Rethinking Loyalty
I recently signed up on an online clothes shopping platform. They had a loyalty program. So I registered for that. I got the base level of points. Later that day, I asked my wife (a frequent shopper on the same online platform) if she had joined the loyalty program. She replied in the negative. So, I signed her up. And guess what – both of us had the same base level of points! Her entire purchase history of many years had been discarded when it came to loyalty and she was on a level playing field with me! Of course, in the future, she will earn more points because of her higher spending – but for now, it was like both of us were starting afresh.
This reminded me of the movie “Fifty First Dates” – where the heroine has short-term memory loss. She wakes up each day with no idea of who she is or who her family members are. So, she has to be reminded each day of her life stage. A video each day reminds her of her past so she can enjoy the waking hours better.
Many brands suffer from the “Fifty First Dates” syndrome. They ignore the past – and some even ignore the present and future. They think that a half-baked loyalty program is all that they need to ensure customer loyalty. What they are not seeing are the significant benefits that a well-designed program with a forward-looking CLV can do for customer retention.
Let’s add one more dimension into this mix. There are two multiplexes near my house, and I tend to split movie watching between the two. None of them remember me from my previous visits so for me there is no real experience differentiation other than the show time and availability of good seats. If they were to look at my transaction history, they would think I am a reasonably loyal customer – watching a movie every few weeks. But what they will not see is that I am giving half my business to their competitor!
This is why I emphasised the need to look at the spending in a category. That is the revenue and profit pool that needs to be maximised, and most brands have no idea about the money they are leaving on the table. And that’s the reason existing approaches to customer loyalty are flawed and need a rethink. Velvet Rope Marketing is the big idea that can transform not just loyalty programs but customer loyalty itself. VRM is the key to opening the door to creating a “profi-poly” (profits monopoly).
Tomorrow: Part 9
