Loyalty program innovation: Giving customers the power of choice

Think of the Starbucks addicts around you. They line up at the nearest Starbucks every morning to get their daily caffeine kick, scanning their phones for My Starbucks Rewards at the counter. 

Despite the steep cost of a free drink – 31 regular coffees – the coffee addicts stay committed. In fact, a study found that the Starbucks app users were 5.6 times more likely to visit a Starbucks every day, and the reward program contributes to 40% of its total sales. 

What’s the reason behind this stellar success? The answer is hidden in their customers’ engagement behaviors.

Starbucks has emerged as a customer loyalty front-runner because they employed a concept called behavioral loyalty – rewarding customers for their behaviors above and beyond their purchases. The vast majority of customer loyalty programs reward customers for their purchases but not in all the other ways that customers engage with a brand.

If you’re in the business of running your company’s loyalty program, this behavioral aspect can make all the difference between being a winner or a loser.

How can you move past a one-dimensional purchase-dependent loyalty program? 

In the absence of a universal definition for loyalty, every company has assigned a dollar value to loyalty. This is what most programs boil down to: the more a customer spends, the more loyal they are. 

Unfortunately, this oversimplification defeats the essence or purpose of loyalty, only giving credit to price-sensitive customers. This is one-dimensional loyalty. 

However, if you look at customer behaviors during the entire customer journey,   a plethora of options open up.

Pre-purchase behavior – encourage customers to join the brand’s communities and to learn more about the product or service

Starbucks’ loyalty customers can access the menu on the app and place their orders even before they physically get to the store. The pre-purchase stimuli kick into place when they order from personalized promotional offers. All they have to do once they reach is head to the counter and grab their order.

To add to this, if the loyalty app users play games on the app, they can earn bonus points. The brand is awarding time spent on the app, even when it does not directly lead to a sale.

Pre-purchase behavior can be as basic as inviting prospective customers to trial new products and services and to give feedback on the new offer. Customers can even be offered expedited delivery of their purchases, or their minimum purchase quantity might be waived off, simply because they participated in a pre-purchase promotion and shared their feedback. 

GM leverages this very well: customers who join GM’s loyalty program are rewarded for enrolling in the program, which earns them 1000 points, and also on completing their profile on the first login – another 1000 points. These points can be redeemed towards a free service or even as an allowance of up to $500 towards a new car.

Ask yourself — do you reward customers when they are making an active effort to learn about your products or services? Do you reward them for going through your videos and Instagram handles, downloading a product handbook, or leafing through success stories? 

Purchase behavior – to ensure that customers act on compelling offers and appreciate the opportunities that open up for them

Not very long ago, there was the Chevrolet’s Truck Legends program that featured real people and not actors. It featured loyal customers driving their trucks, and talking to other people who loved trucks on an all-expenses-paid trip by Chevy. 

The beneficiaries of that Chevy trip are grassroots ambassadors now. They are invited to vehicle reveals and NASCAR races, all for free. And that’s because the brand wants to have a relationship with these people. 

The brand wants each of its customers to think that they are its most important customer. That is in essence what engenders loyalty.  

Unanticipated benefit – truckers at these events have been found to be saying that all their kids drive Chevrolets. Now that is what we are talking about: loyalty that becomes a legacy.

Another angle to explore here is that of coalition rewards or reciprocal discounts. If you are a truck manufacturer, offer reciprocal discounts towards the membership of the tire dealership that kicks in once the number of miles has been exhausted on the first set. Purchases can be made lucrative in many ways beyond the “spend more, get more” models. 

Post-purchase behavior – to ensure that you keep that edge over your competitors

What do your customers do after they buy? 

If they are like us, they probably hit the “Your orders” section on their profiles to check when their purchase will reach them. Or they might tweet about their new purchase or take a screenshot and message it to a friend. 

Moreover, you can reward your customers for:

  • their feedback on how well they liked your product or service
  • if they utilized customer support and their satisfaction level
  • feedback on their satisfaction with respect to setting up your product
  • and so on  

Starbucks’ rewards program, for example, continues to engage the customer beyond the “ordering” transaction — it shows members a personalized home page and provides them with access to the playlist of the desired store. It also allows members to send gift cards to other members and friends through the app.

What does this mean for the customer? 

The customer gets to decide what loyalty means to them – is it only the final purchase, or is it the host of brand advocacy behaviors that they engage in? 

It also lets the customer choose how they want their loyalty to be recognized. Do they want the special benefits of the Truck Legend program or do they want to share their earned points with family and friends as gift cards? 

The idea is to put the customer in the driver’s seat of your loyalty program. Every pre-purchase and post-purchase touchpoint is an opportunity to create thousands of impressions with the customer … and win their loyalty.