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Is a Loyalty Program Necessary to Build Customer Loyalty?

A guest article by the Smile.io team. They developed a Shopify app that allows you to create your own branded loyalty/rewards program.

There’s no doubt that loyalty programs are great for cultivating customer engagement. Yet often times, when it comes to starting a program, businesses find themselves wondering if they’re actually necessary or just a “nice to have”. While studies have shown that customers still want to join rewards programs, this desire doesn’t always guarantee participation in much the same way that wanting to go to the gym doesn’t guarantee you’ll get in shape.  

For some brands, this risk is simply too big to take, but others are still intrigued by the idea of rewards programs. But why is there even a debate in the first place? If the stats don’t lie, and most customers want to join loyalty programs shouldn’t every brand have one?

Well, the short answer is no. I’m sure this wasn’t the answer you expected from a loyalty marketing specialist, but it’s true: a loyalty program isn’t necessary to generate customer loyalty. Before you start rethinking everything you’ve ever known about retention marketing, let me explain why.

Loyalty is an Emotion

When you hear the word “loyal”, what comes to mind? For some, it might be a dog or a passionate sports fan. For others, it might be a best friend. No matter what you thought of, they all have something in common: commitment. When someone is loyal, they’re willing to put time and energy into supporting and being there for another person, place, or thing.  

We see this type of behavior everywhere, including customer-brand relationships.A loyal customer chooses to shop with you over your competition because they genuinely care about your brand and what you have to offer them. Throughout the course of your relationship, these customers have made the decision that your customer experience is superior to that of your competition and is worth coming back for.

With this in mind, loyalty can also be defined an emotion your customers feel for your brand. So while offering a loyalty program with fantastic rewards might help you acquire customers, the way those rewards make shoppers feel is what will keep them coming back.

This emotional response is also what will prompt your customers to share their experience with your brand with their friends. Regardless of what product or industry, customers always recommend the brands that bring them excitement.  

That’s why eliciting these emotional reactions is a key part of building lasting loyalty with new and existing customers! The trick is knowing how to do it, and an examination of some of the world’s best brands can give us a clearer picture of what it means to build customer loyalty - with or without rewards programs.

The Benefits of Loyalty Programs

I know I just said that customer loyalty programs aren’t necessary, but that doesn’t mean they’re not effective. Take Starbucks, for example. With their My Starbucks Rewards program, they’ve transformed the way that customers order, pay for, and engage with coffee, even offering their rewards members an illustrious Gold Card as a physical symbol of their unwavering loyalty to the brand.

While this might seem like a trivial token to some, the reality is that the Gold Card has become an almost unparalleled symbol of social status for most Starbucks customers. A quick search on Instagram or Twitter makes this reality clear, as customers frequently brag about their entry into the upper echelon of coffee drinkers.

These types of tokens are a common way for brands to build a sense of exclusivity or status into their programs, particularly within a tiered program structure. With customer tiers, brands are able to acknowledge their best customers with exclusive rewards and added benefits, creating more value that brings added joy to every transaction.

This increased satisfaction is also built through Starbucks’ mobile app. As a key component of their rewards program, the app has also significantly enhanced the calibre of their customer experience, allowing customers to interact with the brand no matter where they are. From animations of gold stars falling into cups and a scan-to-pay feature that keeps wallets blissfully card-free, Starbucks has designed a rewards program that doubles as a lifestyle solution that customers can access anywhere and everywhere they are.

While Starbucks’ rewards program may be a cut above many of its competitors, the principles upon which their program is built are universal. With exclusivity, omnichannel access, and physical gifts, Starbucks’ loyalty program generates feelings of positivity, offering shoppers a customer experience they really can’t find anywhere else.  

Building Excitement with Your Customers

While a loyalty program is definitely one of the most effective ways to build customer loyalty, it’s not the only way. As we already mentioned, at the end of the day it all comes down to playing to your customer’s emotions, and the world’s best brands are doing that in a variety of different ways.

Let’s see how Sephora, Apple, and the Walt Disney Company generate customer loyalty with their customer experiences.

How Sephora Builds Loyalty Through Transformation

As a leader in the cosmetics industry, Sephora is one of the biggest brands on the planet.  Some of their overwhelming success can be attributed to their state-of-the-art VIB loyalty program, but it’s not the only weapon at their disposal.  

