An article in the New York Times, titled Using Smartphones and Apps to Enhance Loyalty Programs, recently caught my attention. The author John Grossman talked about how the world of loyalty schemes, once the province of car washes and sandwich shops with their ‘ten-punch’ punch cards, is about to be blown open through the use of loyalty apps on smartphones.
The article spoke about two kinds of behaviour enabled through a programme that rewards loyalty, in this case defined as frequency of purchase. The first is something called the ‘endowed progress effect’, where research has proven that a ‘ten-wash’ punch card with the first two washes already punched will be redeemed faster than an ‘eight-wash’ card. People seem to be pulled along a repeat purchase path faster when they think they have a head start on the game.
The second is ‘random intermittent reinforcement’, which refers to the act of providing an unexpected reward to the most valued customers (ie, a free drink at checkout). Think slot machines. If people believe that they have a random chance of winning something, they’ll be more likely to drop their quarters in the machine again and again.
But as I read this, I was thinking, is that what loyalty has become in the age of digital media and mobile apps? Is loyal behaviour only built by the manipulation of that behaviour through incentives?
I would argue that loyalty bought this way is empty loyalty. It may work to drive traffic in the short term, but without an underlying brand affinity, driven much more by other emotional and rational considerations, these sorts of schemes are bound to fail, and for several reasons.
First, we’re saturated with loyalty programmes. They’re no longer differentiators. Rather, they’re a price of entry. We’ve come to demand and expect to be rewarded for our purchases. Second, for a loyalty scheme to work, it has to be based on a foundation of product benefits. If it doesn’t feel good to do it, eventually no incentive is high enough. Third, the proliferation of options, and the ease with which one can switch between brands, means that there’s a brand right next door that will step in when another fails, loyalty programme or not.
All of this means that the loyalty I exhibit today could easily be discarded tomorrow. Only through a more enduring bond – that can stand up to the efforts of others to buy that loyalty through better, more ‘rewarding’ incentives – will a brand achieve lasting loyalty.
In other words, the path to loyalty is the same as the path to building a successful brand.
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