Loyalty and Rewards ARE NOT the Same Thing

Loyalty is a very tricky thing to define. Traditionally it is understood as a faithfulness or a devotion to a person, country, cause, group, or brand.  It is anything to which one’s heart can become attached or devoted.  That goes well beyond the transactional elements of a retailer and touches ideas of identity, obsession and even love.  Loyalty can be rewarded, but loyalty usually comes from within, from a story we like to tell ourselves. We’re loyal to sports teams and products (and yes, to people) because being loyal makes us happy.

Businesses seek to become the objects of loyalty, in order to have their customers return. Brand loyalty is a shopper’s preference for a particular brand, be it a retailer or product, and a commitment to repeatedly purchase that brand in the face of other choices. Traditionally, businesses establish loyalty programs which offer rewards to repeat customers, and often allow the business to keep track of their preferences and buying habits.  But is it loyalty?  It could just as easily be understood as opportunism – it is transient and fleeting, driven by a transactional relationship rather than long-term engagement.  Truly loyal customers understand that there’s almost always something better out there, but they’re not so interested in looking.

And it’s wise to remember that loyalty takes on different flavors across the globe. In terms of loyalty programs, there is a wide variety. Hong Kong offers many loyalty programs which include Octopus Rewards, which started as a chip based smartcard for transport and now, the Octopus cards can be used to earn points in certain shops, including McDonald’s and Wellcome supermarket. The idea is that the rewards and loyalty are derived from the shared wellbeing of the group.  Loyalty is about more than an individual and the business, it is about facilitating interactions within the socio-cultural network as a whole.  It is a subtle difference, but important in that it moves the decision process away from simply finding “good deals” to a reflection of one’s place in the social structure, with Octopus Rewards becoming a facilitator of what it means to be a good person.  This is reflected in the historical and cultural underpinnings of China (see The Sociology of Loyalty by James Connor for more detail).

Increasingly, companies complain that loyalty program discount goods to people that are buying their goods anyway, and that the expense of doing these programs rarely pays. Other critics see the lower prices and rewards manipulate customers, providing them short-term gains, but ultimately leading to feelings of resentment. Loyalty programs established in Russia have been less successful than anticipated because they are seen as an intrusion into a person’s life.  To some, participating in a loyalty program funds activities that violate privacy (Doing Business in Russia by Sergey Kolpashchiko).  Again, as with China, history and cultural patterns shape expectations and beliefs about these programs.

So if rewards programs are no guarantee and significant cultural differences shape whether or not a loyalty program will take root, how do you establish real, meaningful, long-term loyalty?  Well, the good news is that there are universals.

As wealth increases and people have more free time to spend shopping experience and interaction with the retail space becomes more important (see The Comfort of Things by Daniel Miller).  Loyalty becomes less about price incentives and more about catering to notions of identity, personal comfort and local identity.  It becomes intertwined with establishing emotional bonds that translate into devotion.  Part of why Heineken has done so well in the global market is that it appeal to a sense of nationalism when appropriate (sponsorship of soccer teams in Latin America).  The reward is being associated with a winning team and the Heineken give-aways that happen at games.  In retail the challenge has largely been overlooked, but the possibilities for establishing long-term relationships rather than short-gain transaction increases are virtually bursting with possibilities

Loyalty, then, relies on shifting the conversation to achieve a specific paradigm: quality of product, service and experience leads to customer satisfaction, which leads to customer loyalty, which leads to profitability. Marketing and advertising draw upon the positive experiences of those exposed to a truly loyalty-centered business model inspired ventures to attract new customers.

Rewarding loyalty for loyalty’s sake is not an obvious path, but it’s a worthwhile one.  The idea that shifting the focus from paying people for sticking it out so the offering ends up being more attractive to one of deep engagement involves risk, commitment and a well developed strategy. But the payoff moves the business to one of volumes to one of margins. Tell a story that appeals to loyalists, engage them and you win. Treat different customers differently, and reserve your highest level of respect for those that stand by you.  That’s when you will see devotion and brand loyalty that cuts across global borders.

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