As I write this, I’m sitting about six rows back from where I normally sit on this flight. The space around me feels like it has shrunk – again. They haven’t offered me the nice headphones. I didn’t get a newspaper like I used to.
I’m not grizzling.
After all, they’re such little things aren’t they? And they’re a formula. If you’re a gold flier you get this. If you fly even more frequently than that, you get this.
The thing is that formula of recognition is now well entrenched in my flying experience. I’ve gotten used to it – to the point where I usually don’t even notice when it happens, but I very quickly notice when it doesn’t.
That got me thinking – What happens when your business model clashes with the economics of rewarding your customers? What do you do when it seems like your brand can no longer afford to give people who buy from you the “bonuses” that they are so used to?
First of all, I think it’s important to understand that such a situation constitutes more than just a change of policy. It amounts to a change of buying habit – and habits, as we all know, are infectious and addictive behaviours. If you do need to make a change to a programme, that means you can’t just send out written notice of new measures. You need to seriously think through how you’re going to successfully change the habits for the people affected, and to what.
So many times I’ve watched brands change aspects of a loyalty programme with conflicting results. The pressures on the bottom line might ease (success) but the risk to the topline going forward actually increases (not a success) as people review whether this habit still feels worth it to them.
Given the above, what can you do to adjust the experience so that it delivers as closely as possible to the original feeling, whilst meeting financial targets? To arrive at an answer I sometimes pursue a line of enquiry used in experience design. What do customers feel now, what do we want them to feel, and what can we do/introduce that closes that gap? Focusing on how people feel rather than what they get widens the field for possible answers.
One opportunity that can be overlooked in a change-over are the component elements of the habit itself. Loyalty programme overhauls tend to focus on one feature – qualification for the points system. But the habit around an activity often extends way beyond just what is earned. In facts, points are usually at the end of that process. What people value is how rewarded they feel across the entire experience given the money they have spent. So, on an airline for example, squeezing up seats or making the meals smaller or even using less staff or less experienced staff, can all make customers feel short-changed, regardless of whether the functional aspects of the flight have changed. Even the points system may not have changed, but the experience around earning those points can make people feel they are being economised. The habit as a whole has been adjusted – and that has the potential to shift customers’ perceptions of the whole experience, and therefore potentially compromise their loyalty, regardless of whether or not they get the rewards they’re used to.
So it’s the emotions across all those touchpoints that need to be considered – not just the points themselves. Otherwise you risk reducing your loyalty programme to a policy around entitlements, and at that point, as the Righteous Brothers used to say, you will indeed have lost that lovin’ feeling.
If you do need to make changes, how should you approach it? The temptation is to make cuts across the programme. But there’s a fine line to be negotiated here because one of the clear risks is that you alienate that relatively small percentage of people who transact with you regularly and who can and will take their business elsewhere. On the other hand, if you slash the benefits to those just starting out with you, you risk giving them no incentive to forming and growing the habit of dealing with your brand.
The FlyBuys programme in New Zealand is perhaps the most successful consumer loyalty programme in the world in terms of household penetration. They seem to me to use a successful combination of points, personalisation and customised special offers to make rewards more and more specific to each person over time, as they get to know them. Great approach.
Increasingly, my sense is that brands running rewards programmes will need to abandon “dumb” programmes (buy 9, get one free type programmes – transaction based, no market intelligence gathering, no specific customer insight gathering) in favour of programmes that intelligently offer people experiences/opportunities that feel right to them, within a framework of scarce resources. In terms of maintaining/lifting the perceived quality of rewards that people get for a decreasing budget, that could well mean receiving less rewards but ones that are better tailored to feel just as valuable.
So if, for example, there is a need to take away the headphones from an economic point of view – what did having the headphones telegraph to loyal customers, and is there something else you can now do that sends that same reward message to the brain at less cost to the company?
As always, what people actually get is far less important and influential than what they feel they get.
Oh excellent. The person in front just pushed her seat back.