Sephora has also dedicated a significant amount of time to understand their customers’ needs, and these desires are often centered around the idea of transformation.  When customers purchase makeup, they’re buying the ability to transform their look, their style, and sometimes themselves.

Color IQ and Virtual Artist are only two examples of Sephora’s commitment to delivering great customer experiences that give customers more than they’d expect from a cosmetics retailer.  Inside and out of their rewards program, Sephora is able to continually surprise and delight their customers, creating a store environment and brand experience customers can’t wait to enjoy again.

With each of these innovations, Sephora is consciously taking steps to reinforce their customers’ decision to shop with them over a competitor.  By offering exceptional experiences at every touchpoint in the purchase process both instore and online, Sephora is able to build one-on-one relationships with each customer that feel truly personal and enriching.  These considerations breed a deep-rooted sense of loyalty and love, keeping makeup enthusiasts from choosing another brand when it’s time to refresh their palette.

How Apple Builds Loyalty Through Trendsetting

Apple is one of the world’s most dominant brands. Customers line up for hours on end to get their hands on the latest products, and can’t imagine their life without them. Even without an official loyalty program, Apple has an unshakeable customer base that refuses to shop anywhere else, but how?

The answer is simple: Apple is trendy. Since the introduction of their first personal computer in the 1980s, Apple has endeavored to be a brand that pushes the envelope, looking for innovative new ways to challenge our ideas of design and technology.  

This continuous innovation has made them an authority on what is current and desirable, appealing to customers’ desire to be part of the “in crowd”.  Whether they admit it or not, everyone wants to feel like they belong, and this desire to fit in spills over into our brand decisions. With sleek, visually appealing products, seemingly endless customization options, and the promise of being on the cutting-edge, Apple offers a positive and fulfilling experience that customers simply can’t find anywhere else.

As a trailblazer, Apple had the chance to establish their brand as “the one to know”. With more and more iterations of their product, Apple has continued to give their passionate followers more reasons to fall in love with their brand. It is these reasons, then, that push Apple’s customers to so passionately defend and promote the brand to others, trying to get Android users to switch to iPhones.  

By promising new and improved features regularly and delivering them all in a beautiful package, Apple has tapped into their customers’ values and committed themselves to offering products that meet and exceed those needs. Through these ideals, customers feel like they’re always on the edge of the next big thing - something no one would want to give up.

How the Walt Disney Company Builds Loyalty by Being Transportive

There are few brands that understand nostalgia like the Walt Disney Company. Since the 1930s, Disney has been telling stories that transport audiences to whole new worlds they never knew existed. Then with the opening of Disneyland in 1955, that magical experience jumped off of the screen and into our world. Since then, Disney’s physical presence has expanded even further to include hundreds of retail locations and 6 resorts and has become an excellent case study for customer loyalty in the process.

So why do millions of people flock to these resorts year after year?  While nostalgia plays a huge role in Disney’s appeal, it’s the immersive quality of their experiences that is truly outstanding.  Every single detail in every corner of the park is meticulously planned to make customers feel a certain way.  Smells, sounds, and sights are hand-crafted to make guests feel as if they’ve truly been transported to another universe, allowing them to forget where they are for as long as they choose to stay.

In a world as busy as ours, this type of escape is becoming increasingly important to people. By giving customers the opportunity to engage with experiences so far outside of their everyday life, Disney has positioned themselves as a brand synonymous with joy, fun, and being carefree.  These types of emotions can be difficult to find in day-to-day life, making them that much more valuable to customers looking to experience something new.  With so many stresses from day to day, customers are drawn to the simplicity of a brand that allows them to simply feel happy.

Additionally, Disney has built their brand upon the idea of wish fulfillment. Phrases like “dreams come true”, “make a wish”, and “magic happens” immediately bring to mind ideas of hope and prosperity - something everyone is looking for.  By aligning their goals with their customers’, Disney fosters deep feelings of satisfaction and joy that customers can’t wait to tell others about. These reactions, combined with the fact that they are continuing to update and create outstanding content, makes them a delightful and exciting brand that customers want to engage with as much as possible, bringing them back to “the most magical place on Earth” year after year.

The Key to Loyalty: Positive Experiences
No matter what you do or what you sell, the key to customer loyalty is a positive customer experience. So whether you choose to create one with the help of a rewards program or not, knowing what your customer's value is the key to delivering a positive experience. At the end of the day it’s those great experiences that will keep them coming back and sharing their satisfaction with others time and again, and after all - isn’t that what customer loyalty is all about?
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