Retail banks today are racking their brains on how best to stand out from the crowd when it comes to retaining the loyalty of their customers; and more specifically, their payment card customers. No longer is a loyalty programme with rewards via points or cashback considered exceptional.

But the harsh reality is that if you don’t have this as a basic part of your programme, no matter how ‘un-innovative’ it’s considered by today’s standards, you will not retain your position in the playing field of payment cards.

The front runners are now looking even further ahead; trying to grasp what it is exactly that makes their cardholders put their bank card top of wallet.

Let’s take a look beyond the basic loyalty drivers of points accumulation, cashback or discounts. Let’s take a look at four other drivers that are increasingly important and yet relatively untapped today.


1: Is loyalty an attitude or behaviour and does it matter?

Marketing practitioners commonly discuss consumer loyalty in terms of ‘attitudinal’ and ‘behavioural’ traits. ‘Attitudinal loyalty’ is the predisposition of a consumer to prefer a particular brand or product.‘Behavioural loyalty’ is the actual behaviour exhibited by the consumer, most typically measured in terms of purchases made.

Conventional wisdom leans more towards ‘behavioural loyalty’ as the most effective measure of consumer loyalty, due to the ease of measurement and immediate financial benefits realised. But while this approach is practical, it fails to take into account the changing nature of both the consumer and retail environments.

Today’s retail environment is dominated by price-sensitive consumers with access to perpetual ‘daily deals’ and ‘discount-related offers.’ As a result, it has become increasingly difficult to separate genuine ‘behavioural loyalty’ from casual and coincidental relationships.

The level of ‘social integration’ between consumers is also now at an unprecedented level. Social media networking is resulting in a dramatic enlargement of the social circles that each consumer can influence as a result of their ‘attitudinal loyalty’. It’s therefore hardly surprising to see new loyalty programmes focusing their primary attention on ‘social influencers’ rather than repeat purchasers. A good example of this is the ‘AHA Life Influencer Network’ recently launched by online retailer AHALife.

As Winston Churchill so aptly put it: “Attitude is a little thing that makes a big difference.”  The next milestone for loyalty programmes lies in effectively nurturing and harnessing ‘attitudinal loyalty’ to maximise the levels of social influence amongst connected consumers.


2: Offering consumers relevant rewards they actually want

The modern consumer anticipates an increasingly personalised service, from ‘highly targeted’ advertising when surfing the web, to ‘relevant’ product recommendations while shopping online. As a result, our lives are now inundated with targeted and more relevant offers and information.

Many loyalty programmes still fail to offer ‘relevant’ redemption choices specific to various consumer segments. Those that do offer more choices, often leave the consumer to trawl though catalogues looking for something of interest to them. This risks  the consumer losing interest and quitting before managing to find something relevant.

To really maximise engagement, loyalty programmes need to reframe the redemption process and proactively guide the consumer towards redemption choices that are relevant to them. To do this they need to take into account traditional segmentation criteria such as life-style and life-stage. More importantly, loyalty programmes should dynamically adapt to reflect the actual redemption behaviour of comparable consumers.


3: The value of differentiated rewards

With the exception of the airline and hotel industries, most loyalty programmes focus more on rewarding ‘frequent shoppers’ rather than loyalty in the traditional sense. The majority fail to differentiate truly valuable consumers from the masses.

Tiered loyalty programmes that provide differentiated rewards and privileges based on the level of commitment exhibited by consumers are now gradually appearing in mainstream sectors. Well known brands such as Starbucks, Safeway and Timberland all have tiered loyalty programmes in at least one of their respective markets, and more brands are likely to follow in their footsteps in the not so distant future.

Higher-value consumers expect differentiated rewards and privileges from the masses; it is an essential component in delivering a loyalty programme that is attractive across the board. These consumers know how valuable they are and expect to be treated accordingly, failing which they are likely to defect to someone who does recognise their value and commitment.

Research conducted in this field by Dreze and Nunes has shown that tiered loyalty programmes are perceived to be more attractive, not only by the consumers who earn the extra rewards and privileges, but also, surprisingly, by those consumers that do not. It seems that bottom-tier consumers also prefer having something to aspire to, even if they know that they are unlikely to qualify to a higher tier.


4: Providing the right blend of ‘hard’ and ‘soft’ rewards

Most loyalty programmes reward consumers with ‘hard’ rewards, typically in the form of discounts, gift certificates, free merchandise and cash-back. As these rewards are tangible in nature, they are easily copied by competitors and consumers often jump from one brand to another as soon as new programmes offering a better rate of reward appear. Highly competitive sectors such as grocery, fuel and credit cards are especially prone to this type of leakage, unless they are able to establish a sense of ‘emotional’ loyalty with the consumer.

One of the most prominent illustrations of this type of behaviour can be observed by looking at the often hyped ‘daily deal’ promotions that are becoming increasingly popular. Whilst ‘daily deals’ are an extremely effective advertising tool, a consumer who visits a restaurant simply because they are running a discount promotion is just as likely to visit a different restaurant next week for the very same reason.

That said, it is important to remember that ‘hard’ rewards are an essential part of any loyalty programme, but it is imperative that they are given to the right consumers at the right time and for the right behaviour. Failing to do so results in these rewards simply becoming normal and expected by the consumer, losing their effectiveness over time.

‘Soft’ rewards, on the other hand, are more likely to nurture and strengthen the emotional bond with the consumer, whilst also serving to reduce the incidence of effort-reward value comparisons against other loyalty programmes. Such rewards can be in the form of priority lanes, personal concierge / shopper services, lucky draws or even invitations to exclusive events.

In all cases these rewards should be given selectively to emphasise to the consumer that their value has been recognised and, therefore, rewarded accordingly.

When considering ‘soft’ rewards, an effective approach is to offer rewards that ‘money cannot buy’. This maximises the perceived value to the consumer and increases stickiness as the consumer is more likely to try to retain their ‘special perks’ over time.

A good example of a ‘money cannot buy’ reward is exclusive ‘VIP backstage concert passes’ that simply cannot be purchased on the open-market and thus have a perceived value that far outweighs the underlying financial cost of the reward. This type of exclusive reward could be offered to exceptional customers, auctioned off to the highest bidder, or simply awarded to the winner of a prize draw.

The next time you are considering your loyalty programme, look beyond the obvious. Simple tweaks can differentiate between becoming another ‘me too’ programme versus standing out as an innovator.


Oscar Sanderson is a senior marketing consultant at Welcome Real-time