The missing ingredient in loyalty; behaviour

How to move the loyalty needle for your customers through emotional loyalty.

Three paper lists showing the different kind of loyalty a customer can have.

There’s a lot of interest from brands who have products and services in loyalty.

This can result in hefty investment in schemes which try to bridge the gap between provider and consumer.

Is there a danger that some of these brands are wasting their money on schemes that won’t move the needle for their customers?

What are we talking about when we talk about loyalty?

When we talk about loyalty or reward programmes, what we’re really talking about is productised behavioural design.

The coming together of experience design, technology, data, experience strategy and brand into a shared space with the aim of encouraging certain user behaviours.

This often happens under the proviso that the customer is rewarded in some sense - either intrinsically or extrinsically - for demonstrating the behaviours you want them to.

For example, ‘we would like customers to buy more eggs from us,’ so we incentivise that purchase through discounted prices, points collection resulting in free gifts. Likewise, we would like a customer to continue using us as their chosen provider of flights, so we reward their tenure with an exclusive perk, like a free flight to New York after x number of transactions. 

Loyalty defined

Loyalty is a subset of behaviours that companies want to reward and encourage.

What does it mean to be loyal?

Here’s some definitions:

You might meet all of these modes of loyalty, but they don’t automatically lead from one to another, nor necessarily should they.

To illuminate the issue another way, loyalty strategies can be seen through three lenses:

Transactional loyalty

With transactional loyalty, customers expect something back for their patronage.

This often goes hand in hand with ways to save money, and links to the rise of the savvy consumer thanks to sites like Martin Lewis’ Money Saving Expert

Brands use repeat purchasing behaviour to drive customer acquisition or for promoting other behaviours of value such as paperless billing or the frequent use of products, services, platforms and stores. 

Example: Nectar and their relationship with Sainsbury’s

Pros of transactional loyalty
Cons of transactional loyalty
Entangled loyalty

Entangled loyalty demonstrates the sunk cost fallacy.

Customers know they’ve spent ‘x’ amount of money in an ecosystem and know it would be foolish to leave and often difficult to do so due to the perceived cost, time, money and effort of moving.

Examples: Apple, I’ve got an iPhone and a Mac, my music library is saved, and my data is in the cloud. 

Pros of entangled loyalty
Cons of entangled loyalty
Emotional loyalty

Loyal customers who are emotionally invested in your brand are the holy grail of loyalty.

Emotional loyalty is demonstrated most explicitly through advocacy (e.g. NPS), repeat purchase and non-transactional engagement, e.g. vouching for a brand and recommending it to friends without being prompted.

Customers with this level of investment are more likely to respond to intrinsic or random rewards and like recognition and preferential treatment, they want to feel part of something.

Emotional loyalty typically aligns to purpose driven brands. These are brands that stand for something whether that’s good causes or great design. They also double as lifestyle and personality signifiers - take Patagonia.

Pros of emotional loyalty
Cons of emotional loyalty
The nuts and bolts of the problem

As a brand it’s perfectly valid to focus on one type of loyalty.

Successful and well thought of programmes have existed within each category. However, an ideal state would cater for a spectrum of behaviours within a single programme.

This can help you move from transactional relationships into emotional ones over time - achieving both scale and engagement without alienating or excluding different groups of users with a range of needs.

Loyalty programmes or schemes often fail because there are diminishing returns on purely transactional programmes as customers get used to the rewards and come to expect the same treatment every time. 

Really great loyalty programmes sit on a spectrum incorporating transactional, entangled and emotional elements. A strong loyalty framework builds out transactional rewards into journeys which extend and develop over the course of a customers’ lifetime. This creates a tiered journey for different user groups which extends with the amount of time and effort they invest into the scheme and as a result your brand. 

What’s important is understanding the lifetime journey and how users’ expectations change over time. This must extend to your wider customer experience strategy and brand touch-points to make a measurable difference.

The bottom line is through customer-centred design you increase your chances of understanding your customers’ needs and wants and therefore your ability to design for them.

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