Is Customer Loyalty Earned, Bought or Both?

"Why was God able to create heaven and earth in seven days and seven nights? Because he didn't have installed customers and legacy technology to worry about." – Brad Smith, CEO, Intuit.

That’s what Smith told Fast Company earlier in the year when he was pondering this question: How do you actually move an existing group of customers from what they fell in love with to the next thing that could be great?

What he’s specifically talking about is near-field communications (NFC), a technology that uses a low-power radio signal to transmit information between two devices – such as a point-of-sale system and a consumer’s smartphone – and enables consumers to take actions such as making payments simply by tapping their phones against a terminal. I’ve written about NFC quite a lot, as well.

Mobile marketing pundits have been trumpeting NFC as the next big thing for several years, but as recently as September 2013 only 18% of American smartphone users owned an NFC-enabled device. And that’s primarily because tapping a phone isn’t all that different from swiping a card or handing over cash. 

In other words, consumers have been so well conditioned to using cards (prepaid, debit or credit) that it’s difficult to get them to embrace a new technology that requires them to change their habits – and there’s a similar dynamic in loyalty.

Loyalty program engagement has dropped 4.3% since 2010, but program memberships have continued to climb – there are 2.65 billion of them in the US alone! Clearly, consumers are used to joining loyalty programs, but when they find them unengaging, they stop using them, remaining members in name only. 

Not exactly a recipe for lasting brand loyalty, is it? Brands need to earn their customers’ goodwill and repeat business. That means communicating with them through their preferred channels and taking the necessary steps to know their wants and needs and so give them rewards that add actual value to their lives.

ThinkInk works with some loyalty companies that really get this.

For instance, Toronto-based Points, runs a virtual loyalty wallet where members can track, trade and redeem a variety of rewards currencies in one convenient location. Not only do consumers have more freedom to use their rewards how they want to, participating brands get to share some of their customer data for a clear picture of customer wants and needs that allows the brands to make relevant offers.

Another company, Kula Causes, built an online platform where brands can allow their loyal program members to convert unused points or miles into cash donations to the charitable organizations that mean most to them (there’s over 2.5 million to choose from!)

In this case, Kula’s partner brands, which include JetBlue and Kellogg’s, earn their loyalty members’ “brand love” – and longer-lasting business relationships – by acting as conduits for those customers’ charitable instincts.

We’re also lucky enough to work with Kobie Marketing, an award-winning loyalty marketing firm that has built many of the world’s most successful customer loyalty and CRM programs for brands including Verizon, AMC Theatres, TGI Fridays, BJs Restaurant & Brewhouse and Royal Bank of Canada. They were recently selected as a leader in customer loyalty services for the second time by Forrester Research, Inc. The findings were published as part of a comprehensive assessment of customer loyalty program service providers in the Forrester Wave™: Loyalty Program Service Providers, Q4 2013. The recognition showcases Kobie Marketing as a loyalty industry innovator while underscoring how companies such as Kobie help brands build programs that track, understand, reward and grow customer value and engagement. Go Kobie!!

Another client, the Fuel Rewards Network is a free rewards program that significantly cuts consumers fuel costs. Members of the FRN program are rewarded at the pump and through their regular purchases at local grocery stores, restaurants and online retailers with cents-per-gallon off savings that can then be redeemed at Shell gas stations around the country. In just over a year, the Fuel Rewards Network has saved Americans more than $240 million in fuel costs with members saving an average of .28¢ on every gallon. All of us at ThinkInk have enrolled in the program – and it’s open to everyone. Visit www.fuelrewards.com to learn more.

Last but not least is PointsHound. PointsHound, which launched in beta in October 2012, is a new type of online hotel booking site that caters to the coveted and valuable frequent traveler demographic by offering an unprecedented rate of airline, hotel and retail rewards for every hotel stay booked on the site, at more than 150,000 properties around the globe. Travelers can choose to earn points and miles with a growing roster of 12 loyalty rewards programs, including American Airlines AAdvantage, My Best Buy, Flying Blue and Virgin America Elevate when making their hotel reservations at PointsHound.com.

You could argue that customer loyalty is bought with discounts – and that’s true if we’re talking about a program that incentivizes exactly the same behaviors without being imaginative and thinking about the whole customer experience. And in an age of diminishing loyalty engagement, the overall experience is more important than ever to earn and keep a customer’s ‘brand love.’

So, while it’s actually some of both, I’m of the opinion that the best and most powerful loyalty is earned by brands that go the extra mile to better know their customers and give them the kind of true value that can drive those relationships for a lifetime.

If you belong to a loyalty program – and chances are you do – how does the brand earn your “love,” if at all? What experiences have enhanced or diminished your brand loyalty? Share your stories with us below.