Customers are changing. They expect businesses to want to have an appropriate relationship with them, in which they get treated as human beings. And they’re more loyal to businesses that do treat them like this. But most loyalty programs are designed in a way that creates instead a transactional relationship with the customer. In this gap—which we call the loyalty paradox—lives a whole world of cost, and a whole world of opportunity.
As Kantar Futures argues, we are moving towards a “kinship economy,” in which personal relationships are central, and those relationships then facilitate and foster brands. Among the consequences: businesses need to create engagement that isn’t wholly tied to usage or advertising; and they need to treat people so well that they choose to spend their social currency on your business. At the moment, most loyalty programs are not designed to foster this type of interaction.
Delta Airlines learned this the hard way last year when it effectively devalued overnight the air miles that its customers held. One of the many specialist bloggers described this as “a reminder to always diversify your points;” or in other words, not to be loyal to any one loyalty program. Indeed, across all sectors, the research suggests that consumers hold multiple loyalty cards, while recent payments research in the U.K. by Kantar Futures found that the items in their purses or wallets that most irritated consumers were the loyalty cards. There were too many of them, not used often enough.
This loyalty gap is likely to get worse. Loyalty programs are the hybrid child of marketing and technology, the market expression of “one-to-one marketing.” Although the first recorded example of a loyalty program is in the late 18th century, the modern loyalty industry is a creature of digitized customer management, digitized stock management systems and digitized supply chains. As we move into a world of hyper-connectivity, in which customers and supply chains alike are swimming in data, it is more likely that loyalty programs will drive the customer relationship, rather than the other way around.
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