Rewards ≠ Loyalty

Not quite interchangeable terms

ONE FINE DAY in 1981, someone at American Airlines eyed the empty seats on many a flight and mused, “If we gave those seats to our most-frequent fliers, they’d be tickled and we’d be none the poorer.” Thus began what today are commonly called rewards programs. They range from American Express’s program, where card users earn points good for catalog items, to buy-ten-get-one-free punch cards the neighborhood sandwich shop hands out.

A well-executed rewards program can increase frequency and spend, but there is danger in mistaking those metrics for loyalty. Loyalty is a feeling, an emotional commitment, a not terribly rational compulsion that makes the mere thought of defection abhorrent.

For a good example of loyalty, look no further than your nearest ardent sports fan. You may infer that person’s loyalty from game attendance, pennant-covered walls, or block letters painted on chests, but it’s important to keep in mind that some of the most dedicated fans do none of these things, and some of the least do all of them.

You may accuse me of conflating apples and oranges. As a diehard sports fan, I want to agree with you. Indeed, to compare a credit card or sandwich shop to my beloved Utah Jazz or Denver Broncos strikes me as akin to blasphemy. But as a marketer I must concede that sports teams are still products. I must also concede other product categories that boast no less ardent fans. For example, try persuading a Harley, Coke, Mac, or mayonnaise devotee to settle for Honda, Pepsi, Windows, or Miracle Whip—while being prepared to duck.

Granted, loyalty-as-a-feeling is all but impossible to quantify. We marketers have little choice but to infer it from frequency and spend. And there’s nothing wrong—in fact, there’s everything right—with using incentives to bring customers back more often to spend more.

But marketers who believe their customers are loyal would do well to submit to the occasional reality check. If a competitor could lure away your best customers by offering them a richer rewards program, you don’t have loyal customers; you have purchased ones.

Now, there’s nothing wrong with purchased customers any more than there’s anything wrong with incentivized customers. The difference matters only if loyalty truly is your goal. If so, remember that attaining loyalty begins with recognizing its nature as a two-way street. Or, as evolutionary psychologists put it, with reciprocal altruism, which essentially states that a proven strategy for getting others to scratch your back is first to scratch theirs.

Want loyal customers? A good starting point might be to first show—not just claim in advertising—your loyalty to them.

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