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There are about 4 billion loyalty program memberships in the US, and they’re all fueled by some sort of reward. Yes, even the recently announced Starbucks metaverse loyalty program is expected to trade NFTs (a fancy way of saying a reward digital asset).
Entrepreneurs, take note: The next decade will see significant changes in consumer expectations of brands and banks. Between stocks, NFTs, and developments in blockchain and crypto, “loyalty” is a category that will see significant progress in retaining an enticed consumer. What is driving this change, and what will move the needle for consumers while delivering a solid return on investment for the brand?
A reward alone does not necessarily lead to loyalty. In fact, a reward often only earns a customer one transaction at a time. Brands are learning that there is a difference between loyalty and rewards: One creates lasting long-term business success rooted in a relationship with aligned incentives, and the other merely extends a brand’s lifeline into next quarter’s revenue.
Loyalty means attachment to the institution where one resides. It means awareness of the decision being made to shop from one brand or another. It goes out of its way to get to the store, gas station, or restaurant that the customer cares about most. When a customer is merely incentivized to come back again via a disposable reward, it generally speaks not so much about loyalty as about the “deal” they will get at that time.
My team talks to brands every day about reward currencies and the pros or cons of the most common incentives. There are so many different types of programs; these include points, cash back, discounts and miles. Brands have built various combinations of the same reward currency over the past two decades – many of them having great success tying their rewards to brand values and their most popular and loved products. So how does a brand turn rewards into loyalty, rather than just a second transaction?
Related: 3 secret reasons why your brand needs a rewards program
Keep it simple, keep it connected
Consumers have been burned by complexity – frustration in managing multiple loyalty platforms with different web-based logins has led to a wave of brands building and launching their own standalone loyalty programs. Recent additions to this “standalone loyalty” approach include McDonald’s MyMcDonald’s Rewards or Taco Bell’s mobile app. These brands realized that asking customers to do the work of tracking, managing and redeeming their rewards could be more of a burden than a relationship-building experience. So they brought orders, rewards and other user engagement all into the same space.
The beauty of this approach? Rewards don’t disappear. They have been redesigned in ways that fuel creativity, engagement and camaraderie with the customer. They are personalized and presented with choices that the customer can make along the way.
The quickest way for a loyalty program to feel unattainable or outdated is if it’s a disjointed experience – a program that awards random points that yield inconsistent rewards or a program that only rewards for a transaction but offers no opportunity for additional customer behavior and engagement. Instead of focusing on that reward, a connection needs to be built between the customer and the brand.
Related: Why Small Businesses Should Use Customer Loyalty Programs
How we can develop reward programs
Classic reward currencies incentivize trades. They create fleeting, one-off moments that don’t serve the customer connection. In some cases, they can even tarnish the brand. Those are the rewards we want to take modern loyalty away from.
Let’s use coupons as an example: the customer can enter the store to use a coupon they earned for a recent purchase. That coupon (while serving the transaction purpose) creates an expectation that what is being sold has a lower value than what it is listed for, and it tells the customer to make their choice on the price tag alone. The traditional compensation equation prioritizes low cost over quality, convenience and value alignment – the transaction over the relationship.
That’s not to say that coupons (or miles, points, or a free frozen yogurt at the end of a 10-visit punch card) don’t belong in a loyalty program. They just need to be connected to more than one transaction. What other ways can customers earn those rewards? Is there an option to redeem versus build for a bigger reward? Does the reward currency provide tangible value? Perhaps that coupon is being offered because a customer has shown loyalty and earned the coupon through loyalty, rather than as a means of achieving such loyalty.
Related: How Loyalty Programs Are Emerging As Effective Marketing Tools
Align reward currencies with loyalty programs
Brands don’t need to build and launch large-scale interactive apps to connect with their customers (it can’t hurt, of course, but it all comes down to intent). In many cases, they can reassess or add reward currency options that can grow with their customer relationship. There are so many more ways brands can reward their customers than when the space for loyalty and incentives was created. They can give ownership of digital assets through NFTs, unlock access to exclusive events or offers, and even give shares as a reward.
Using the example I know best, let’s see how some of these new reward mechanisms are changing the customer experience. When a brand rewards its customers in equity rewards, known as ownership, they can:
- Provide instant validation for the consumer, which can bring about a more immediate behavioral change
- Strengthen long-term brand/consumer relationships instead of cherry-picking, couponing or continuous discounting
- Create meaningful entry points to financial markets which half of Americans currently do not have
Related: Customer loyalty leads to long-term sales
With standard points programs, customers usually need to accumulate a significant amount of points, miles, or whatever currency to see any benefits. But the ability to reward in stocks or ETFs, even in small amounts, can create instant gratification – which can then serve as a gateway to other aspects of a loyalty program. Equity-related rewards can potentially grow over time along with consumer trust, loyalty, and brand love.
Most importantly, this is a program that speaks to long-term vitality for a brand and the consumer. According to user surveys through our company, Bumped, 65% of users have told friends about a company they owned after becoming a shareholder. The customer now has a new thread of relationships that coupons cannot create. Overall, 31% of users who become shareholders are willing to pay more for a product from a brand they own, rather than expecting to pay less the next time they’re in store. Most importantly, the consumer may even feel uncomfortable shopping with a competitor once they take ownership – that’s loyalty.
Let’s build a world of empowered, aligned and motivated consumers, a world where everyone wins and is part of what they care about most. That is the future of reconciliation beyond a single transaction, be it in the form of crypto, NFT, points or stocks.
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