Loyalty Programs allow marketers to avoid competing on price, making it much harder for competitors to copy what they are doing. They can copy the product, the discount, but not the soft benefits value that is unique to a company brand.
Brand loyalty will be truly achieved when you’re the only one in your category that people will recall and associate with. For e.g. Photocopy = Xerox / Search Engine = Google / Shaving = Gillette amongst others. If a brand is not making efforts to truly change or develop the category that it belongs to, then it is under a high risk of being another me-too in that category.
Having said that, customers and consumers now have multiple options for everything. For a brand to differentiate and create a category of one is truly difficult, in such a highly competitive and price sensitive market. From a consumer’s point of view, they are no longer loyal to brands and are constantly looking for the best value and choice that every brand has to offer.
Even if, after years of investment you manage to create a category of one, be the pioneer in that category, truly disrupt and organize a highly unorganized and inconvenient offline option, it will not take much time for someone with deep pockets to disturb that brand loyalty, because the bitter truth is that your most loyal consumers are not loyal to you, they are loyal to the “value for money” you provide. Consumers today, especially those of service brands, don’t have an emotional attachment to the brand and hence the cost of switching is low and easy.
So, in these times of extreme competition, what can brands do to make sure that they don’t lose their most loyal consumers?
Going beyond miles, points, and stars:
Gone are the days when loyalty programs were pushed. There were days when loyalty was measured in miles and points and tiers with a rather complicated set of terms and conditions to earn and redeem them.
There have been successful cases such as Jet Privilege or Starbucks Loyalty Rewards program. However, the same formula cannot be applied to online businesses. Consumers have an array of choices, easily available to them and will always look for service that gives them the most utilitarian value of their time and money instantly rather than waiting for some points to reach a certain level for them to redeem something prized.
A few years back, people used to brag about what they have collected – Gold Card / Platinum Card amongst others. Forward things a decade, I don’t care how many miles I have or how much I can further earn, I would go for the cheapest flight available.
Loyalty today is sold, not earned
When it becomes difficult for brands to create an offering that is unique to them only, it becomes easier to eliminate a problem that is common to all. Don’t ask me to “earn” anything, tell me what is “guaranteed”. Every category is plagued by certain operational challenges that become increasingly difficult to negate or overcome.
- Surge pricing for cab hailing or cab availability during peak times
- Cancellation / Rescheduling charges for online flight / hotel bookings
- Delivery charges, surge pricing for online grocery or food delivery
This is when brands realized that the very problems that they created by the virtue of moving people from offline to online can be converted into benefits if their consumers are willing to be loyal to them.
For a minimum monthly / yearly upfront price that the consumer pays to the brand, it gets rid of all the problems that were a critical deterrent to the development of that category but also ensures that loyalty is bought, upfront. Because I have subscribed to a particular brand’s membership program I know I am entitled to a better deal and service than any other brand.
Benefits of “Membership Programs” in today’s competitive and changing world are tremendous as it-
- increases the cost of switching
- makes the consumer more involved
- collects a revenue upfront to offset the cost of added benefits
Another benefit of these Membership Programs over the traditional Loyalty Programs is that the benefit of these goes beyond freebies, discounts and, promotions and they are more service level benefits.
It is exciting to see experiments around customer loyalty that goes beyond miles and points and in fact, would require all functions in an organization to come together and make a product within a product. The sheer innovation and thinking that will be required to make your frequent users, more frequent and eliminate switching is the need of the hour.
Looks like, we are in the process of developing the 8th P of Marketing – PARTNERSHIPS !!!