Brands want loyal customers. They buy more, pay more, and refer more. But research shows that loyalty is in decline. Consumers are considering more brands and switching providers more frequently than ever before.
So what can marketers do with their loyalty programs to earn greater trust, commitment and advocacy? The answer isn’t more sweepstakes, coupons, points, promotions or emails. It takes a rethinking of what loyalty really means in a digital age.
1. Loyalty needs to be reciprocal. Consumers today expect this allegiance to go in both directions. According to a study by Kitewheel, three-quarters of consumers believe loyalty programs are for brands to show their loyalty to consumers. But two-thirds of marketers think the reverse: that loyalty programs are a way for consumers to show their loyalty to brands.
You can see this disconnect in how brands talk about loyalty. The phrases “brand loyalty” and “customer loyalty” often mean the same thing. What would the world look like if brands were loyal to their customers? Credit card companies would waive late fees for customers who were on vacation when the payment was due. Retailers would reward shoppers who don’t spend a lot, but are active on social media as brand advocates. Airlines and hotels would renew status levels for customers who took a hiatus from traveling when they had a baby or were between jobs.
2. Loyalty is about emotion first, behavior second. For most brands, the measure of brand loyalty is repeat purchase behavior. This metric puts the cart before the horse. Loyalty is powered by emotion; repeat purchases are the result.
The increasing popularity of promotions shows this flawed thinking in action. Low prices may be a way to drive more transactions, but it doesn’t necessarily earn loyalty, at least not in an emotional sense. Ivan Wicksteed, CMO at Old Navy and architect of the brand’s recent transformation, has said, “It’s the emotional connections that a brand makes… that last the longest and go the deepest.”
Things get worse when carrots turn to sticks and brands start penalizing disloyal behavior. Consider Amazon’s recent announcement that it would stop selling products that aren’t compatible with its video streaming service. Like other Amazon customers, I question how this serves its mission to be “Earth’s most customer-centric company.” Or consider phone companies like Verizon and AT&T that are always looking for ways to lock customers into another two-year contract.
3. Go for gratitude and loyalty will follow. How does one create a sense of loyalty that is reciprocal, authentic, and emotional? The answer is to focus on fostering the emotional response that is most likely to drive loyal behavior—gratitude.
By definition, gratitude is “a readiness to show appreciation for and to return kindness.” Note that gratitude is inherently reciprocal. It also combines both emotion and behavior. There is a feeling of appreciation and an expression of that appreciation through some kind of action. Gratitude therefore can serve as the basis of a relationship beyond the transaction.
It’s tempting to think that gratitude can be generated by doing nice things for your customers. It’s a good start, as Starbucks has demonstrated with the success of its own loyalty program. Giving gifts, granting rewards, and doing other nice things can work in the short term, but customers can become conditioned or easily wooed by someone else with nicer gifts.
The strategy for generating sustained gratitude is to discover and foster a shared purpose with your customers, and to help them share that purpose with others. Shared purpose is not something you do for your customer, but rather with your customer. Satisfied customers at T-shirt company Custom Ink, for example, receive a personalized communication when they complete a survey after their purchase: “Your t-shirt design is an extension of yourself, a statement of your creativity! I’m so glad that we were able to help bring your idea to life. We love seeing our t-shirts out in the world, so check us out on Facebook. You can share your story, post a picture of your creation, and share it with your friends.”
All of the elements of a gratitude program are in these sentences. CustomInk is going beyond the transaction to create a shared purpose around expressing creativity. They are expressing their own gratitude, not for the transaction (“thanks for your purchase”), but for the opportunity to contribute to that purpose (“glad to help you bring your idea to life”). They have created a personalized interaction to show loyalty to the customer. And they have identified a social currency in the t-shirt itself (they call it “a creation”) with opportunities to share it with others.
GE is another company pursuing a gratitude strategy with its “Surprise and Delight” program. It launched a “Healthymagination” program with a shared purpose of “creating better health for more people.” To deliver on that shared purpose, in 2012 the company created an outreach program designed to “create an emotional connection” around health.
GE monitored social media outlets and engaged people talking about health. They didn’t try to sell, but instead to express appreciation and support. In some cases they went even further, sending personalized gifts (like a yoga mat or water bottle) as a tangible expression of appreciation aligned to the shared purpose.
The spirit of gratitude is apparent in the interactions. For example, one of GE’s tweets said “@[name] Your blog post made us smile. We’re glad you share your healthy habits with your friends :-)” This was followed by a personalized gift. The recipient responded with: “@generalelectric Your lovely gift made me smile. So it’s smiles all around :-) And yes, sharing fitness with friends is the best!”
The key to success for GE and CustomInk was the authenticity of the appreciation they showed to their customers. The interactions weren’t transparent attempts to drive another transaction. They were inspired by a well-articulated shared purpose, motivated by a heartful desire to “show appreciation for and to return kindness,” and organized with a well-planned program combining social media, personalization, and customer support. And there wasn’t a coupon or loyalty program point anywhere in sight.
If you are wondering how to generate more brand loyalty, consider implementing a gratitude program. Identify the shared purpose that you can work on together with your customer. See where you can express appreciation for their accomplishments toward that shared purpose. Cultivate gratitude and loyalty will naturally follow.
Originally appeared on Harvard Business Review. Reproduced with permission from the author.