Loyalty programs have proven time and again they do generate lift. An effectively run loyalty program helps companies cross-sell, up-sell, and grow overall spending. This we cannot dispute. Yet, what is the true motivation behind consumers remaining loyal?
I asked myself this question the last time I stayed in Chicago and chose the hotel because I knew they would give me my favorite room, allow me to "raid the mini bar," give me free Internet access (because I'm a loyalty member), and have great wine at happy hour. In sum, I know I am going to enjoy my experience even though I'm in Chicago for business on one of the coldest days of the year. I know even though I'm a loyalty member it will take me a very long term to earn a free room, so I'm not there for the points. I'm there for the experience - which means I'm willing to forgo a stay at my typical brand.
Why do I shop at Amazon every time? Because it keeps track of prior purchases, stores all my addresses, and has everything I could ever want to buy so I can shop and ship out gifts for 10 people in an hour. I equate my experience with ease and speed on Amazon and I find it not worth the savings to go anywhere else.
Why is it that some people watch their airline status like a hawk and will take a three-segment flight over the weekend at the end of the year? They want the status. Status is the only thing that keeps us business travelers sane, because they equate this experience with less hassle.
Points drive sales and experience drives loyalty. Yet, to provide an appropriate experience you need to gain insight into customer motivations. Which isn't always easy - and is even more challenging to convert this insight into something actionable.
- Hypothesize. "Don't boil the ocean" was a common catchphrase of past boss of mine. Start with a series of hypotheses you will look to test: "We see repeat customers because they enjoy the surprise and delight benefit." "The more information storage opportunities we provide, the less likely they will switch." "Our travelers expect to be treated better as they travel more."
- Ask. Don't guess how they will talk about experiences. Start off qualitatively by asking people directly what motivates them to use your product or service. Start looking for trends and converting this information into more quantifiable surveys.
- Integrate. Align the quantifiable information to your LTV segments and overlay their actual behaviors. Because what people say doesn't necessarily align with what they do, you'll want to employ some predictive analytics here to identify trends and gain insights.
- Test and Learn. By starting with a good set of hypotheses you should be able to make these insights actionable through a testing and optimization plan. Start with your proven communication methods and then roll out the winners to the rest of your channels.
Sending out an email that contains my points with no context is nothing to me - and in many cases depressing because I know it'll be years before I gain my reward. An email that speaks to my motivations is worth reading and keeps me loyal. What are your motivations?
