Rethinking Loyalty

“What’s wrong with our product?” Few businesses ever ask their customers for such an honest evaluation. While we often hear that customers want to feel valued, many companies don’t understand how to establish that critical emotional tie.

Indeed, emotions are the main driver of loyalty. A recent report conducted by Capgemini found that 82 percent of consumers who have a high level of emotional engagement with a brand will lean toward loyalty when making a purchasing decision.

Establishing an emotional connection with customers means looking beyond the standard transactional reward or “points” programs. In fact, 54 percent of rewards programs have fallen inactive, with 28 percent abandoning the programs without redeeming any points.

The study, “Loyalty Deciphered — How Emotions Drive Genuine Engagement,” highlights several key influences on what fosters loyalty with consumers.

Here’s a closer look at some key takeaways from the report:

Honesty builds trust

Let’s revisit the question of “what’s wrong with our product?” Domino’s Pizza asked themselves this in late 2008, and launched a campaign called “what is wrong with Domino’s Pizza?” At the time, Domino’s was coming off a tough year in which its stock price fell to $3.85 per share. The company pitched the question to their customers across several key channels, including on social media.

As a result, “people felt that Domino’s was honest and really trying to hear them, which built trust,” says Professor Renee Gosline of the MIT Sloan School of Management.

Based on the customer feedback this project generated, Domino’s made several improvements. By 2017, the company’s stock reached a high of $221.58. It’s clear, as the report states, that straightforward and honest initiatives attract a wider audience and build the trust that organizations need to gain customer loyalty.

Reciprocity is the foundation of loyalty

“Show your love,” says one focus-group participant quoted in the study. 86 percent of consumers with high emotional engagement say they expect a brand to reciprocate loyalty, regardless of their participation in a loyalty program. This means responding to customer complaints promptly, thanking customers for passing a spending milestone, and listening to their suggestions for products or service.

For example, in 2012, PepsiCo launched a “Do Us a Flavor” campaign for Lay’s potato chips in which the company asked customers to submit their ideas for new flavors. Lay’s received 3.8 million flavor submissions in a 12-week period, 1.2 billion impressions on Facebook and an 8.5 percent increase in sales.

Service drives sales

Favorable interactions drive positive results. According to the survey, 83 percent of emotionally engaged consumers said their loyalty will increase following a positive interaction with after-sales support. This means organizations should think about their service channels as relationship channels rather than cost centers. 83 percent of emotionally engaged consumers want multiple ways to interact with brands, compared with 36 percent of the less-engaged customers.

British fashion house Burberry has built customer interactions around technology. The company can track, remember, and anticipate consumer desires. Furthermore, in each Burberry store, employees have a tablet that displays information related to customers’ in-store purchases and online activities on Burberry.com.

Employees make buying suggestions based on purchase history or social media activity. Burberry’s focus on personalized customer management resulted in a 50 percent increase in repeat customers.

Loyalty is personal

Points are nice, but what do they really mean? Rewards should make customers feel like they’re gaining something of value. Leaders are more likely than laggards to offer rewards and incentives that are important to consumers, such as personalized product recommendations, allowing consumers to choose rewards they deem most valuable to them, and recognizing and celebrating special moments in consumers’ lives.

French cosmetics company Sephora offers an innovative rewards program that goes beyond the traditional points system. Its Beauty Insider program places members into three tiers based on their spending. The program allows members to use their points to purchase beauty products. Members in the higher tiers gain access to exclusive products, events, and weekend trips.

As Heiner Evanschitzky, professor and chair of marketing at Aston Business School in the UK, says: “From learnings in the humanities and biology and over millions of years of evolution, humans can only survive when they are in loyal groups. Brands and companies can capitalize on this human need.”

Loyalty is a human emotion. The benefits to building stronger emotional ties with customers are significant. It’s time for brands to stop thinking of loyalty as a transaction, and reimagine how to show their customers brand love in action.