Much attention has been paid to the ubiquity of loyalty programs and the commoditization of the reward structure. Most loyalty programs in the marketplace have become “me too” initiatives, often developed with good intentions, but unclear objectives.
At the end of the day, the real goal of any well-constructed loyalty program is to move the customer from a transactional interaction to an emotional relationship (while maximizing profitability, of course). Many loyalty programs continue to reward and focus on transactional interactions—hence, so many loyalty programs look the same. While most marketers would argue a high transaction and high gross dollar customer is a loyal customer, is she really? What if that customer interaction occurs in the absence of an alternative? The minute an alternative is presented (e.g. competitive store opening), that “loyal” customer could be gone.
In the retail industry, many marketers believe the customer who spends a considerable sum of money in their store, buying every cosmetic, box of cereal or dietary supplement is a loyal customer. But what if the transaction is subsidized, occurs because of inertia or because the customer happens to live just two blocks from the store? The moment a richer competitive offer shows up, that customer could attrite. Retailers need to spend more imagination on getting beyond the transactional relationship. Highly engaged consumers are not necessarily committed customers. Understanding customer needs and motivations are fundamental to loyalty success. To be clear, the actively loyal customer is the only long-term profitable customer.