Loyalty Is Killing Brands (A Manifesto for Modern Membership)

As marketers, we spend $billions on famous advertising campaigns to build brand awareness and affinity. At the same time, we spend other $billions on finely tuned loyalty programs that drive customer behaviours. But too often, these forces can work against each other – cancelling out and reducing the overall value they add to a business. 

There is a better way. A way for loyalty to build brands. Not break them down. 

The marketing-industrial complex (Salesforce et al, I’m looking at you…) has made it too easy to deploy a standard loyalty solution. One where the immediate ROI can be seductive, but at the cost of the very brand which won you that customer in the first place. The world of loyalty has become too transactional – relying on costly ongoing bribes to drive customer behaviour which should be a result of the relationship they have with your brand. 

These loyalty schemes all tend to look the same, and have been optimised to a dull, functional formula: A. Low cost benefits for joining: such as free delivery or priority access. 

B. Affordable rewards for specific behaviours: a sweepstake with every purchase, or pointless points that rarely add up to anything worthwhile. 

C. Regular loyalty communications: a weekly email trying to sell you more stuff with endless discounts and coupons and promotions. 

Not only has this become boring and unrewarding for consumers, but it’s now table stakes in most categories. Offering little competitive advantage, but a significant ongoing cost. 

The opportunity lies in moving away from these old-fashioned loyalty schemes, towards modern membership programs. A space beyond the functional and transactional, where we can live up to the original promise of customer loyalty – a long-term relationship with emotional engagement at its core. One that not only uses the brand to drive consumer behaviour more efficiently, but also builds that brand as effectively as any paid for channel. 

Consider how the following three principles could help make the shift for your business. 

Discounts are margin eroding in the short term, and train customers not to pay full price in the long term. Reward points are powerful, but customer habituation and points deflation tend to reduce their efficacy over time. The system needs to be kept fresh without overcomplicating.

 

The Priority Moments programme that we helped design and implement for O2 Telefonica, allowed them to move away from discounting their own product and start rewarding customers with added value in other areas from music event tickets to exclusive film previews. 

Loyalty has become commoditized. Everyone offers me something in return for my custom. And it usually looks very similar. What happens if you don’t follow the pack? 

We broke the mould of supermarket loyalty in the UK when we launched myWaitrose - offering free coffees and newspapers instead of the ubiquitous points. A low cost, high perceived value reward, that differentiated the in store experience - making you feel hard-done-by when you shopped anywhere else. 

Martech has supercharged our ability to target customers, and AI allows us to create genuine segment-of-one communications if we so wish. But with great power comes great responsibility. Not just to target relevantly and responsibly, but also to remember that every customer relationship is a human relationship. 

With British Airways, as well as all the expected digital touchpoints for customer comms, we can prompt colleagues to talk to an individual customer during their flight – to congratulate them on their first trip as a Gold Member, or celebrate their honeymoon with a glass of bubbles. Much more than just another email. 

Loyalty has become overly transactional and functional. By shifting our frame of reference from bribes that drive behaviour, to behaviours that build a brand we can achieve so much more. It’s time to ask yourself if your loyalty solution is doing enough to build long term brand and business value. If not, then start applying the principles laid out here.