Loyalty schemes are everywhere. From the local coffee shop offering one free for every 10, to big chains like McDonald’s offering free food on a points basis, businesses sense an opportunity to boost sales. And the way they are marketed suggests businesses also believe loyalty schemes can help forge a more personal, long-term relationship with customers.
This looks like great psychology. Decision-making is more emotional than rational, so it seems logical that by creating a feeling of familiarity, simplicity, and a sense of security, the likelihood of being chosen in future will increase.
And it seems to be working. In a recent Yonder Consulting survey of 2,000 people, 70% said they actively participate in retailers’ loyalty schemes and only 9% choose not to. Moreover, half (51%) agree they are more likely to choose products or services based on a loyalty scheme.
But is this as positive as it sounds? While half might agree schemes make them more likely to choose a brand versus a competitor, a third remain unsure.
More importantly, schemes clearly fail to connect at the emotional level. Only one in 10 are convinced that schemes show that retailers care about people like you or me, while over half do not feel confident that brands protect their privacy in loyalty schemes. This suggests that the central aspect of what makes actual loyalty work – a feeling of mutual responsibility – is missing from loyalty schemes.
Brands may feel this does not matter if customers are being given enough to keep picking them over their competitors, but a transactional consumer is not a loyal consumer. Customers choose you because they see you as the best option at the time – and they are happy to take any rewards given out. But without a deeper connection, there is nothing to prevent them from choosing someone else if it helps them get that job done better.
Aside from whether they actually succeed in keeping customers coming back, there is also a greater danger that loyalty schemes lead brands to prioritise short-term financial gain at the expense of long-term customer connection. By playing the relationship card and then failing to follow through with it, brands risk not just failing to keep customers, but are also actively undermining trust and belief in their brand.
IKEA Family is a great example of a scheme that gets it right. From free hot drinks with your meatballs after a long walk around the store or insurance against breakages when building your flatpacks at home, although the financial reward is tiny the scheme is brilliant at creating a sense that IKEA understands – and more importantly cares about – what customers care about.
Just like IKEA, brands should ask themselves how they can make themselves more important to customers in the customer’s terms, and be laser-focused on strengthening that connection. By showing that they care, understand and want to support their customers in what they care about, brands and retailers will create a true sense of loyalty, which because it goes both ways, will cost less and be far more enduring.