When you hear the term “customer loyalty,” what do you think of? While it’s easy to lump the concept of loyalty into one heart-covered box, it’s actually more layered than that.
Customer loyalty can be defined in four unique ways:
Each of these terms represent different relationships customers can have with your brand, and knowing what type of relationships your customers have with you is incredibly important. Now more than ever before, customers are looking to build real emotional connections with the brands they shop with, but what does that actually mean?
In order to create these loyal relationships you need to know where your customers fall on the loyalty spectrum and, more importantly, where on the spectrum they need to be to develop the strongest relationship with your brand.
Inertia loyalty makes it hard to leave, not enjoyable to stay
On the surface, inertia loyalty sounds pretty appealing: it optimizes your brand’s barrier to exit, making it less likely that customers who shop with you will leave for a competitor.
However, this is not an effective form of customer loyalty. For starters, the reason your customers aren’t leaving isn’t because they actually care about your brand — they’re just sticking around because it’s too much work to leave! Whether it’s a result of contracts, service cancellation policies, or simply a lack of better options, your customers feel trapped, not valued.
Inertia loyalty focuses on acquiring new customers as opposed to building relationships with existing ones.
Not only that, but brands that pursue this type of loyalty also do very little beyond the customer acquisition phase. By making heavy use of one-time incentives and discounts, you’re ignoring your existing customer relationships and putting all of your attention towards maintaining a barrier to exit instead of strengthening connections with your customers.
These factors make inertia loyalty a very ineffective long-term strategy that can negatively influence your acquisition spending. In the end, it simply won’t hold up in competitive markets. Anyone can be beaten on price, and once your customers find an easier, cheaper option, they’ll be gone faster than you can say “please stay!”
Mercenary loyalty is rooted in transactional relationships
If inertia loyalty is the least effective type of customer loyalty, mercenary is right behind. That’s because it is extremely easy for this type of loyalty to become purely transactional.
When customers only care about how big of a discount you can give them, it's impossible to develop deep relationships with them.
In simple terms, mercenary loyalty is defined as “paying” customers for their loyalty. This could be with traditional punch cards, excessive membership discounts, or pay-to-join loyalty programs. Each of these strategies motivate customers to stay by helping them save money, basing their relationship with your brand on the money they do or don’t spend with you as opposed to how your brand makes them feel.
This keeps your connections with customers from being anything but shallow. Your customers only want to engage with your brand in order to earn a new discount, putting you in direct competition with anyone who is willing to offer them more. This ultimately puts you into a “race to the bottom” that significantly stunts your growth.
Cult loyalty can't be cultivated
Have you ever known someone who is absolutely obsessed with a brand or a sports team? Chances are they’re always happy to talk about it and get really excited when given the opportunity to share their passion with someone else.
Apple, Disney, and Nike are only a few examples of brands that have tapped into this idea of cult loyalty. When customers develop cult loyalty for a brand, they start to blend their own personal values with those promoted by the brand they’ve grown to love. As a result, rejecting the brand starts to feel like rejecting their own values.
Cult loyatly is extremely powerful but virtually impossible to generate strategically.
This makes cult loyalty a nearly unbreakable form of loyalty, but there’s a catch. These powerful emotional connections are almost impossible to engineer. No matter how effective your marketing campaigns are, cult loyalty can only emerge organically over time. Without a clear way to develop it, it becomes an elusive unicorn that can be cultivated once it exists but is nearly impossible to predict or manufacture.
True loyalty is powerful and authentic
True loyalty is the holy grail of customer loyalty because it is built on reciprocal relationships. This fourth form of loyalty is inspired by emotional relationships that develop when customers experience real value from the brands they shop with. This value is often a combination of transactional and experiential benefits and motivates customers to “pay it back” with repeat business.
True loyalty is built on reciprocal relationships.
This creates a powerful two-way exchange of value that supports itself. With true loyalty, competitive offers, convenience, and the promise of “something better” don’t matter because every customer’s connection to your brand is based on how much they trust your brand. By delivering an experience customers feel good about, you create a sense of belonging that leads customers to believe you have their best interests in mind.
