What does a loyalty program do?
This is a question that can elicit a unique answer from everyone you ask.
Most people will offer you a list of features that includes coupons, point accrual, and redemption. While all of these features can be part of a loyalty program, this is the wrong way to think about loyalty.
Loyalty is not about the program.
Loyalty is about the customer and making a strong, sustainable connection with that customer.
Let’s Start by Defining a CRM Program
CRM stands for Customer Relationship Management. At their core, all CRMs have one thing in common: They store customer information. This includes names, addresses, emails, purchase information, etc.
Many of these programs include additional functionalities, such as segmentation, email marketing, workflow automation, and analytics. These tools give you everything you need to communicate with your customers and better understand their habits.
OK, so What is a Loyalty Program Then?
Loyalty programs can have some similar features as CRMs, but the main difference is the goal of each program.
Loyalty programs exist to create more loyal customers by modifying their behavior. They should make you top-of-mind for your customers in your category. While this sounds overly simplistic, it’s easy to lose track of this with all the different vendors and tools out there.
A loyalty program isn’t defined by a list of features, but rather entirely by this goal.
You can’t mention loyalty programs without talking about Sephora’s Beauty Insider program. The top tier of Beauty Insider boasts benefits like access to a community, free beauty classes, custom makeovers, exclusive events, and more. These are all benefits that help drive additional brand loyalty to Sephora.
Sephora also uses email and segments customers, but these are not the elements that make its customers loyal.
How to Tell if Your Program is a Loyalty Program or Just a CRM
How are you judging the success of your program?
If you are looking at users who sign up and counting how many people you can email, you likely have a CRM.
If you want to know what your users are purchasing and track that, you likely have a CRM.
Tracking how many points your users are earning and redeeming (earn & burn)? Still a CRM.
Let’s Take a Second to Talk About the Elephant in the Room: Points Programs
Point programs feel like they are core to a loyalty program. They’ve been a part of most programs for the past 40 years, but points programs don’t work like they used to.
The goal of a loyalty program should be to make your company top-of-mind for your customers and points programs are no longer effective ways to do this. We live in a culture driven by instant gratification. Needing to make multiple purchases or large purchases to receive a gift card back no longer carries the same effect it once did.
Many companies are beginning to move to programs that offer instant benefits on every purchase to take advantage of this new reality. Restoration Hardware’s Grey Card offers customers 25% off every purchase. This makes them top-of-mind because the customer knows they’re getting a deal every day.
How to Create a True Loyalty Program
To exist as a loyalty program, you need a benefit mix that focuses on your customers’ needs, not the needs of your company. This always sounds counter-intuitive, but the customer needs to be first or you’ll never earn their loyalty.
Loyalty is hard to track and measure because it’s an infinite game.
Your customers don’t need to earn points, but you need to earn their loyalty. This is the reality we live in now.
Ask yourself this: How does my program make my customer’s life better or easier?
Starbucks having mobile ordering makes its experience better. Amazon Prime makes its experience better. And as mentioned earlier, Restoration Hardware’s Grey Card makes its experience better every day.
This is the Age of the Customer
Retail has changed dramatically in the past few years and, unfortunately, most companies’ loyalty programs have not kept pace with these changes.
The only way to earn loyalty today is to put your customer at the center of everything and this means rethinking how you viewed loyalty in the past.
Stop treating your customers as lines in a CRM before your get left behind.
Brian Carl
Brian is our VP of Marketing and leads the overall direction of our B2B Marketing and Marketing Operations Teams. When he’s not chasing his three kids around at home, he enjoys reading as much as he can about marketing, technology and leadership or playing video games when they finally all fall asleep.