We all have been exposed to loyalty programs, every retailer seems to have a loyalty program running. Research tells us that there would be close to 18 such programs an average shopper would be enrolled. Thousands are spent on setting up and running these loyalty programs, but how successful are these programs?

Again as per a study done 1/3rd of points accumulated by shoppers are not redeemed. The reason these loyalty programs do not do well are because these loyalty programs are creating loyalty for a special deal or offer and not for the business. The true value of a loyalty program is when the program creates sufficient reason for the customer to resist competitive offers/discount while they continue to do business with your company.

Loyalty could be calibrated at various levels from “Convenience” where the only purpose the customer is loyal to you is because you are the most convenient option available to “Cult” where the customer develops a deep association with brand values as a result the brand becomes symbolic of the values the customer would want to be identified. Examples are “Apple” and “CocaCola”.

In order to build true loyalty the concepts of engagement and motivation need to be first understood

Engagement as per Forrester’s research can be defined as having 3 parts

• 1 - A deep emotional connect with the brand
• 2 - High levels of active participation
• 3 - A long-term relationship

Motivation as defined by BusinessDirectory.com

Internal and external factors that stimulate desire and energy in people to be continually interested in and committed to a job, role or subject and to exert persistent effort in attaining a goal.

Motivation can come from within a person (let’s term it as intrinsic motivators) and from outside (let’s term it as extrinsic motivators). The power of intrinsic or extrinsic motivators depend on the nature of task that is being executed. Loyalty is a subject that best lends itself to intrinsic motivators.

Below are 5 intrinsic motivators

• 1 - Autonomy
• 2 - Purpose
• 3 - Mastery
• 4 - Competition
• 5 - Recognition

Hence an effective loyalty program should be able to engage customers and leverage the 5 intrinsic motivators successfully. Cult loyalty is not something that would be built in a day but putting in place a loyalty program with the right framework would certainly ensure you get there.

In our next blog we could cover the 5 essentials for an effective loyalty program.