Some marketers regard incentive programs as extending a thank-you gesture to keep customers coming back. Experts in business psychology liken the practice to bribery. Real loyalty can be spoiled by bribes. There is a better, more profitable route to true customer loyalty.
LOYALTY WITHOUT BRIBERY
Phrases such as points program, loyalty rewards, frequent buyer, and loyal customer are often used in similar contexts; one or more even in the very same context. In modern marketing, the central idea connecting them: A company that rewards consumers for repeat purchasing can secure steady business from them over time. While this may be true, the business practices it typically entails and the messaging they convey actually sacrifice genuine loyalty or bypass it altogether.
don't spoil a good thing
Some marketers describe incentive programs as extending thanks to keep customers coming back. Yet, experts in business psychology liken the practice to bribery. They point out that repeat purchasing does not necessarily indicate true loyalty. Indeed, real loyalty does not depend on discounts or give-aways. Bribes can actually spoil bona fide loyalty.
loyalty involves a relationship
Customer loyalty is a matter of business relationship management. In contrast to points programs and pay-your-bill-to-enter lotteries, a higher road leads to genuine loyalty. True loyalty, more profitable and more old-fashioned, requires a different view of business relationships.
retailers as mercenary intel gatherers
Many retailers use club membership cards with give-aways and points programs as buyer incentives. As intended, these generally do secure repeat business and often keep customers from leaving for competitors. However, the benefits to these companies come at considerable cost. Yet, study of various membership-based loyalty programs reveals the advantage that retailers seek: consumer data from tracking purchases – managed data usable in marketing decisions.
faux generosity costly
When a grocery-chain customer provides their membership number at the till, a computer links the products purchased to their name. This contributes each time to consumer statistics linked to the information that the customer provided in applying for membership. Secure storage, management, and retrieval of consumer data involved in such programs requires significant ongoing investment. Thus, the give-aways and discounts associated with points programs involve responsibilities and costs that retailers using them must sustain in collecting and managing customer information to use in targeted marketing that aims for growth in sales and profits.
emotional engagement essential
While retailers and their suppliers seek more and better consumer statistics to sell more products to more customers, and to keep them coming back, the practices involved leave true, mutual loyalty out of the equation. Indeed, loyalty and rewards really do not belong together in the context of why customers buy.
statistics blind to heartfelt loyalty
The dominant view today equates loyalty with repeat purchasing: “If they continue buying from you, that means that they’re loyal.” That makes sense on only the surface. That lacks a basic understanding of what leads people to feel loyal. Actual loyalty engages feelings such as:
Authentic loyalty has more to do with intrinsic incentives as a customer than with extrinsic incentives as a purchaser.
respect my values
For a business to earn the true loyalty of its customers, it must understand that discounts and contests (examples of extrinsic incentives) are actually superficial. Customers want more at a deeper level – ideally in sync with their personal values, such as being treated sincerely as a valued individual.
sincerity beats bribery
For example, the greeter at an optician’s shop remembers every returning customer and always treats them warmly. If a competing optician’s shop offered a free iPhone as an incentive to attract new customers, that wouldn’t faze this shop’s loyal clientele. They’d never go anywhere else for eyeglasses or contact lenses.
repeat purchasers actually not loyal
In a Gallup Management Journal article, WJ McEwen and JH Fleming write, “Without a strong emotional bond, customer satisfaction is meaningless.” (Customer Satisfaction Doesn’t Count, GMJ, March 13, 2003) Is there a strong emotional bond by the time you’ve bought nine cups of coffee then get the tenth free? Gallup: “These customers aren’t really loyal; they’re just customers who haven’t left yet.”
retention trumps recruitment
Generally, retaining customers is more profitable than attracting new ones. Indeed, loyal customers often go to extra lengths to buy from companies that they prefer. In contrast, any company that gives away prizes or provides discounts to recruit new customers must recoup the costs of doing so. Inevitably, the cost-recovery must come from somebody's pocket.
mutual liking and trust, mutual benefit
When customers develop real loyalty to a brand, it involves mutual liking and mutual trust, leading to a business relationship of some depth. The development of true brand loyalty comes from staff who like their job as well as their employer and who serve customers with sincerity. Engaged personnel who foster true customer loyalty work for companies that treat them well and operate under well-defined, customer-service-focused values. Such companies can dispense with the trinkets and give-aways and earn good, steady profits.
- Glenn R Harrington
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