In Episode 154 of The CX Cast (subscribe!), we were excited to have our colleague, Principal Analyst Emily Collins, join us to talk about loyalty programs and their influence on customer experience. Here are five things I learned during our conversation: 

  1. Airlines started it. Loyalty programs started 30-plus years ago in the airline industry as a reaction to deregulation. Without strict regulations on which routes airlines could fly, the carriers needed another way to ensure repeat business. Loyalty programs — and the sometimes irrational behavior of fliers chasing points and status – were born.
  2. Discounts aren’t enough. Most loyalty programs offer discounts, but that’s not enough. Discounts should be viewed as the starting point of loyalty program benefits, not the entirety of benefits. After all, most companies offer discounts to new customers, during sales, and, it seems, with more and more regularity throughout the year, judging by our email inboxes. Once customers sign up for the loyalty program, companies need to go beyond discounts or frequency-based savings to offer something else.
  3. Experiential perks > discounts. The best programs look for perks that make the experience better, more convenient, or that create emotional attachment to the brand through memorable experiences or moments that come as part of the loyalty program. For an example of creating a better, more convenient experience, think of Starbucks’ mobile order-ahead feature, which is available only to Starbucks Rewards program members.
  4. GDPR gives loyalty programs another reason for existing. Loyalty programs help with GDPR compliance. Consumers have to give their personal data as part of joining the program and accept T&Cs in the process. That is unlikely to be the primary reason any company starts a program, but it is a nice benefit. 
  5. Loyalty programs take advantage of game mechanics. Gamification is at the heart of a lot of the milestones (leveling up) and points earning (keeping score, progress bar, etc.) that are part of loyalty programs. Game mechanics explain some of the strange consumer behavior — such as mileage or segment runs on airlines. Spending a day flying back and forth between Houston and Dallas might seem truly weird, until you realize that the flier is working hard to “level up” and ensure that they maintain their elite status for the following calendar year.

For more insights like these, check out the episode of CX Cast, listen below, or check out Emily’s research on loyalty programs.