Only a small percentage of businesses systematically assess the generosity of their loyalty programs. Fewer still care about how their members feel about the advantages they receive as part of those loyalty programs.
However, a generous program is more likely to provide the intended results than a stingy one.
Beware of competition in the loyalty market!
Customer loyalty programs have been increasingly popular among businesses looking to build long-term relationships with their clientele in recent years. The goal stays the same whether it is earning points, earning badges, or receiving special benefits. It is all about encouraging purchase behavior and brand engagement.
Restaurants, supermarkets, gas stations, pharmacies, home improvement centers, have all opted for loyalty programs and the list goes on… Loyalty programs continue to multiply, giving consumers the opportunity to join more programs, regardless of the sector of activity of the business.
Consumers who have had enough of being charmed
Loyalty program have come under increased scrutiny from consumers. Is the point value fair? Is the program sufficiently rewarding? Moreover, is it possible to rack up points quickly? When establishing a loyalty program, businesses should think about these questions.
Customers have evolved the ability to analyze various programs and join only those that are truly worth their time and money. Nobody thinks twice about switching from one program to a competitor’s program if the latter proves to appear more generous!
Rewards worthy of the level of commitment (and expense)
Be cautious, because simply rewarding your most loyal consumers is not enough. Make sure that the rewards you provide are in accordance with what members feel they deserve in exchange for their loyalty. This will prevent disappointing them and producing dissatisfaction or even a sense of unfairness.
Fairness, a principle of justice… and loyalty!
The Journal of Hospitality Marketing & Management released a study in 2018 that looked at how members felt about their loyalty programs. Researchers used the Theory of Justice to shed light on loyalty program participants’ perception of fairness in order to conduct their research.
The American philosopher John Rawls invented this theory in 1971. It is founded on three key elements: procedural justice, distributive justice, and interactional justice. If this all seems a little overwhelming, let us help you understand these specific terms.
The 3 key elements that should support a loyalty program
1 | Procedural Justice (to put an end to “stingy” programs)
The first element of the Theory of Justice, procedural justice, is concerned with the fairness of the process. In the realm of loyalty programs, this usually translates into terms of incentive systems. A program will be perceived more generous if members can immediately experience the benefits of the loyalty program and if the earning and redemption of rewards is straightforward.
To put it another way, the rewards must be accrued at a rate that the customer finds appealing. If you have to spend $1,000 on gas to get nothing but a free chocolate bar in return, your program is unlikely to appeal to many people.
Allow your members to gain points in a variety of methods, including financial, experiential, and social, to boost the perceived generosity of your program. A member might earn points by completing surveys and referring friends. They might also earn points by participating in events and meeting financial or behavioral objectives, in addition to earning points on the total amount of the bill. It only takes a little imagination to find ways to reward members outside of the buying cycle.
2 | Distributive Justice (because not all members are equal)
The second element of the Theory of Justice is distributive justice. This one focuses on people’s perceptions of fairness, or how resources are allocated among members.
This facet of loyalty relates to how members are treated and rewarded in comparison to regular consumers. Consider rewarding your most loyal customers by providing them with unique privileges, for example.
Want a proven method for doing this? Create a tiered structure that allows you to alter the value and number of rewards based on how committed your members are. In order to receive more generous rewards and perks, members will progress through the various tiers based on their purchases or engagement.
3 | Interactional Justice (or why it’s crucial to interact with members to recognize them)
The third and final element of the Theory of Justice is interactional justice. It relates to the interpersonal aspects of your communications. This aspect refers to the relationship that exists between the business and the members in the context of loyalty programs.
All points of contact, the frequency of communication, and the kind of relations between corporations and loyalty program members are all considered by interactional justice.
Therefore, customer loyalty increases when a firm is open and honest with its most loyal consumers, rewarding and empathizing with them. To achieve this, establish a communication plan that includes a welcome phase, tailored content, a happy birthday message, a reminder for inactive members, and so on.
The end goal is to provide a generous loyalty program
In conclusion, while each element improves the relationship between a business and its clientele, Shulga and Tanford’s findings imply that members place a larger priority on the relationship between the reward received and the work required to get it.
Keep in mind that the appeal of a program is directly correlated to its generosity. As a result, a “stingy” loyalty program might generate a perception of injustice. This can harm the relationships you are seeking to cultivate with your clients.
Reference : Shulga, L. et Tanford, S. (2018). Measuring Perceptions of Fairness of Loyalty Program Members, Journal of Hospitality Marketing & Management, 27:3, 346-365.
