Customer Loyalty Needs to Benefit the Customer

Recently I was asked how do customers benefit from being loyal to a company. Let’s explore some here.

Typically you would offer your best clients access to improved levels of service. One of my favorite examples is how companies will utilize their telephony software to move their best customers up in a phone queue, so the most loyal (and highest value) customers get preference to be served on the phone first. For those considering this option, you have to analyze the benefit of keeping these customers loyal versus filling the new customer pipeline.

Of course, there was a time airlines provided first class upgrades for free to their best customers; just one of the many loyalty benefits that have seemed to erode in that industry. Is it because someone did the analysis and found it not to be beneficial (if you have insight please leave a comment)? A good reminder for us to always review our loyalty programs and do the analysis.

Insurance companies (like Progressive, Nationwide, Allstate and Liberty Mutual) offer disappearing deductibles to clients who stay with them longer, saving the clients (and likely the insurance companies in the form of reduced marketing expense) money. Disappearing deductibles used to be a fairly exclusive benefit a number of years ago, but seem to have become table stakes in the business. I suppose it is still a benefit to a loyal customer. As a business owner you need to understand if your customer truly perceive it as a benefit before you position it as such.

Costco and REI, among others, offer dividends to their loyalty card shoppers. So in the case of Costco, not only do customers receive credits when they use the card, but they may accrue deeper credits/dividends when they use the card at Costco outlets or with Costco partners. Real great example of the benefit of loyalty.

Many lodging companies offer a deeper discount to repeat guests than to new guests. They will likely provide free upgrades to better rooms if there is availability. No need leaving a premium room vacant. And there is a certain amount of benefit to surprise and delight when it comes to value perception and customer satisfaction.

I love surprise and delight as a concept. I recently stayed with my vegetarian wife at a great hotel known for their chocolate chip cookies and mentioned to the concierge that she would appreciate vegan chocolate chippers (which they did not have on their menu). And oh, by the way, it was to be a little extra gift from me for her birthday. I was expecting to be charged. So I was a little surprised that they did not charge me for the generous plate they brought to my room. But what was even more surprising was the free 30 minute free copper tub soak the concierge provided as her own birthday gift for us. Will I be staying there again next time I go skiing in Beaver Creek? Absolutely. Did I tell all of my friends and coworkers? You bet!

Surprise and delight works on a deeper psychological level. Most people enjoy a surprise. And those who have been surprised (whether positively or negatively) are going to tell someone. And we often remember the surprises in life. So it makes sense to create surprise and delight moments for your customers, and ensure your best customers are relaying a greater share of positive stories. And likely recommending your business in the process.

I can go on and on. In each case the consumer benefits from the loyalty initiative first, with the benefits accruing to the bottom line of the company employing the tactic. But in all cases a business should test these loyalty initiatives to determine incremental impact on retention before investing in them for the long-term. The firm also needs to weigh the investment against other investments that may be available to the business at the time. And they must balance benefits against investment and impact to customers. You want to be careful when favoring one group because that could impact how you service another group or how the other group or segment perceives your company.

Before embarking on loyalty initiatives, be sure to think about the customer. What will your best customers really value? Are there some benefits that may be more important to some customer segments than others? Talk to a few customers from different customer segments (focus groups may work best, or even approaching them in store) to get their perspective. Be sure you consider how a loyalty program aligns with your brand? Are there components of a loyalty program that may be a better fit with your brand than another? What are your objectives and how will a loyalty program help you to meet (or exceed them)?

What are some of your thoughts? What loyalty benefits have you seen for your customers that have been real winners in terms of driving even more loyalty?

And as always thanks for reading and commenting.
Steve