When we look at “loyalty” or more specifically “customer loyalty” in business we usually mean “loyalty programmes”. These programmes have become part of our lives, be it in air travel where most modern loyalty programmes started but also other areas of travel such as hotels and even everyday life through credit card or multi-partner shopping programmes. It’s so easy to take them as they are because (overall) they are quite successful in driving revenues for the companies using them. So, all is fine, I guess.
Let’s take a step back though and ask ourselves whether they truly do what the name actually implies and thus whether they are not only successful but serve a broader purpose and deliver the maximum they potentially could.
What does “loyalty” actually mean?
If you look at today’s loyalty programmes, I would tend to say that “loyalty” is a tool for maximising revenues from a group of customers and prevent them from “leaking” or “sampling” as much as possible. This of course is fine and serves a business purpose. However, does that actually achieve what the term “loyalty” really means?
Probably not surprisingly after having asked the question, I would tend to disagree with that definition. Loyalty to me is more accurately an inherent emotion in a person towards another person or indeed a company – and funny enough a company towards its customers. Loyalty kind of always cuts both ways if to be stable in the long term. True loyalty implies a relationship, and this is also inferred to by using the term relationship marketing. Taking a bit from psychology let’s have a closer look what kind of relationship we usually have between loyalty programme operators and members today.
Loyalty programmes are either, if they include an emotional component, designed to keep those customers who supply the provider and associated companies with the most revenues from leaking and sampling and/or they provide a reward in terms of a hidden discount. In fact, they don’t look at how actually loyal a customer is or potentially could be at all. Further they only go one way with little or now influence from the actual programme member over what is provided and also in most cases isolated from customer service delivery. In many cases even for “very loyal” customers it’s more about rules than individual solutions that would show loyalty towards these customers. On the other side some of the most customer centric and very successful companies don’t even have a loyalty programme while showing loyalty towards their customers when things don’t go as planned.
As such a loyalty programme in itself is not providing for actual loyalty. More to the point when the rules of the programme are used as a one-sided definition of what loyalty means it by definition becomes a one-sided relationship. That may still work commercially successfully. After all, even interpersonally there are one-sided co-dependent relationships which work for a long time. They however only work until something better evolves instead of evolving into something better.
In the airline industry the advance of so-called low-cost carriers may be a good example. While of course the lower cost base was a factor in their success by allowing lower prices – the customer actually never cared about the internal cost base – they did, in my mind, something more important on the emotional level: they empowered the customer to customize the product to an extend handing power to the customer. Some airlines today are very good at doing this – even though they may actually have higher prices compared to some others – making them very successful in the marketplace.
I’ll go deeper into customer empowerment and why that actually means more control over your product instead of less in a future article.
Interestingly adopting a more emotionally centred and reciprocal approach to loyalty across all functions, in product or service provision as well as in a loyalty programme might also help to solve the conundrum that your best loyalty programme customer might in fact not actually be loyal at all while quite a few others are individually very loyal, though not as commercially relevant as an individuum while the group is very much so. Meant by this is the fact that your “best” customers might just give you only 50% of their business and still be commercially highly relevant just because they have so much business to give without even being loyal whereas a large number of people may give you 100% of their relevant business making them truly loyal without individually becoming commercially highly relevant. The latter group may be the larger potential in the market though. Certainly, something to think about in my mind.
Strangely, we may therefore have a situation where we actual two-sided relationships between companies and customers that don’t operate loyalty programmes while experiencing a more one-sided co-dependent type of relationship between the operators of loyalty programmes and their members. Now let’s imagine what kind of powerful relationship it could be if a “tool” like a loyalty programme would actually be used to empower a truly two-sided relationship?
The basis is there and by applying what companies without loyalty programmes are doing right with the powerful basis of a commercially already successful loyalty programme across other areas of the business there is a lot of potential yet to be realised.
Let me know in the comment section what you think and whether you agree with this take on things or not. I’ll also go into empowerment and organisational structures which support that in a later article.