The Ideal Strategy: Effective Loyalty Programs

But also motivates past customers to return. A strategy that promotes short-term transactions, but at the same time strengthens and nurtures the long-term relationship between the customer and the brand. I think you’d agree with me that such a strategy would be perfect. So, what if I told you that such a strategy exists? It’s a «jack-of-all-trades» strategy that I consider the «Swiss Army knife of marketing»: Loyalty programs. Yes, I know many would say that loyalty programs seem to be nothing more than a long-term promotion everyone is familiar with, not some kind of marketing secret weapon. That they’re basically about points and rewards, and therefore might be appealing but not particularly innovative. On the surface, this notion might hold some truth, but precisely because there’s so much more to them than meets the eye, it’s worth re-evaluating our perception of these programs. Here are four often overlooked aspects that make loyalty programs one of the most powerful and promising strategies available:

1. They connect with consumers on both rational and emotional levels. This is no small feat. In the market, we find many examples of brands and products that either focus purely on rational arguments or purely on emotional ones to capture the attention and interest of their customers: the former emphasize the features and functions of their products, their components, their pricing, their unique formulation, and the science behind it. All these arguments are aimed at a purchasing decision based on logic, which all consumers pride themselves on. On the other hand, the latter appeal to basic human fears, aspirations, and desires. They use celebrities, influencers, social pressure, and behavioral psychology tools to persuade. Yet, while either of these techniques has proven effective on its own, it’s in the balanced combination of the two where the most effective strategy would lie. In this respect, loyalty programs can boast about connecting with consumers on both levels simultaneously: rewards provide the rational argument (it benefits you because of what you receive), while the feeling of recognition and the special treatment they promise offer an emotional touch (they make you feel special).

2. They’re buzzworthy and memorable. Who said that «awareness» is a benefit exclusive to branding strategies and advertising? The main driver of consumer awareness in marketing is «word of mouth». The spread of ideas and the fact that the world’s most popular brands are such is because people talk about them. If we represent a boring brand or solution that no one talks about, we’re doomed! Therefore, our marketing strategies must necessarily include and foster opportunities for conversation about the brand and product. Nobody remembers a discount, an ingredient list in shampoo, or passionately discusses the features of a burger. Loyalty programs, on the other hand, with their rewards, gamification mechanics, and chances to win, can indeed spark imagination, be memorable, and drive conversation. From the possibility of dream vacations to a trip to space, or just getting a free meal at a restaurant, experiences are consumers’ favorite topic.

3. Data, data, and more data. Loyalty programs are special lenses that allow us to see clearer and farther. They reveal information about consumer behaviors and habits not easily discerned otherwise. They also help us uncover different types of customers we didn’t even know we had, their relative value, and potential. But most importantly, they show us that the average customer doesn’t exist, but rather there are different segments and who belongs to each one.

4. Superpower. Last on this list, I’d like to mention that a superpower of loyalty programs is that they encourage both frequency and longevity. Frequency is the pillar of every business; without repeat purchases or, better put, with customers who would only buy once, no business would survive. Similarly, the longevity of customers is perhaps the most important criterion for determining their loyalty, and a customer’s significance is directly related to it. Loyalty programs are perhaps the only strategy that actively and intentionally addresses and promotes these variables.

Building brand loyalty is clearly the number one way to increase business profitability, and as we’ve outlined here, it’s the most comprehensive, versatile, and potentially the most relevant customer strategy. However, even though these programs exist in nearly every industry and business sector today, the vast majority don’t tap into their full potential. They focus on mechanics and benefits and not enough on strategy. This represents an opportunity for those who want to win not just the gratitude of their customers but also a significant competitive advantage for their companies.

By Carlos Porras, Director in Mexico and specialist in loyalty programs.