Make the switch to true loyalty with an effective rewards program
When you consider the four different types of customer loyalty, it’s easy to understand why true loyalty is your most competitive advantage. When customers genuinely care about your brand, they’ll be much more willing to stick with you over time. That’s because the relationship they have with you becomes the only reason they need to stay in your brand community.
A rewards program fuels the emotional relationships that make customers want to stay engaged with your brand over time.
The most effective way to build these relationships is with a rewards program. As the best community building tool, a well-designed program is perfectly positioned to push the needle of every customer relationships towards true, emotional loyalty.
That doesn’t mean you can just start a program and walk away, though. In order to inspire true loyalty with rewards, there are three important considerations you need to incorporate into your program design.
Consider what your customers actually value
A program that engages more than one customer motivator is going to be more successful. This is the biggest difference between mercenary loyalty and true loyalty.
While mercenary loyalty can be effective to a point, it isn’t able to motivate more than one type of customer. The reality is that your customers’ motivations are changing all the time, which means your rewards program needs to be able to address what they currently value most.
Design your program with customer feedback in mind to make sure you meet their needs.
The only way you can do that is by taking the time to learn what your customers want from your brand and, just as importantly, what they value about your brand. Making these needs the foundation of your program sets you up to deliver an experience that evolves with your customers’ needs. Consider adding experiential rewards, brand-specific product offerings, and creative points names to tie every element back to why your members fell in love with your brand in the first place.
When your customers can see their needs being met with your program, they’ll be able to see how much you care about them. This recognition will plant the seeds of true loyalty that will only continue to grow as you seek and act on their feedback.
Make your program mutually beneficial
When you’re building your rewards program, put yourself in your customers’ shoes and consider what you would want to get out of the relationship with your brand. Better yet, ask yourself what you would be willing to do to get it!
When customers truly love your brand they’ll be willing to tell others about it and, most likely, want to! Research has shown that 83% of customers are willing to make a referral, which means your loyal customers are more than happy to help you out by telling their friends and family about you. This comes from a desire to give back to your brand, tapping into some of the principles of cult loyalty.
A mutually beneficial rewards experience taps into cult loyalty by empowering people to share their experiences with others.
You can harness this desire to give back with customer referrals. Not only do they expand your marketing reach but they also give your loyal customers a sense of ownership while still delivering value.
This ownership allows you to use the concept of cult loyalty but within a reciprocal relationship. When customers share the value of your brand with their friends and family, they deepen their emotional connection with you by letting others know that they’ve aligned themselves with what your brand represents. At the same time, these actions improve your community’s all-around ability to sustain itself as more customers join and get engaged.
Referrals are the best way to emphasize emotional connections because they make customers feel important.
By including referrals as part of your rewards strategy, you make every customer feel like an important part of something bigger. A referral strategy turns every member into advocates and puts them in control of their role in your community. This experience perfectly complements their desire to both give and receive in their relationship with your brand, once again moving them closer to true emotional loyalty.
Deliver a positive customer experience
Above everything else, true loyalty depends on your ability to deliver a positive customer experience. This means that everything from the rewards you offer to the messages you send need to deliver a full 360 degree experience that makes customers feel good about their relationship with you.
An effective rewards program is the sum of all its parts, not just the rewards it offers.
One of the best ways to do that is by investing in world-class customer support. You need to run a program that makes it easy for your team to fix a customers’ points balance and even easier for them to understand how your program works. This sets them up to answer questions quickly and effectively as new members join and start exploring.
You can also improve the customer experience by reminding customers when they have rewards to use. Building a program with onsite notifications and timely email messaging is the best way to help customers get the most out of your program. By reminding them of the value they’ve earned, you demonstrate a commitment to meeting their needs and exceeding expectations, which will only improve how they feel about you.
Helping customers get the most value out of your program lets them know you care about their experience with your brand.
Finally, build a program that is as beautiful as possible. Putting an effort into the way your program looks will make it easier for customers to remember and look forward to the experience you deliver.
With all of these elements working together your rewards program will deliver more value, leave a good impression, and include customers in your brand story. Through your program you will have the power to encourage the true customer loyalty that will set you up for long term success.