Remember, the typical program of loyalty does not create loyalty.
Faithful programs have evolved very much beyond their humble beginnings as simple “won and burnt” points systems. While many still see them mainly as marketing tools to run repeated business, today’s loyalty programs have become sophisticated income engines that can significantly affect the latest line of a company.
Consider this statistics startling from our annual customer service research: 46% of American customers are willing to pay more for companies that have good loyalty programs. Even more saying, 39% have chosen a brand over another, even if it is more expensive, simply to earn more points in a loyalty program.
The transformation of loyalty programs into income generators became particularly evident during the Covid-19 pandemic. While airlines were baseing their fleets, their loyalty programs were still generating considerable income through partnerships with credit card companies and other businesses. If you use a credit card associated with your favorite airline, you have experienced this first hand. You don’t have to fly to the airline to continue winning points and prices. This discovery led to some interesting assessments of these programs, sometimes worth more than the essential business itself.
I had a chance to make a Amazing business radio Interview with Aleksander Kaczmarek, Vice President of Loyalty at Cartrawler. Car Trawler offers a technological solution that connects car rentals with brands like American Airlines, Uber, Emirates, American Express, Hilton and many other brands you have known. If you’ve ever bought an airline ticket or reserved a hotel and you will ask if you need a rental car, you may have tried an experienced car bait.
According to Kaczmarek, modern loyalty programs are much more powerful than the points and prices that most people think. They have evolved from simple points collection systems on sophisticated customer engagement platforms. Today’s programs use technology to create quiet experiences that encourage clients to interact with brands in many ways. For example, loyalty applications of many retail sellers now include features such as mobile payments, personalized recommendations and exclusive access to products or services.
Kaczmarek says the income potential comes from three main areas:
- Income from direct program: This includes membership fees (think Amazon Prime or Walmart+) and partnership income from other businesses that want access to program members.
- Increasing customer spending: Faithful Program members usually spend more than not members, in part because they are trying to earn rewards and partly because the program makes it easier to do business with the company. (This is reflected in our research and the findings mentioned at the top of the article.)
- Data money: Statements obtained from Loyalty Program data can help companies make better inventory decisions, create more effective marketing campaigns and identify new business opportunities.
According to Kaczmarek, the most successful programs share some features that run both customer engagement and income:
- More than points: They offer immediate values beyond the accumulation of points, such as priority service or exclusive approach.
- Emotional connection: They make emotional links through experimental rewards rather than just transactional benefits.
- Partnerships with businesses and other brands: They use partnerships to expand their value proposal beyond their essential business.
- Using technology for a better CX: They use technology to provide a smooth customer experience at all touch points
However, companies must achieve careful balance. Kaczmarek says, “There is often a debate on whether loyalty programs should focus on generating income or improving the customer’s experience. The truth is that they should do both.”
This double focus is essential because customers are not loyal to the program – they are loyal to the company’s experience. An excellent loyalty program can improve that experience and promote income, but it cannot compensate for service or poor products.
Kaczmarek notes that the future of loyalty programs goes beyond everything we are seeing today, especially in the travel industry. “Looking forward, we are seeing innovative access to loyalty programs. Some cities and business districts are exploring ‘Destination Loyalty’ programs that reward clients to engage with numerous local businesses. Others are creating coalition where complementary businesses share a single loyalty platform. “
So whether you are a small local business or a big corporation, loyalty programs can be more than just a customer retention tool. When properly designed and executed, they can become an important source of income while strengthening customers.
Just remember, the typical program of loyalty does not create loyalty. It is a marketing program that simply rewards and strengthens the repeated business. The real loyalty is still from the constant giving of the excellent experiences that make customers want to say, “I will come back!”