The market largely perceives loyalty as a promotional stunt that offers customers only points’ redemption. But this is not the absolute truth.

Much to naysayers’ chagrin, loyalty is a larger canvas for brands to reap benefits from. Loyalty is about how well you understand your customer and recognize their buying behavior appropriately. A loyalty program is simply an enabler, a solution that facilitates this customer journey and effortlessly builds brand loyalty. But, unknowingly loyalty has also built myths of a tall order than facts. So in this blog, let’s dive into the real world of loyalty and unscrew the myths around it to get the facts straight up.

#Myth 1: Loyalty is an expensive affair

A lot of marketers often dread the upfront cost involved in setting up a loyalty program for their brand. However, if one looks at it closely, they would realize that the benefits outdo the cost involved in setting up a loyalty marketing strategy. If acquiring new customers is anything to go by, then retaining old customers’ drives more revenue and sales. A recent study by Bain & Company on customer retention revealed that a meagre 5% increase in customer loyalty can increase the average profit per customer by almost five times. Isn’t it a great statistics to vouch for and frame your next marketing strategy? In fact, what could in turn be expensive is trying to build a new team from scratch to create an in-house loyalty program. This wouldn’t only be time consuming exercise but it will also mean stepping into a new territory with no experience.

#Myth 2: Loyalty doesn’t generate ROI

What I can be assured of when you enroll for this program? How soon can the growth be seen? These are some of the questions on top of marketers’ mind when enrolling for a loyalty program. But remember, loyalty is a long-term journey for any brand. Expecting instant results from a loyalty program isn’t fair as the brand must count both tangible and non-tangible benefits that are involved in it. When a brand ventures into loyalty marketing, a new journey starts. And in this journey, the brand must constantly reinvent their loyalty program keeping abreast with the market changes. It is thus imperative to make your loyalty program appealing to your customers by innovating with newer strategies like gamification, milestone-based rewards, personalized offers, etc.

#Myth 3: Loyalty is a complex setup

While there can be complex programs like a group loyalty program but a good tech partner will know exactly how to make it work. As a brand, working with on an already established loyalty platform will help you transition swiftly. A technology partner who not only has experience but also a proven scalability to offer new benefits. Brands shouldn’t overwhelm themselves by the pressure of implementing the entire program in one go. A quick pilot run in a smaller geography to test and learn always helps to implement better in future with different set of products and more territories.

#Myth 4: Loyalty means discounting

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No, no and no! Loyalty is not just giving discounts. Many brands deviated from the loyalty path as they already offer discounts. Most of the finance teams of brands strongly believe in this. As a brand, your journey and relationship with customers need to be defined first. Identify which set of customer segment need discounts and which do not. Accordingly, communicate and send targeted message to win your customer back.

#Myth 5: Loyalty is non-measurable

And the good news is that loyalty is measurable. At Capillary, our experts have created a value-delivery model known as Loyalty Delivered Sales (LDS) framework that assures up to 20% topline revenue. This scientific framework to measure the potential of loyalty programs is a robust approach designed through in-depth study of 100+ programs from 5 industries across 20+ countries. You can read more about this in our joint whitepaper study with BCG here.

#Myth 6: Well-known brands don’t need loyalty

Many noted brands feel their goodwill is enough to pull customers or sustain in the competitive market. However, market dynamics are such that sometimes even the most admired brands lose its loyal customers. Take for instance, the COVID-19 pandemic which had many brand loyalists turn into biggest brand switchers owing to the non-availability of products on the shelves. That is exactly where loyalty steps in and prepares the brands for all situations. We live in the times of experiential marketing where building experiences is far superior than offering a slashed price. At one point, even Starbucks didn’t have a loyalty program because everyone loved the coffee but eventually the brand ventured for a robust loyalty program.

#Myth 7: Gen Z don’t relate to loyalty programs

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While it is true that the Generation Z today forms a major percentage of active shoppers and they love to experiment with different brands, it is equally true that this socially active generation loves to avail rewards and offers at the same time. One of the surveys by KPMG in the US market stated that 87% of US millennial are enrolled in at least one loyalty program and are the most actively engaged with that program. Referrals work faster and better with the generation Z. Thus, it would be wrong to say that millennial don’t vie for loyalty programs. If done well, loyalty program has the ability to capture this segment well with engagement-based loyalty programs that are not tied to their overall spend. Rewarding them for referring, consuming content could be considered. Recently, incorporating alternative currencies into your loyalty programs is also gaining popularity with this generation.

#Myth 8: Loyalty means giving a share from your profits

As a brand the rewards you offer to your customers need not always be monetary. You could offer exclusive benefits to your loyal customer base like a preview of your new products or services, informational content, early access to an ongoing sales, etc. Personalize benefits like preferential shopping timeslot, new product launch events, free product sampling to loyal members could be the levers established brands could work on using loyalty programs. Marketers must understand that when their brand offers rewards to the customer; the brand either gets more sales, a new referral, a free download of the app or free reviews, etc. As a brand, you simply incentivize the transactional behavior of your customer for their benefit to grow your brand goodwill and eventually make them a loyal brand ambassador. The way to gather data must not be compromised or ignored. It is a two-way road, you give rewards to get rich data and insights and this will be of prime importance in a cookie-less world couple of years from now.

#Myth 9: Satisfied customers are your loyal customers

Simply sharing reviews or spending more isn’t enough. As a brand, you must be aware of your competitors in the same space and strategize accordingly. Uncertain events like COVID-19 pandemic definitely had many consumers shifting their loyalties to other brands. No one ever imagined but it happened. Hence, as a brand you must look at your customer behavior and reward them from time to time.

#Myth 10: Loyalty means only earning and burning points

Having a simple loyalty program is definitely not enough. Today, loyalty has evolved but unfortunately it is the least evolved dimension in a business’s marketing and growth strategy. Brands need to look beyond simple earn and burn loyalty program to perceive other forms of loyalty as well. There are multiple products of loyalty that brands are unaware of. The 7 types of loyalty products starting from base, personalized, tier, social, digital, dynamic and partner loyalty are cohesively driven by customer behavioral & transactional divergence. It is thus imperative for brands to continue adding more features & benefits to their existing loyalty program to drive effective results.

Aditi Jindal
Writer, traveler, and a cold coffee addict, precisely in that order, Aditi Jindal is a storyteller. Whether it is slicing brands and their content marketing strategies or dabbling different genres of book writing; her keen interest in finding the unique idea for brands to deliver compelling stories keeps her on her toes.