Why money can't buy customer loyalty

Rewards and discounts are good ways to stay top of mind with existing customers and entice new ones to try out your product, but when it comes to establishing and maintaining long-term customer relationships, you need to do more than bait people. You have to give customers a reason to stick around. These efforts can take many forms, but all of them are based on one basic rule: Loyalty is a culture, not a commodity, and it's not something that can be bought; it must be earned.

Why money can't buy customer loyalty
 
Thanks to the recent and highly public issues within the daily deal market, we're all witness to a real-time case study proving that attempting to discount your way to loyalty is a difficult proposition. A major player in the space, Bloomspot, quietly closed up shop while Groupon, the market leader, conspicuously shook up executive management in hopes of righting the ship. These daily deal companies, that once held the promise of helping businesses both drive sales and create loyal customers, are finding that discounts are not a sustainable way to get people in stores and keep them coming back.

This is not to say couponing isn't useful as a tool to drive sales and foot traffic, but the register is not where the relationship should end. The bottom line is that driving mass appeal is a great way to get people through the door, but creating long-term customer satisfaction by delivering consistently memorable and rewarding experiences with your brand is the best model for building a sustainable business.

So what can businesses and brands do to get consumers to take their coats off and stay a while in a post-Groupon world? Here are three rules for building a worthwhile loyalty program.

Loyalty starts long before your customer buys anything

Proper planning and goal setting is key for the development of every consumer-facing initiative. In the case of a loyalty program, the primary goals can vary. That said, programs are typically rooted around the ability to attract customers across various segments. Understand those customers' varying levels of engagement and involvement with the brand, create continuous and relevant opportunities for engagement, and ultimately, get to know these customers personally so you can continue to enhance their individual experiences and move them up the loyalty curve until they are loyalists for your brand.

With these goals in mind, you'll need a loyalty platform that can cater to and recognize users across channels (online, mobile, in-store, etc.), work in tandem with customers' social media and online activity, and scale over time with your program's growth. In our increasingly mobile, on-the-go environment, capturing and rewarding the highly varied modes of engagement beyond simply the point of sale is extremely important.

Make customers feel like you know them

If you break loyalty down to its elements, it is really just the result of executing personalization. On a micro-level, this manifests as remembering names and orders at the local coffee shop or using purchase histories effectively to offer special discounts on relevant items for specific users. It is simply capturing and putting first-party data to work in ways that benefit your customers directly.

There is an integral difference between the potential of first-party data offered by your customers on their own accord, and the nebulous third-party information gleaned by the various tracking mechanisms used today. That potential makes capturing first-party data via loyalty programs or memberships programs invaluable in the mission to nurture relationships over the long haul. These programs can help you gather the right kind of information about your consumers and stop your business from having to make assumptions about what they want.

Give to get

Loyalty, of course, is reciprocal, and a business needs to make sure it is giving the right things. Sometimes that means points, miles, or free shipping, but other times the "right things" aren't actually things at all. Offering one-of-a-kind experiences that can't be bought otherwise are often a great way to get your customers excited, active, and engaged.

We've heard some interesting stories around the industry of this tactic in action, such as restaurants carving a customer's name into a table after a certain number of meals, pro football teams letting its most active fan lead the players on the field carrying the team's flag, and even companies giving to charity on behalf of its loyal customers. All of the above are creative and unique ways to give back to your most loyal consumers -- letting them know there is more to business than just their transactions.

Over time, nurturing long-term customer relationships and building a culture of loyalty creates sustainability for your business. Building this infrastructure requires a systematic, strategic approach and an investment in both time and resources, but when done right, it is an investment that produces both qualitative and quantitative returns. It is a model where both you and your customers have a vested interest in your existence. That vested interest is hard to earn but extraordinarily valuable once it is achieved.

Irving Fain is the CEO at CrowdTwist. Follow him on twitter at @ifain.

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"Money in the bag" image via Shutterstock.

 

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