The problem with most loyalty programs is they are based on the wrong kind of rewards.
Rewards programs are based on transactional relationships that focus on the goals of the business: repeat sales, customer referrals, long term commitment from the customer.
Usually it is a discount based on buying a lot of stuff. And frequently, businesses don’t make it easy for customers to earn those discounts. Many rewards programs have clauses, contingencies and stipulations so complex they would make a contract law attorney’s head spin.
This does not build trust or loyalty. Here is an example to illustrate:
I was once a loyal customer of GNC, the health and nutrition retailer. Every month I spent at least a hundred dollars there. When it launched its loyalty rewards program I signed up. But the rewards weren’t very rewarding.
The program gave me points for GNC-branded products I bought throughout the month. Not every product, only GNC products. Each month I was eligible to cash in the points for a discount on a purchase. The hitch was that I could only do this on the first Wednesday of the month. Tough luck if I was too busy to come into the store to shop on that one day.
On several occasions I told clerks they would be better off not having any reward program than one that treated customers with such disdain. But it seemed customer disdain was part of the GNC culture. This became apparent on my last visit.
That day I brought several items to the counter assuming I’d spend at least $150. Just as the clerk began to ring up my order another customer walked in wanting help. But he didn’t have a question about a product. He wanted to talk about his body building regimen. The clerk could have finished with me before indulging the other customer.
I waited five minutes while he chatted with the enthusiastic body builder. Then five minutes more. I finally got his attention by waving my wallet in the air and pointing to the stack of products on the counter. He nodded and continued the non-sales conversation. After 15 minutes I walked out without buying anything. I never went back.
Emotional rewards matter more than financial rewards
Most people like to save money. But customer loyalty isn’t coin-operated. Loyal customer relationships aren’t built on transactional rewards. They are built on emotional connections and attachment to a brand. True loyalty can’t be bought. It must be earned.
Customers view loyalty as a two-way relationship. It is as much about brands giving value, respect and appreciation to customers as it is about giving them rewards points. Rewards programs treat customers like lab rats in a behavioral conditioning experiment and cheapen the relationship. They don’t give people what they want most.
What people want most is to feel important. They want to feel appreciated. They want to feel like they belong. Emotional rewards mean more to them than transactional rewards.
Loyalty is built on relationship, not financial rewards.[BONUS: In this episode of The Heart of Marketing we talk about how brands can build loyal customer relationships by showing genuine appreciation. Listen in for ideas on creating “wow” moments customers will love.]