Rethinking Customer Loyalty

Rethinking Customer Loyalty
By Mark Cameron

Customer loyalty programs have long been a staple of enterprise marketing activities. The thinking has always been that rewarding repeat transactions—the behavior most desired by the brand running the program—will drive revenue and long term brand interactions. In other words, brand loyalty can be incentivized and measured. But there is a problem: one has to assume that repeated transactions are a proxy for the more emotional concepts of brand affinity and loyalty.


According to a recent study by Edgell Knowledge Network, retail respondents expect that, by 2015, loyalty program members will make up 58% of total revenues. At the same time those retailers also reported that customers who are members of their loyalty programs don’t seem to be any more brand loyal than those who aren’t. Additionally, 81% of those retail loyalty members don’t even know what their program benefits are, or how and when they will receive them.

So, clearly, there is a problem with the way that the majority of customer loyalty programs are designed. While they are effective at measuring the transactional patterns of a customer, they miss the mark when it comes to the other key moments that really define a loyal customer. Simply put, they only value transactions—not the entirety of the brand-customer relationship.

In today’s environment, a customer-centric strategy that rethinks the way that brands approach customer loyalty programs is becoming essential. This is especially true for those brands that are focused on retaining current customers and developing new revenue streams. One must first understand the customer relationship before new revenue streams can be identified.

So how does a business expand its loyalty program to measure and incentivize other forms of positive brand behaviors? To start with, it is important to map the customer’s pre and post purchase behaviors. This will help identify the moments of truth for your brand. They may be how the product is used, how often the customer engages with brand promotions, or if they are a brand promoter online. Each brand will have different “moments of truth” that define the customer relationship.

Fortunately many, if not all, of these activities happen online today. This means they can be identified and measured. The trick is to do it without stalking your customers. For many brands this may be the space where they can extract real value out of social media as it can be the glue that ties an expanded loyalty program together.

Of course, getting a loyalty program up and running that focuses on the real brand-customer relationship takes thinking, planning and a lot of work. But consumers are now looking for much more from the brand they interact with. My team and I hear this every day from both our clients and their customers.

The market is speaking, and the old style loyalty programs aren’t doing the job anymore. There is a significant competitive advantage to be gained by developing a program that looks beyond the plastic card and treats every customer as the person they are.

After all, who has room in their wallet for another useless piece of plastic?

Mark Cameron is CEO and lead strategist of social media conversion and commercialization agency Working Three. While his agency is based in Melbourne, Australia, he works for some of the world’s most innovative and forward-thinking brands. As a regular speaker and writer on social media and digital strategy, Mark stays focused on customers and outcomes, not the technology, leading to simple strategic conclusions.