Provocateur:

Acquiring and retaining high-value customers has become increasingly difficult in a world with an oversaturation of marketing messages and a scarcity of consumer attention. In this new normal, winning new “best” customers and sustaining their loyalty means that marketers must focus more on “delivering an experience” and less on primarily emphasizing price or discounts, according to research from Maritz and The Wise Marketer.

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Consider: In the study, 40 percent of customers who are “very loyal and only buy their favorite brands,” which we call Resolutes, identified a great customer experience (CX) or great product as a loyalty driver. Only 31 percent of Transients, customers who are “somewhat loyal, but can be convinced to switch,” said the same. The gap widens for discounts as a loyalty driver. Nearly half of Resolutes (48%) indicated a preference for discounts, versus 66 percent of Transients.

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This demonstrates that Resolutes want value for their money and a great experience. Transients, on the other hand, are clearly more focused on discounts. Keeping this latter group engaged will erode margin. And because promotional offers are easily duplicated by a competitor, price-related engagement tactics are, as the adage goes, a one-way race to the bottom.  

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Your new loyalty currency

More broadly, this research underscores a new and important truth: The experience your best customers have with your brand when they engage with you is fast becoming your new loyalty currency. And that’s good because the experience you orchestrate is truly unique to your brand, especially when it’s ever-evolving and is designed and reserved for your best and high-potential customers.

Aligning loyalty strategies more closely with CX strategies presents a major opportunity for brands to improve the overall experience they deliver to their best customers. This loyalty experience — what we’re calling LX — and CX are closely related, with one significant difference: As a discipline, CX is generally focused on all customers and the quality of their interactions with a brand. Loyalty strategies, on the other hand, are most effective when focused on best and high-potential customers, which generally accounts for about 25 percent or less of your total customer base.

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CX sets the bar; LX raises it.

In other words, LX is the CX of your best customers. Thinking of LX in this way will lead you to see the importance of optimizing the entire brand experience for those loyal customers, not just the loyalty program experience.

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Create compelling loyalty experiences

An important first step when attempting to design memorable loyalty experiences for your best customers is to expand loyalty solutions beyond just points and rewards. Points and rewards tend to fall into a category we call “Mercenary Loyalty,” simply meaning loyalty that is focused on optimizing a reward or offer. There are at least two other types of loyalty that marketers should consider and that require a focus beyond a reward.

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One is “True Loyalty,” where more emphasis is placed on the quality of the overall brand experience. This could include incorporating techniques such as gamification, highly exclusive status-based interactions, and predictable randomness — anything to make the experience feel special or unexpected.

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Another is “Cult Loyalty,” where marketers can focus on aligning with their customers at a values level and connecting those consumers around a brand
tribe. This type of loyalty requires creating shared experiences that range from point-pooling (members joining together to redeem a collective reward) to members-only events where a brand’s best customers can meet in person.
None of these approaches are meant to replace points and rewards; instead,
the aim is to build on them to enable a multi-loyalty strategy and, ultimately, a curated loyalty experience.

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Traditional programs do still work, but consumers are experiencing fatigue with them. Our research found that 44 percent of consumers who stopped participating in a loyalty program cited “rewards were too hard to earn” as their primary reason, and that 25 percent of consumers active in loyalty programs can’t even recall the last reward they redeemed for. This suggests that marketers who overwhelming focus on Mercenary Loyalty should instead look to develop deeper relationships and drive retention with their best and high-potential customers through a powerful and differentiated loyalty experience.

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The marketers whose brands will win big are the ones who combine the best aspects of Mercenary, True, and Cult loyalty and think about that overarching loyalty experience; that is, loyalty as a lens through which loyal customers view their entire customer experience. Marketers who think about loyalty in terms of
LX — retaining best and high potential customers while offering loyalty solutions beyond points and rewards — will be poised to build sustainable customer lifetime value and the kinds of emotional bonds that can’t easily be severed.

About the Authors

Barry Kirk is VP of Loyalty Strategy, for Maritz Motivation Solutions, and a certified loyalty marketing professional. A loyalty-industry veteran who has spent about 12 years with Maritz Motivation Solutions and Martiz Loyalty Marketing, Barry also held loyalty management positions at Bunchball.

JR Slubowski is Senior Director, Marketing Strategy and Consulting, at Maritz Motivation Solutions. JR has served in senior marketing and consulting positions at LoyaltyOne, Mastercard, and Martiz Loyalty Marketing, among others. Additionally, he taught several strategic marketing courses as an adjunct professor at Maryville University.