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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Taming the Word of Mouth Monster

The customer's word is king.

In today’s culture of the Web, nothing holds greater sway than word of mouth. If want to grow your business, you need the help of your customers and fans.

Let’s look at an example:

The first clip is from SouthEnd Home Improvement's website; the second is a review that one of their customers posted on their Google Places page.

Both essentially say the same thing, speaking to the superior quality of the workmanship and customer service provided by the company. Yet Josh's review has probably motivated far more prospective clients to pick up the phone than the company's own site.

Why is this the case? After all, we don’t know Josh, and he hasn’t done anything to earn our trust.

However, we trust him implicitly because he is not affiliated with the company and thus (at least theoretically) not motivated by a sales agenda or self-interest.

Is it fair? Maybe not. But if you're going to compete successfully in today's consumer-driven marketplace, that's the reality you must live in. In this post-mass media era, you simply cannot talk frequently and loudly enough about your own products and services to muscle your way to the top.

Old marketing has been dethroned.

Marketing was a much simpler proposition back in the days when communication flowed in one direction from companies to customers.

You could buy exposure in the print, radio and TV media outlets of your choosing, and you could control the message down to the last detail. Your investment could be mapped out neatly on schedules and calendars, and you had access to all kinds of reassuring data like reach, frequency and cost per impression. Sign a contract, write a check, hand over your perfectly polished advertisements and wait for the phone to ring.

Traditional advertising is still there for the taking. The problem is that your customers aren’t buying into it anymore. There's simply too much information available to them from too many different channels. All the beautifully crafted ads your budget can buy can't save you if your Google Places page is littered with scathing reviews from dissatisfied customers.

Today's marketplace is ruled by the customer.

Companies today have inherited the burden of mistrust created by generations of brands before them that thrived on the shallow messages and misleading claims of traditional advertising.

Today's consumers view themselves as a band of brothers united behind the cause of holding companies accountable for providing quality products and services and making good on their promises. It's an "us against them" mentality, and you're on the wrong side of the fight until you prove otherwise.

You can't hide the truth from your customers any longer. A disgruntled customer 10 years ago was a mild annoyance. Customer service people could silence the complainer and wash their hands of the matter. It required a screw-up of much larger proportions for a company's bad practices to come to light in the traditional media.

However, one unhappy customer who voices their discontent on Facebook or Twitter has the power to cost you hundreds of potential sales. If something goes wrong and you're not pulling out all the stops to make things right, you're taking a big gamble with your brand's reputation.

In a consumer-driven marketplace, no brand is untouchable. No company is too big to be brought down by their customer.

Don't slay the dragon – make it your friend.

Word of mouth marketing is a fearful proposition for most businesses because it doesn't conform neatly to the metrics and regulations that drive the corporate world.

It's a lot like lightning in that there's no way to predict when and where it might strike. As such it's nearly impossible to capture on record and quantify. However, when it does touch down, there's no denying the power of it's impact.

So how do you harness this inherently anti-corporate force and put it to work for you in the real day-in, day-out, nitty-gritty world of business?

Treat every customer like Oprah.

While word of mouth is not a new concept by any stretch of the imagination, the advent of the digital age and social media have magnified its importance by putting a megaphone in the hands of every customer.

As a result, the customer service landscape is littered with potential PR landmines because you can't always tell who holds the biggest megaphone. Aggravate the wrong customer, and your reputation is toast.

Sure you can tell which members of your online community have the most Facebook friends or Twitter followers or blog subscribers. But things get messy when you encounter these people in the real world. They don't have their subscriber count tattooed on their forehead, and they don't introduce themselves with their Twitter handle.

So what do you do? You must treat every customer as though they have an Oprah-like ability to exert their influence.

Tread carefully, and make sure you demonstrate to each and every customer that you respect them and that their opinions matter. Maybe 99 out of 100 of them won't talk about you anyway, but you had better make sure that the one who speaks up is a happy camper.

Underpromise and overdeliver.

When you are in front of a prospect and you have the opportunity to make a sale, it's hard to force yourself to leave any cards on the table. You want to talk up every feature and every benefit in the most superlative degree.

