How companies can make their customers more loyal
It helps to understand the shopper
Blogger Dani Austin of Dallas, Texas, logged into her Southwest Airlines account a few days before the end of 2019.
Shortly after, she and her husband, Jordan Joseph Ramirez, flew to Las Vegas (and back home) in less than 72 hours.
The spontaneous trip was part of a last-ditch attempt to try to earn the Southwest Companion Pass, a benefit of the Southwest Rapid Rewards program that allows pass holders to bring one companion on flights for at least a full calendar year free of airline charges (not including taxes and fees).
But consumers jump through hoops for more than airline rewards.
My brother-in-law is a die-hard shopper at American Eagle Outfitters. He recently purchased a jacket and jeans from the clothing store for just $2.69.
He’s no extreme couponer, but he leveraged his loyalty arsenal: his store credit card, AEO Connected Rewards account and a coupon.
So what’s the secret? When consumers are devoted to a particular brand, they can cash in.
WHAT’S IN A REWARDS PROGRAM?
Rewards, or loyalty, programs favor repeat customers. That often takes the form of discounts, coupons or free products. Consumers generally create an account and earn points or perks after making purchases.
The more you spend or the more points you rack up, the greater your payoff.
While saving money may be the obvious benefit, status is also an important draw, whether it’s sitting at the front or standing in a special VIP line.
These structured programs often include experiential rewards, according to Emily Rugaber, head of marketing at Thanx, a digital engagement platform. At a restaurant, that may equate to skipping the wait or tasting a special menu item first.
“It feels good to be treated differently,” says Jonah Berger, a marketing professor at the Wharton School at the University of Pennsylvania and author of “Contagious: Why Things Catch On.”
WHAT’S IN IT FOR RETAILERS?
Retailers are banking on the fact that increased customer loyalty will aid in customer retention — and translate into more transactions. Holding onto existing customers who are already familiar with the brand is less costly than constantly amassing new customers, Rugaber points out.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| AEO | AMERICAN EAGLE OUTFITTERS INC. | 19.93 | +0.69 | +3.59% |
| LUV | SOUTHWEST AIRLINES CO. | 33.00 | +0.64 | +1.98% |
Retailers also get your data. You may provide your name, email or phone number when you create an account. That information could be tracked with your purchases and could leave you vulnerable in the event of a data breach.
“The benefit for the brand is, knowledge is power,” Rugaber says. “Data drives the ability to better engage.”
“With that transaction of ‘I’m going to give you access to my data for the benefits of the loyalty program,’ certainly the consumer wants to be aware of who they’re offering their data to and what their rights are.”
While rewards programs are also called loyalty programs, they don’t engender true loyalty, says Ryan Hamilton, associate professor of marketing at Emory University in Georgia.
For example, Hamilton says he’s a loyal Cleveland Browns fan, even when the team loses. But if the terms of a loyalty program ever change, he may stop using it exclusively.
Rewards programs are transactional, and consumers are looking to get something out of them.
WHAT DOES IT TAKE?
You — yes, you — can score savings like the examples at the beginning of this article. Here are three ways to do it.
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—LOOK FOR A PROGRAM. Check to see if your favorite retailers, restaurants or other brands have a rewards system you can join. “Most retailers have programs,” Rugaber says. “Just try to see if one exists in the first place.” Registration is quick and can often be done online.
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—SET YOUR SIGHTS ON SAVINGS. While you should avoid spending money solely to garner rewards, it’s smart to optimize your purchasing behavior. “Understand both the rules and also the potential benefits,” Berger says. Learn what purchases count toward points, how many points you need to reach a certain reward and so forth.
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—TAKE YOUR BLINDERS OFF. If you’re sticking with one brand exclusively, loyalty can actually ace you out of deals and opportunities. So occasionally check for offers from other brands. “One of the costs of the program is limiting your freedom of choice,” Hamilton says. If the benefits still outweigh the drawbacks, start working your way toward savings. “If you are all in and you’ve decided the costs in terms of information and reduced variety are worth it to you, then learn the ins and outs of the program,” he says.