Loyalty Programs: Show Some Unconditional Love...

Conditionality. It's at the heart of traditional loyalty programs - if you do that, I’ll give you this in return. It's a very rational exchange of value.

Yet conditionality is not a great basis for earning loyalty. At best, such a rational exchange will help retain a customer until something better comes along.

Rather, loyalty depends on creating an emotional connection, so that customers stick with the brand even when meaningful alternatives are available, and perhaps even extol its virtues to their network.

Of course, loyalty programs can't by themselves create such an emotional attachment to the brand. That lies in what the brand stands for and the customer experience it has to offer. However, such programs can help to strengthen that attachment, if they forgo conditionality and instead just focus on the welfare of customers.

Here's three simple ways I've found to do that:

Say thank you.

Position the program as a simple thank you, by removing all the conditions imposed on customers so that it becomes as easy as possible to earn and redeem rewards, with no strings attached.

This lay at the heart of Tesco's Clubcard, one of the world's leading loyalty programs. Introduced in 1994, it offered a point for every $ spent. After 13 weeks, all the points were converted into cash (100 points = $1), and sent through the mail as a voucher to spend in Tesco, along with a thank you letter.

It was simple: the more you spent, the bigger the thank you. It was fair : everybody still paid the same prices. And it was unconditional: the voucher could be redeemed on anything you wanted.

Tesco still got the rational benefit, as customers spent a bit more, and stayed with them longer. But crucially, customers felt appreciated, seeing it as another example of Tesco caring that bit more. It added an emotional component.

Personalize the rewards for the customer.

Many programs, of course, do this by providing bonus coupons based on a customer's purchase history. However, if these are focused on encouraging customers to try products or categories they haven't bought before, then they feel very conditional, and redemptions tend to be low. They are not personalized for the benefit of the customer, but rather for the brand. 

In contrast, leading operators like Kroger and Tesco ensure that at least half these bonus coupons are for products they know the customer actually buys. These coupons no longer seem conditional, redemptions dramatically increase, and again customers end up feeling more appreciated.

Sephora and Starbucks add an emotional component in a different way, by offering customers a free gift or a drink on their birthday as part of their programs.

Add a surprise.

In addition to the straightforward value exchange, adding some unexpected extras can increase the emotional appeal. Science has shown that the brain finds unexpected pleasures more rewarding than expected ones. 
Rental car companies, for example, often upgrade loyal customers to more luxurious cars, and hotels often upgrade to better rooms or provide a little something during turn-down service. While BestBuy surprise their frequent shoppers with free, random rewards that are not announced or advertised, such as tickets to exclusive movie premieres. 

All these are ways of adding an emotional component to a traditional loyalty program. However, perhaps the bigger opportunity lies in using the insight that the program provides to improve the customer experience.

Safeway's JustforU program, for example, highlights which of their promotions and which manufacturer coupons a customer might be interested in, based on their purchase history. Amazon and Netflix use what they've learnt to recommend products or content a customer might find interesting. While Singapore Airlines use customer data to serve customers their favorite drink.

None of this of course is rocket science, and in today's digital and mobile world it's becoming increasingly easy to do. However, it does require a different mindset  focusing on increasing the welfare of customers, without conditions. 

In our personal life, this would be described as unconditional love. It underpins the strongest of human relationships.

To strengthen emotional attachment, what could be more powerful or more human than showing customers some unconditional love...