How brands can turn rewards programs into long-term loyalty
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There are about 4 billion loyalty program memberships in the US, and they are all driven by some form of reward. Yes, even Starbucks’ recently announced metaverse loyalty program is expected to be about NFTs (a fancy way of saying a digital asset as a reward).
Entrepreneurs, take note: There will be significant changes over the next decade in consumer expectations of brands and banks. Between stocks, NFTs, and advancements in blockchain and crypto, “loyalty” is a category that will see significant progress in order to retain an enticed consumer. What is driving this change and what will move the needle for the consumer while providing a solid return on investment for the brand?
A reward alone does not necessarily create loyalty. In fact, a reward often brings a customer in for just one more transaction at a time. Brands learn that there is a difference in loyalty and rewards: one creates lasting, long-term corporate success rooted in a relationship of aligned incentives, and the other merely extends a brand’s lifeline to the next quarter’s earnings.
Loyalty means an attachment to the institution one spends time with. It means awareness of the decision to shop at one brand or another. It goes out of the way to get to the shop, gas station or restaurant the customer cares about the most. When a customer is only incentivized to return one more time via a one-time reward, this usually doesn’t speak as much to loyalty as it does to the “deal” they’ll get by doing so at that moment.
My team talks to brands every day about reward currencies and the pros or cons of the most common incentives. There are so many different types of programs; these include points, cashback, discounts and miles. Brands have spent the last two decades building different combinations of the same rewards currency – many of them to great success by tying the rewards to brand values and their most popular and beloved products. So how does a brand ensure that rewards turn into loyalty, rather than just another transaction?
Related: 3 Secret Reasons Your Brand Needs a Rewards Program
Keep it simple, keep it connected
Consumers have been burned by complexity – frustration in managing multiple loyalty platforms with disparate online logins has led to a wave of brands building and launching their own stand-alone loyalty programs. Recent additions to this “independent loyalty” approach include McDonald’s MyMcDonald’s Rewards or Taco Bell’s mobile app. These brands realized that asking customers to do the work of tracking, managing and redeeming their rewards can be more of a burden than a relationship-building experience. So they put ordering, rewards and other user engagement in the same place.
The beauty of this approach? Rewards do not disappear. They are recreated in ways that spark creativity, commitment and camaraderie with the customer. They are personalized and presented for choices that the customer can make along the way.
The quickest way for a loyalty program to feel untouched or stale is if it’s a disjointed experience—a program that awards arbitrary points that provide inconsistent rewards, or a program that only rewards on one transaction but doesn’t open up the opportunity for additional customer behavior and engagement. Instead of focusing on that reward, a bond must be built between the customer and the brand.
Related: Why Small Businesses Should Use Customer Loyalty Programs
How we can develop reward programs
Classic reward currencies stimulate transactions. They create fleeting, one-off moments that do not serve to connect with the customer. In some cases, they can even tarnish the brand. Those are the rewards we want to move modern loyalty away from.
Let’s use coupons as an example: The customer may come into the store to use a coupon they earned for a recent purchase. This coupon (while serving its transactional purpose) sets the expectation that what is being sold has a lower value than it is listed for, and it tells the customer to make their choice based on the price tag alone. The traditional reward equation prioritizes low cost over quality, convenience and value alignment – the transaction over the relationship.
That’s not to say coupons (or miles, points, or a free frozen yogurt at the end of a 10-visit punch card) don’t have their place in a loyalty program. They simply have to be connected to more than one transaction. What other ways can customers earn these rewards? Is there an option to redeem vs build for a bigger reward? Does the reward currency provide concrete value? Perhaps that coupon is offered because a customer has shown loyalty and earned the coupon through loyalty, rather than as a way to gain such loyalty.
Related: How loyalty programs are emerging as effective marketing tools
Matching reward currencies to loyalty programs
Brands don’t need to build and launch full-scale interactive apps to connect with their customers (it doesn’t hurt, of course, but it all comes down to intent). In many cases, they may reconsider or add reward currency options that may grow with their customer relationship. There are so many more ways brands can reward their customers than when the loyalty and incentives space was created. They can provide ownership of digital assets via NFTs, unlock access to exclusive events or offers and can even provide equity shares as rewards.
Using the example I know best, let’s look at how some of these new reward mechanisms change the customer experience. When a brand rewards its customers in equity rewards, also known as ownership, they can:
- Deliver instant validation for the consumer, which can drive more immediate behavioral change
- Strengthen long-term brand/consumer relationships instead of cherry picking, coupons or continuous discounting
- Create meaningful access points to the financial markets which half of Americans do not currently have
Related: Customer loyalty leads to long-term sales
With standard points programs, customers usually need to accumulate a significant number of points, miles or whatever the chosen type of currency is to start seeing any benefits. But the ability to reward in stocks or ETFs, even in small amounts, can create instant gratification – which can then serve as an entry point to other aspects of a loyalty program. Equity-related rewards can potentially grow over time, along with consumer confidence, loyalty and brand love.
Most importantly, this is a program that speaks to the long-term vitality of a brand and consumer. According to user research through our company, Bumped, 65% of users have told friends about a company they own after becoming a shareholder. The customer now has a new thread of relationships that coupons cannot create. A total of 31% of users who become shareholders are willing to pay more for a product from a brand they own, versus expecting to pay less the next time they’re in the store. Most importantly, the consumer may even feel awkward doing business with a competitor who once became an owner – now it’s loyalty.
Let’s work to build a world of incentivized, coordinated and motivated consumers, a world where everyone wins and is part of what they care about most. It’s the future of alignment that extends beyond a single transaction, whether it’s in the form of crypto, NFT, points or shares.