Most businesses seeking a way to acknowledge their customers use "loyalty" programs that are scarcely more than surface-level engagement leveraging heavy discounts. This approach can alienate customers who are unable to differentiate between a slew of identical programs. And since these types of redemption programs use points as a form of currency that may sit on the books for years (depending), they require stakeholder buy-in across the organization - a challenge most marketers wish to avoid.
But for CMOs and CIOs looking for a way to align on personalization, decreasing churn, and staying within budget, loyalty still reigns supreme as the top retention strategy. And increasingly, stakeholders are investing in loyalty that focuses less on redemption and more on recognition. The points-free loyalty uses the "act and unlock" method to lift customer behavior, rather than rewarding existing behavior often found with punch-card points programs.
How to Design Recognition Loyalty
Tiers: Tiering benefits is a clear way to reward customers as they increase in value. As a member reaches each tier, their experience with the brand becomes more meaningful. It also pulls the emotional levers that drive loyalty (see below). Rather than a surface-level, broad discounts to try to entice purchase, brands are able to invest in experiences that show how much they value and appreciate their highest value customers.
Experiential: Building out seamless experiences drives engagement at regular intervals, which means a customer who values this brand starts to habitually use the brand, perhaps increasing visits from twice a week to three times, or purchasing slightly more with each visit, until the brand becomes a part of the customer's lifestyle.
Communications: We've seen brands go from broad messaging to highly personalized, targeted messaging for customer segments at the "just right" level. Speaking to customers in the right way at the right time means they're more likely to engage, less likely to block, and increasingly likely to do business with your brand.
The Emotions of Recognition Loyalty
As much as we wish our purchases were driven by logic, we all know they're a result of our emotions. A brand can leverage these emotions thoughtfully through the customer journey to add to their bottom line.
Exclusivity: Tiering is a surefire way to create exclusivity for members. Have you ever felt relieved to leave the crowd of people at the airline gate behind while you board the plane first in leisurely and quietly? That’s exclusivity.
FOMO (Fear of Missing Out): It may seem like an emotion that shouldn't affect us after high school, but missing out is still a feeling most people prefer to avoid. I've certainly felt this while all my favorite celebrity influencers were snapping their purchases from a department store’s highly anticipated annual sale that offers early access only for cardmembers. You can bet I signed up for that card very quickly.
Loss Aversion: It’s human nature to hate losing something in which you’ve at least partially invested. So if customers have achieved a tier status that expires after a year of inactivity, for example, they're more likely to act in the way brands hope in order to retain that membership level.
Being Valued: The feelings of being valued and appreciated were found to drive loyalty far more than the fleeting satisfaction that comes from free stuff and discounted items. Recognizing desired customer behavior with elevated experiences for every brand interaction means a customer’s trust and loyalty builds at each touchpoint.