The Ideal Strategy
When it comes to marketing and consumers, what would the ideal strategy look like? How about one that simultaneously attracts new customers and retains existing ones, giving those considering your brand for the first time a reason to take the plunge while motivating previous customers to come back? An ideal strategy would promote short-term transactions while also reinforcing and nurturing long-term customer-brand relationships. I believe you'd agree that such a strategy would be perfect.
Now, what if I told you that this strategy exists? It's an all-encompassing approach that I consider the "Swiss Army Knife of marketing": Loyalty programs.
Yes, I know many would argue that loyalty programs seem more like long-term promotions that everyone is familiar with, rather than some secret marketing weapon. That they're essentially about points and rewards and are attractive but not particularly novel. This notion, on the surface, might have some truth to it, but precisely because there's much more to them than meets the eye, it's worth reevaluating our perception of these programs.
Here are four often overlooked aspects that make loyalty programs one of the most powerful and promising marketing strategies available:
They connect with consumers on both rational and emotional levels. This is no small feat, as in the market, we find many examples of brands and products that either have a purely rational or purely emotional focus when seeking the attention and interest of their customers. The former emphasize the features and functions of their products, components, price, unique formulation, and the science behind it—all logical arguments, which consumers claim to favor. On the other hand, the latter appeal to the most basic human fears, aspirations, and desires. They use celebrities, influencers, social pressure, and behavioral psychology tools to persuade. However, while any of these techniques have proven effective individually, it's the balanced combination of both that makes for the most effective strategy. In this sense, loyalty programs can boast of connecting with consumers on both levels at once: Rewards present the rational argument (it's beneficial because of what you receive), while the sense of recognition and special treatment they promise constitutes the emotional element (they make you feel special).
They spark conversation and are memorable. Who said that "awareness" is an exclusive benefit of branding strategies and advertising? Word of mouth is the primary way consumers become aware of a brand or product. The spread of ideas and the fact that the world's most popular brands are what they are is due to people talking about them. If we represent a boring brand or product that's not a conversation starter, we're in trouble! That's why our marketing strategies must necessarily include and encourage conversations about the brand and the product. No one remembers a discount, an ingredient list on a shampoo, or passionately discusses a hamburger's features. Loyalty programs, on the other hand, with their rewards, gamification mechanics, and winning possibilities, can stimulate the imagination, be memorable, and generate conversations. From the possibility of dream vacations to a trip to space, or simply winning a restaurant bill, experiences are consumers' favorite topic.
Data, data, and more data. Loyalty programs are special lenses that allow us to see more clearly and farther. They reveal information about consumer behaviors and habits that are not easily recognizable otherwise. They also allow us to discover different customer types that we didn't even know we had, along with each one's relative value and potential. But the most revealing and critical aspect is that they show us that the average customer doesn't exist; there are various segments, and everyone belongs to one of them.
Finally, I'd like to mention that one superpower of loyalty programs is that they incentivize frequency and longevity. Frequency is the foundation of every business. Without repeat purchases no business would survive. Likewise, the longevity of customers is perhaps the most important criterion for determining loyalty, and a customer's importance is directly related to it. Loyalty programs are perhaps the only strategy that genuinely cares about these variables and motivates them directly and intentionally.
Clearly, building brand loyalty is the number one way to increase business profitability, and as we've explained here, it's the most comprehensive and versatile customer strategy, potentially one of the most significant as well.
However, despite the fact that loyalty programs are now prevalent in almost all industries and business sectors, the vast majority don't harness their full potential. They focus on the mechanics and benefits but not enough on the strategy. This presents an opportunity for those who wish to gain not only their customers' gratitude but also a significant competitive advantage for their companies.