However, if that's what it takes to close the deal, you'd better be prepared not only to make good on every claim but also to go above and beyond the call of duty.

Your sales pitch is your customer's baseline expectation. If you do only what you say, they'll thank you for a job well done and move on.

But if you go the extra mile and do more than promised, then you'll get them talking.

Never make a sale at the cost of your reputation.

You want to hear the cash register ring as much and as often as possible. However, selling your products to a customer when you know they're not actually a good fit for that person's specific needs is like playing Russian roulette.

If the product isn't really the right solution, your customer is going to be unhappy, and they're going to point the finger at you. They'll either assume that your product is subpar or, far worse, that your company is dishonest in its claims. That sale will end up costing your company and your brand's reputation dearly.

Make every impression count.

Generally speaking, your customers have short-term memories. Your relationship with them is only as good as your last encounter, and your brand’s reputation lives and dies in the moment of interaction.

Every phone call, every email, every visit to your store counts. That means you had better make sure that every person your customers come into contact with understands the importance of every touchpoint.

Customers are allowed to have bad days, to be unpleasant, even to be irrational. Customer service people are not.

Be remarkable – literally.

Your customers are not professional spokespeople. Promoting your company is not anywhere near the top of their agenda.

To get them talking about you, you must overcome the inertia of their natural tendency to talk about pretty much anything other than your company.

How can you do that? You must surprise and delight them. You must offer them something that's truly new, innovative and exciting. Your products or services must make their lives easier or better in ways that are meaningful and significant.

If you want buzz around your restaurant, you have to make it buzzworthy. Everything from the food to the service to the ambiance must offer something your customers can't get anywhere else in town.

Reinvent the wheel if you have to. When your customers find something so great that it ignites their passion, they won’t be able to keep it to themselves.

Feed them a steady diet of good content.

Your customers don't go through their lives talking up the products and services they use like they just stepped out of a commercial from the 1950s.

However, everyone loves a hot tip. Mary who enjoys working in her yard doesn't call up her girlfriend to have a heart-to-heart conversation about fertilizer. However, if she finds a great video on the Scotts website about how to keep her lawn lush and green all summer long, you'd better believe she'll email a link to the other members of her gardening club and retweet it for the benefit of the gardening enthusiasts who follow her.

With the simple act of sharing the video link, Mary's given Scotts her word of mouth endorsement as a trusted expert.

Content marketing works. Period.

Get the conversation started.

You can't control what your customers say about you. In fact, you can't force them to say anything about you at all. What you can do, however, is get the conversation started.

Social media has removed the communication barriers between you and your customers. Use that to your advantage by identifying the motivations that drive your fans to act and giving them ways to carry your torch that cater to their passions and personalities.

Ask for their input. Recognize their good ideas. Provide good information and inspiration that they'll want to pass along to their own networks. Get creative and make it fun to be your fan so they'll invite others to join the party.

No one ever said it would be easy.

Building good word-of-mouth marketing around your brand is a slow, arduous climb of earning the trust of your customers and motivating them to act on your behalf.

There are no shortcuts here. If you want good word of mouth, you must earn it the old-fashioned way through hard work and honest communication. You must deliver top quality products and services that provide exceptional value. You must develop authentic relationships with your customers and be attentive and responsive to their needs. If something goes wrong, you must go above and beyond to set things right. In all things, demonstrating genuine respect for your customers is paramount.

However, all of this hard work will not go unrewarded. The payoff for your investment of time and resources is getting and keeping the best kind of customers — true, dedicated fans that become advocates for your brand.

Thanks to the power of social media, when your evangelists start talking, they’re not just going to tell one person, they’re going to broadcast it to everyone in their social circles on the Web – via Facebook, Twitter, LinkedIn, their blog, etc. As a result, you’ll not only gain exposure to potential new customers, you’ll have an inherent foundation of trust by association.

The ripple effect that occurs as the good word of mouth around your brand continues to spread virally from one person’s network to another will do far more to sustain and propel the growth of your business in today’s economy than any form of paid advertisement that your money could buy.

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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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