By Tim Young
Loyalty programs have existed for decades. They have taken on many forms and range from simple (stamp cards) to complex (earn points and redeem). Today there are 2.65 billion loyalty program members in the U.S. alone. But even though the average number of loyalty programs per U.S. household has grown to 21.9 (up from 18.4 in 2010), only 9.5 of those memberships – less than half –are currently active.
No matter how loyalty programs take shape, they have one common goal: Increase customer loyalty. Why? Because repeat customers spend 67 percent more than new customers. In fact last week, Starbucks reported 34 percent stronger sales attributed to its loyalty program and expanded food service driving up customer visits.
What separates the successful programs, like Starbucks, from the unsuccessful programs is how they treat their customers in the form of the “customer relationship.”
Most organizations want their customers to be loyal to them and spend scores of resources analyzing how customers relate to their organization. But what many of them omit from their analysis is how the organization relates to the customer, how businesses can build a culture of “saying yes.”
Social psychologists believe as much as 82 percent of social judgments can be predicted by answering these two questions:
- What are the intentions of this other person toward me?
- How capable is this person of carrying out those intentions?
Oasis Disc Manufacturing founder and president Micah Solomon wrote about building a culture of saying yes in his book High-Tech, High-Touch Customer Service. Early on, he believed his employees understood that he wanted a culture of saying yes, and they were doing whatever it takes to keep a good customer happy. But it turns out that some of his best employees thought the mission was to save money… This was a major disconnect.
Relationships are a two-way street. Customers make social judgments, and react to how they are treated. It is too easy to turn customers into data on a spreadsheet and forget that people react on emotion, which is very often illogical. People tend to overreact both positively and negatively.
And now with social media, customers shout out their experiences, good and bad, to hundreds or thousands of people within seconds of the event.
The interactions with customers are endless. But if we zero in on the topic of loyalty programs, one aspect that jumps to the top of the pile is: How do you show your loyalty to your customers?
- Do you make it easy or difficult to redeem the loyalty credit they have earned?
- Have you given your customers something they haven’t earned?
- Have you surprised them with something to make them say “Wow!”?
I frequent a particular pizza store. I routinely call my order in ahead of time, which allows them to track how often I visit and what I buy. Every time I purchase a pizza, I get a card stamped (it is a low tech operation), and I receive a FREE large pizza after I get 12 stamps. Notice I said 12 stamps and not 12 pizzas. Why? Because when I have visited and they have made the wrong pizza or haven’t been ready when I arrive, they will give me an extra stamp. It makes me leave with a good experience and appreciation for the service and relationship they have built with me, instead of leaving frustrated with their misstep.
The ex-finance person in me is saying “that extra stamp is going to cost the organization a lot of money if they keep doing that.” And “if he was already going to buy 13 pizzas, we gave him a free pizza when we didn’t have to.” But the business person in me understands that I’m a lucrative repeat customer, and the future revenue stream I represent is large and could be even bigger if we continue to have a strong relationship and they show their appreciation.
What have you done for your customers lately to earn their loyalty?