The biggest mistake brands make with loyalty programs is to model them on human loyalty. Human loyalty is an admirable, deeply emotional bond that unites us. It’s irrational, inexplicable and often counters our survival instinct. The marketing world, ever the imitator, often looks to these emotional bonds as its guide to creating loyalty.
is a mistake. It’s time not to make loyalty more "human," in the
traditional way, but to treat it as a question of economics and
It’s an old obsession of marketing to make us care
about products as much as we care about each other. Brand building is,
in the words of Saatchi & Saatchi CEO Kevin Roberts, to “inspire
loyalty beyond reason.” It’s all about turning brands into human bonds.
But at the same time, most loyalty programs don’t take into account some
(non-emotional) very human preferences and behaviors. Consider the
typical loyalty program from an airline like Delta. The point-building
process is painfully slow and there’s a single-year window for customers
to keep their Medallion status. After that, the process starts over.
Customers begin with an impossibly high minimum point requirement,
making gratification too delayed. Those who don’t give up on the spot
await laborious redemption (they can use their miles for certain
destinations but not for others), often irrelevant partner benefits, and
disinterested customer service.
Marketing is not where loyalty
programs belong. Their place is within a company’s revenue structure and
within users’ decision-making process. With loyalty programs, companies
are dealing with customers’ clear expectations of tangible economic
benefits. To their interactions with a company, customers bring a
specific assessment of some form of economic gain with behavioral
dynamics to match. The new model for building loyalty capitalizes on
these dynamics. It is based on decision-making, business design, and
experience design for tangible outcomes.
thing to know about human decision-making is that we want to be happy.
And we prefer many small repeated gains over anything else. We’d rather
find two $50 bills in two different places than a single $100 dollar in
one. Since money usually doesn’t just lay around, we use mental
accounting to multiply this small-gains effect in everyday situations.
Mental accounting is responsible for our perceptions of value, utility,
costs and benefits of something. It decides whether we are going to
redeem that Groupon deal, or if JetBlue’s offer is really a good one. It
shapes all of our shopping, saving, and retirement decisions. It is a
great starting point for any loyalty program. Knowing what mental
accounts its customers are using and how they manage them helps a
company maximize the impact of its offers.