itself wasn’t really so unjustifiable, what made it unpalatable for customers was the company’s lack of transparency in explaining the business drivers behind the rate hike – the rising operational costs of maintaining a physical DVD business and the growing licensing fees for content streaming. Instead, Netflix spun the move as giving customers a “choice,” offering the option to subscribe to a DVD-only service at its lowest price ever. Here's an excerpt from their ill-advised news release: To his credit, CEO Reed Hastings acknowledged the poor handling and chalked up the misstep to “overconfidence,” which still sounds like PR spin, but hey, we’re making progress. The lesson? If a change in product or policy may have negative consequences for your customers – even if only in perception – acknowledge them, express empathy over the inconvenience or added cost, explain the reasons if possible and then point out the benefits or offer alternative options. People understand that businesses must evolve and that profit is still part of the equation. Don’t assume that your customers are beyond reason or treat them like they’re too stupid to detect what’s really going on.

2. Over-serve your customers.

It’s always good business to go the extra mile for customers, but never more so than when trying to recover from a mistake. How you handle disappointment is what determines whether your customers write you off and tell everyone about it or trust you more and spread the good word about you. When Google decided to phase out Wave due to poor user adoption rates, they didn’t just shutter the windows and bury the technology as if it never existed. Instead, they gave users months to move their data off the service, converted Wave into an open-source project and gave the Wave community the tools to get involved:

3. Be humble and listen to your customers.

Building on the success of its breakthrough app Wunderlist, Berlin-based software firm 6Wunderkinder recently launched Wunderkit, a project collaboration and management tool designed around the social connections of today’s work environment. Wunderkit was made available in a “freemium” model, offering standard features to all users for free with additional functionality available for a small fee to power users. As the company analyzed feedback from its beta release of Wunderkit, they realized the community’s dissatisfaction with project collaboration between users – one of the platform’s central features – only being available to premium users. What follows is a fantastic example of how to demonstrate that you’ve heard your customers loud and clear, understand their feelings and are acting to resolve the issue:

The customer is king, and the king is here to stay.

Never underestimate the commitment required to engage with customers effectively in today’s marketplace. Human relationships are not managed well with rigid rules and policies but instead must be governed by human values like compromise, sensitivity and transparency. It takes much more than a Twitter account and Facebook page to win the hearts of customers. You must develop a culture that is focused on and driven by the customer through and through. Be purposeful in growing such a culture. Establish your own rules of engagement. Make sure every employee is encouraged to embrace and exhibit those values. Empower them to do whatever it takes to take care of your customers. The journey may be a bit rocky at times, but if you walk the line faithfully, you’ll earn something from your customers that can never bought with advertising dollars – trust, respect and even passion for your brand and what it stands for.

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Mistrustcasting: A Tale of Two Brands

One day recently, a high school math class decided to conduct an experiment to ascertain whether Oreo’s Double Stuf cookies actually contain twice the “stuf” – crème filling – as implied by the treat’s name.

The class’s work yielded the faintly damning discovery that the Double Stuf contain only 1.86 more filling than the original incarnation – a shortage of 7 percent. Hardly headline-making news, right? After all, most folks would agree that it’s close enough and simply applaud the teacher’s creative, hand-on approach to this classroom exercise.

And that’s where Oreo should have left it, but they chose not to. Instead, when contacted about the matter by Business Insider, the company issued a formal statement claiming the math class had reached an inaccurate total and that their Double Stuf recipe does indeed include fully twice the amount of filling. So Business Insider put together its own experiment, which came down in favor of the math class.

Oreo’s response made this story bigger than it needed to be, and as a result, the brand’s overall reputation took a hit. After all, if they felt the need to lie about 7 percent of their filling, what else might they be hiding? The cookie controversy served up good fodder for a few days of news bites and morning drive-time humor, but given the public’s lasting love for Oreo, the Double Stuf kerfuffle blew over in short order.

More than filler

The Double Stuf debacle is an entertaining – if relatively innocuous – example of just how easily the integrity of even the most well-known brands can be called into question. That’s why the task of building and maintaining trust in your brand is such serious business. For more evidence, let’s take a closer look at BP and SC Johnson, two huge corporations with very different approaches to brand integrity – and very different reputations.

Both companies deal in products under close scrutiny in today’s increasingly green-minded business and marketing environments. BP is the world’s sixth largest petroleum fuel interest, and SC Johnson is one of the world’s largest producers of household cleaners.

If you look at their advertising and PR, both companies use strikingly similar language, which is logical, given that each company has a vested interest in portraying itself as environmentally responsible and forward-thinking.

But the court of public opinion tells a very different story, making it clear that their efforts to define themselves are yielding drastically different results.

BP’s big problem

More than three years after the disastrous oil spill in the Gulf of Mexico, BP is still dealing with the aftermath on many fronts. In addition to the illegal practices which led to the spill, the company has been found guilty of felony for lying in its response to the disaster and has paid out more than $42 billion in clean-up costs, settlements and fines.

BP was found to have engaged in multiple deceptions before, during and after the spill. The company repeatedly refused to disclose accurate or timely information for months after the disaster, which resulted in a far greater impact on the environment than would have happened if the company would have been immediately forthcoming.

A visit to BP’s website shows that the spill still dominates much of the company’s PR efforts. That’s as it should be.

