In a world of ever-growing loyalty programmes and schemes, how can you make yours stand out?
At the heart of it, loyalty is a multifaceted concept, with competing functional and emotional factors at play.
Often more weight is given towards the functional aspects, like price and product availability. Whilst these are important, with something as inherently emotional as loyalty, there's a missed opportunity: To leverage behavioural science in crafting a compelling rewards scheme that keeps both customers and businesses happy.
Viewing customers through a behavioural lens
Understanding your customers and their aims can be key when offering rewards they'll appreciate the most. Meyer‐Waarden et al (2013) offer an insight into how customers can be segmented according to their purchasing orientation.
According to this author, the five main types of shoppers are:
- Economic: Their decisions are highly influenced by price
- Hedonic: Aim to find pleasure from their shopping experience
- Apathetic: Dislike shopping and want to be in and out as soon as possible
- Brand loyal: Prefer the reassurance of brands they’ve shopped with previously
- Social-relational: Desire a more personalised and interpersonal relationship with the brands they shop with
It’s important to note that customers will have elements of each orientation, and it may differ according to the purpose of their shopping experience. However, they'll naturally align most with one of these five, and once this has been established, you can begin to tailor rewards. For instance, Economic shoppers will most value discounts, compared to Hedonic customers who crave rewards that will enhance their shopping experience.
It’s not just what you give, but how you give it
Once you’ve established the optimal rewards for a customer, psychology tells us that the way in which you give it can make all the difference. One of the most famous examples of this is a study examining the tips that customers left after a meal at a restaurant carried out by Strohmetz et al (2002). They found that:
- When restaurant diners received a single after dinner mint, tips increased by roughly 3%.
- When two mints were gifted, tips quadrupled to 14%.
- When the waiter offered one mint, paused and turned back and gushed ‘for you nice people, I’ll give you another’ tips skyrocketed to a 23% increase.
In the context of loyalty schemes, how can we bake in magic moments similar to the third scenario that resulted in a 23% increase in tips? This could be linking rewards to special milestones for customers (like their birthday) or linking rewards to products that you know they like (if data on this exists). Where loyalty schemes sit on an app or online, gamification represents an untapped way of boosting the reciprocity associated with reward giving.
When loyalty alone isn't enough
Jones and Sasser (1995) propose the importance of both loyalty and satisfaction when it comes to growing your customer base. By viewing your customers through this dual lens, the following matrix emerges, with four distinct groups:
Beginning with the supporter camp, these individuals could be considered the foundation of a company’s customer base due to their staying and supportive behaviour. Their wants are superbly aligned with the company’s offering and as a result, this group is the easiest to serve.
Within this group are customers who are so satisfied and whose experience surpasses their expectations, so much so that they share this positivity with others - these are champions. This glowing reference, leveraging the power of social norms, is an effective way of attracting new customers. It's even more convincing if those champions interact with someone they consider to be close to, like friends or family.
On the other end of the scale sit departers, whose main behaviour is leaving or having left unhappy. These are customers ranging from very dissatisfied all the way to neutral - importantly, these neutral customers can also depart. This group also includes customers who, in the past were very satisfied, but having encountered some negative experiences, now find themselves in the departer group. Simply allowing these customers to leave would be unwise, and here firms should do what they can to revert them back to their previous high levels of satisfaction.
Similar to supporters, this group of customers also have a subsection, named objectors. They've had an exceptionally poor experience, and sadly for companies, they're far more willing than their champion counterparts to let anyone who will listen know just exactly how bad it was.
Despite not being as difficult as departers and objectors, elusive and trapped customers can be both time-consuming and expensive to serve. As such, it’s vital for companies to address their needs and attempt to convert them into supporters - and eventually champions.
We’d love to chat if you want to find out more about these segments and see how they might be playing out in your loyalty programme. Get in touch via phoebekent@cowryconsulting.com.
References
Meyer‐Waarden, L., Benavent, C., & Castéran, H. (2013). The effects of purchase orientations on perceived loyalty programmes' benefits and loyalty. International Journal of Retail & Distribution Management, 41(3), 201-225.
Strohmetz, D. B., Rind, B., Fisher, R., & Lynn, M. (2002). Sweetening the till: the use of candy to increase restaurant tipping 1. Journal of Applied Social Psychology, 32(2), 300-309.
Jones, T. O., & Sasser, W. E. (1995). Why satisfied customers defect. Harvard business review, 73(6), 88.