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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McDonald’s "Pay With Lovin’" Campaign: A Cautionary Tale of Good PR Gone Wrong

During this year’s Super Bowl, McDonald’s ran a very interesting commercial, not about a special new sandwich or other changes to the fast-food giant’s menu, but about how customers may be able to pay for the items on that menu. Dubbed “Pay With Lovin”, this new promotion allows select customers to pay for their order with kindness of some kind. As shown in the ad, you can make a call to a family member and tell them that you love them, give someone a compliment, or even do a little dance in exchange for your Big Mac and fries. The ad itself is actually very well done and touching, and the entire campaign is an interesting change from a company that is certainly not seen in a favorable light by many consumers (McDonald’s is always at or near the top of “Worst Fast-Food Restaurant” surveys and lists). In this article, we will take a look at why this new promotion from McDonald’s is a good move for the company and what we may be able to learn from this campaign.

The perception of McDonald's

When someone says “McDonald’s” to you, what do you immediately think of? If your answer is “cheap, low-quality food”, then you are not alone. Right or wrong, McDonald’s has long been known by many for inexpensive, mediocre food. The company’s decisions over the years, like their “value menu” of very low cost items, has certainly contributed to this perception. Today, restaurants like Chipotle and Panera continue to grow in popularity by offering customers quick service, but with better quality (and more expensive) meal options than the traditional fast-food restaurants offer. These restaurants, often known as “Fast-Casual”, have taken business away from McDonalds while further cementing their place as the go-to location for that aforementioned “cheap food.” So how does McDonald’s start to move away from this negative perception of their brand – they begin by changing the conversation.

Changing the conversation

McDonald’s latest promotion has nothing to do with their food or their prices, the two things for which they are most commonly known in negative light. This “Pay With Lovin” campaign is all about fun and good feelings. It is part contest, part giveaway, and part customer appreciation event all rolled into one.  The campaign itself is a very interesting experiment. Between February 2nd and the 14th, each participating McDonald’s location will have 100 total “prizes”, with a select number of customers selected by random each day. Those random customers will be given the opportunity to “Pay With Lovin” and use a fun expression of kindness instead of money when they are ordering their meal. There is excitement to this promotion as customers wonder if they will be chosen for this “Pay With Lovin” opportunity. It also provides McDonalds with a great way to connect with those customers in a way that they have never done before. In an article on Inc.com, McDonald’s Chief Marketing officer, Deborah Wahl, says, “We’re on a journey of transformation and a key part of that journey is how we engage with our customers.” McDonalds realizes that to change the negative perception of their brand, they need to change the conversation, and they are starting that change by interacting with their customers in a fun way that is designed to make people feel good.

People are talking

Another great aspect of this promotion is that people are talking about McDonalds – and it is not in a negative way! The company has given customers something to get excited about and something to share with others. That moment of delight when a customer is informed that they can “Pay With Lovin”, and the fun that happens from that event, is something people can enjoy and then share on social media by telling others about the experience. This will further spread the good cheer and the positive vibes for a brand that has seen far too few of those in recent years. The fact that people are being nice and kind as part of this campaign just adds to the positive vibes of the promotion, and while I am sure there will be the occasional sourpuss who will refuse to engage in this idea (you can’t please everyone, no matter how hard you try), the majority of customers who are told their order is free if they simply spread some love will be happy to do so!

What’s next?

So changing the conversation is a great start for McDonalds, but what comes next? This promotion, as innovative as it is, is a short term initiative. Once this campaign is over, McDonald’s will be back to being known as that cheap, low quality fast food restaurant unless they make some additional moves in their business. If they want to truly change the conversation in the long term, they need to build on what they have started here – but at least they have found a place to start.

What can we learn?

So what marketing lessons can we take away from McDonald’s “Pay With Lovin” campaign?

1. If people are speaking negatively about your brand, finding a way to change the conversation is a good start to changing perception.
2. If you want to change the conversation, start with your existing customers and change how they talk and think about your company.
3. Engaging customers in ways that are fun and unique will get people excited and talking, which encourages them to tell others about their experience. The more people they tell, the quicker the conversation around your brand moves towards the positive.
4. A campaign like this is a great start, but if you have larger problems, you still need to fix those issues or risk falling back exactly to where you were before your campaign began.

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