But even as BP touts its gulf clean-up efforts in carefully crafted feature articles, it releases defensive statements whenever its efforts and motives are called into question. For example, in a statement dated August 28, BP responds to recent allegations by the state of Louisiana claiming that BP has not adequately addressed the clean up. Here’s the money quote that leads the statement: "Any suggestion that BP has failed to address the clean up of the Louisiana coastline is both false and irresponsible.”

No acknowledgement of BP’s responsibility, no conciliatory tone indicating that BP is committed to repairing the damage it caused, no apology for all of the suffering. Just a hardline defense, with copy that reads like it was drafted by a stereotypical Hollywood lawyer. This antagonistic tone is at odds with the shiny, happy stories that appear throughout the special section of its site dedicated to the Gulf of Mexico restoration.

This stark discrepancy between rosy PR fluff pieces and sharp legal statements defines the very heart of BP’s brand integrity issue. This is a company whose practices are squarely at odds with the public image it attempts to project.

Start with the logo

Petroleum is hardly a “clean” business; the best any oil company can offer is diligent safety practices and commitment to mitigating its environmental impact.

When BP debuted its green sun logo in 2001, the flowery “helios” mark, it was a clear effort to position the brand as somehow “cleaner” and more environmentally conscious than its competitors. The green sun implies a very different focus than, say, an oil derrick looming over a seascape. Yet in the decade plus since its logo shift, BP has actually decreased its efforts in the arena of solar power, finally announcing plans to shutter them altogether in 2011.

The fact remains that BP is first and foremost an oil concern, with all the environmental risks that such companies encounter. Until BP’s research spending on alternative fuels exceeds the 50 percent mark, that logo is a blatant lie.

Follow the money

Many brands seeking to build trust with the public establish charitable foundations or make contributions to causes. With its image in desperate need of a reboot, BP has made significant donations to gulf cleanup efforts and regional charities that focus on hunger and housing. These are all high-profile, press-release-ready efforts.

It’s certainly better than nothing, and BP does seem to grasp the idea that it needs to spend big to show its concern.

But you won’t find much in the way of marine environmental research on BP’s books or any slowdown whatsoever in the company’s high-risk deepwater drilling projects. No, right along with its more environmentally friendly efforts like wind and biofuels, BP is still using the lion’s share of its research dollars to pursue the same kind of risky drilling that damaged the Gulf of Mexico so dramatically.

As John Bell writes in Forbes Magazine, “BP’s talk about caring for the environment was for naught, as its actions failed to match its message.” Small wonder that a site like boycottbp.com is still growing strong. Or that the brand ranked at number seven in MarketWatch’s 2013 poll of companies with the worst reputations.

SC Johnson’s evolving transparency

While SC Johnson certainly faces environmental concerns, it does have an inherent advantage over a company like BP. After all, a Gulf-scale tragedy is highly unlikely in the arena of household cleaners.

But this field carries its own set of risks. Many of SC Johnson’s products – insect repellents, cleaners and baby shampoo, to name a few – are used by families on a daily basis. And in the last decade, concerns have increased about how these types of products impact not only the health of customers but the greater environment as a whole.

In large part, SC Johnson has responded to such concerns with a careful trust-building approach that includes admission of mistakes and a proactive willingness to change corporate policy and behavior. While there have been a few bumps in the road, even their response to setbacks has been characterized by a tone that emphasizes responsibility over defensiveness.

Open policies

One major area of concern with consumers about household products is the ingredients. Many cleaners and air fresheners tout a natural, organic identity while their labels contain a long list of unpronounceable components unfamiliar to anyone lacking a degree in chemical engineering. In an effort to counteract this, SC Johnson launched its "What’s Inside SC Johnson" website in early 2009, where it has published complete ingredients lists for almost all of its products.

However, the company’s track record is not perfect. Its “Greenlist” label, featured on Windex and other products SC Johnson claimed passed its highest environmental standards, was the subject of several consumer-advocate lawsuits. Because the label closely resembled other third-party designations for independently vetted products, the suits rightly called into question the legitimacy of SC Johnson practice of promoting its own – potentially misleading – self-proclaimed green standard.

Response to criticism

One of the ways in which SC Johnson has been most successful in upholding the integrity of its brand is in its response to controversy. The company trades heavily on its identity as a family-owned business, something that can be difficult to buy given its global scope and multi-billion-dollar annual sales numbers. But when issues arise, it is not a corporate lawyer that does the talking for SC Johnson; it’s Fisk Johnson, CEO and true blood family representative.

In the case of the Greenlist issue, Johnson reiterated the company’s commitment to the environment, but admitted its misstep. “When you're out in front of an issue like this, it means that you're not always going to get it completely right, as was the case with this particular issue," he said.

SC Johnson has also demonstrated a willingness to change its formulas and policies ahead of any legal mandate – and also ahead of many competitors. The company has reduced its greenhouse gas (GHG) emissions by 42 percent since 2000, and it has installed two wind turbines at its largest global manufacturing facility, enabling that facility to produce most of its electrical energy onsite.

Integrity gets results

All of this earnest effort is certainly paying off for SC Johnson. In 2012, the United Nations Foundation for Social Change honored the company as a global Leader of Change, and in 2013, the company received an EPA Climate Leadership Award for Aggressive Goal Setting.

SC Johnson’s mix of staying true to its family roots, increasing transparency with customers and demonstrating a willingness to change combines to reinforce its reputation as a brand that operates with integrity. While the company isn’t perfect, its actions maintain consistency with its image. By any measure of consumer confidence, that’s a powerful – and to borrow from BP’s ill-used lexicon – sustainable strategy.

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