Loyalty and Dedication: The Priceless Commodity?
Brand and customer loyalty has been a hot topic for the past few decades. Since American Airlines started its first “Frequent Flyer Miles” program in the 80s, companies and brands all over the world have been coming up with new and interesting ways to capture attention and reward their faithful consumers for buying their products or using their services.
Traditionally these would come in the form of a barcode card, key fob or printed coupons. These schemes offer a combination of rewards and recognition, in order to drive up sales and customer retention rates. Credit card companies are notorious for their offers, with the majority now handing out flight miles, cash back, credit points and prizes if someone makes a purchase on the card. Through this, the idea is that they are helping the customer to stretch their budget that little bit further and keep them coming back for more.
Despite this, almost half of people still do not participate in these loyalty programs. And only half of those again are actively using them. So why is that? Could it be that most reward schemes come down to only one thing: freebies? As the concept has gained popularity over the last couple of decades it’s easy to see how it can be a double edged sword.
The problem is that it’s possible to get it wrong. While offering free stuff to customers the more they buy, an aggressive campaign could feel almost like a bribe, whereas a complicated system with different tiers and structures can only serve to confuse and confound the customer. Take Starbucks as an example:
My Starbucks Rewards
Last year, Starbucks introduced a Gold membership card. A customer could pay $25 dollars for a year membership, and in return they would get 10% off their purchases every time they went into Starbucks. For hardcore coffee drinkers this could equal some serious savings. The card would pay for itself in a matter of a month or two (or even a few weeks if you were a serious caffeine addict).
Now though the current economic climate, coupled with poor sales and stock drops down to over-expansion, Starbucks has had to reassess it’s approach. As of December 26th of last year the Gold card is being retired and replaced with My Starbucks Rewards.
Under this new scheme, customers can acquire a card and “activate” by loading currency of any denomination on to it in store or online and begin using it immediately to purchase their hot cup of joe in the morning. For every purchase that is made, “stars” are accrued on the card. The more stars, the better the rewards. Rewards can range from a free birthday drink, free in-store wi-fi (2 hours per day), free beverage customization and free brewed coffee refills up to a free tall beverage and a personalized card.
There is even a limited test run for customers to use the “My Starbucks Rewards” iPhone app to pay for their drinks.
In some ways this is a brilliant tactical move. By using pre-paid cards or an app on a mobile, it helps customers to feel like they are not buying the drink, but rather they are owed it when they walk into the store. Like they are getting it for free. Instead of handing over money or fumbling with the pin for a debit or credit card, customers can breeze through the purchase process and be on their way. This ease of purchase should keep the flock coming back again, and shunning other competitor brands. Effectively cementing “The Starbucks Run” as part of the daily routine.
On the other hand, getting customers to part with their money online or in the store without taking away a tangible product could prove difficult. And with the various reward levels and perks it may be too much information for most customers to digest in the short space of time they in are in store. Buying coffee is an express transaction with most people in a rush to wake themselves up and get back to the office, so convincing them to take the time, listen, understand and ultimately decide on it may prove to be the thorn in Starbucks’ side.
And if it falls to the baristas to make the pitch and case to the customer. Will it end up being a case of sacrificing customer experience in return for a chance at dedication?
It could go either way for Starbucks as only time will tell if their gamble will pay off. That said they have taken an interesting approach with the iPhone app as a medium for delivering rewards and express payment. This is still a relatively new concept, still unexplored by most companies but with a world of infinite possibility.
Motorola recently launched their “Mobile Loyalty Solution” which allows retailers to digitize their subscription and membership services, which is then saved onto a mobile phone. Through this platform a consumer can carry around all their membership details with them 24/7, and can receive updates and notifications of special offers, deals and newly released products. No information as to what platforms it will function on yet, except that they say it will be available on “the majority of mobile phones in the U.S. market today”.
Yowza!! have taken a similar approach, but purely with coupons wrapped up in an iPhone app. Yowza!! uses the GPS and 3G (and to a lesser extent the Wi-Fi on the iPod Touch) functionality of the iPhone to pin point your location, then presents on a map nearby stores that have offers or coupons available. All the customer needs to do then is take their phone in, show the cashier the coupon and receive their reward.
All of these are geared purely to drive sales under the guise of saving money, and in today’s technology-centric world it’s surely the way forward. But with a bigger and bigger push on maintaining customer dedication the question has to be asked:
Is your loyalty up for sale?
