While celebrity meet-ups and amazing freebies garner buzz, it’s a balanced approach, pairing both emotional and rational benefits, that wins long-term customer loyalty.

 
Emotional brand stories get a lot of play these days — in articles, social media posts and more. After all, there’s enormous appeal to transformative customer experiences. They’re fun to talk about as marketers and even more compelling to experience as consumers.
 
Consider the first time Oprah Winfrey shocked her in-studio audience by giving each of them all of her “favorite things.” Or the media splash that followed when every audience member received a new Pontiac? As Winfrey later explained, “It’s about knowing that something really magical and joyful and wonderful can happen to you when you least expect it.”
 
Similarly, a growing number of loyalty programs are emphasizing emotional experiences and rewards. Such programs delight customers with unexpected value, like a dessert at a trendy restaurant or tickets to a hotly anticipated concert. These benefits are powerful: The recipient is treated like a VIP and likely feels stronger brand loyalty, while the company enjoys positive social media. It’s a win-win.
 
And the behavioral-science research backs it up: According to Bain & Company (“The Elements of Value,” Harvard Business Review, September 2016), emotional elements are one of the key factors that create consumer value. That is, creating emotion is essential to any brand that wants to unlock long-term customer loyalty and boost its profitability. Yet it’s critical to remember that emotion remains just one element that drives brand loyalty and purchase behavior. Other motivations depend on what a spectrum of customers perceive as valuable and want from the brand.
 
In fact, the research says that while the value of a product or service is ultimately up to the consumer, there are universal building blocks of value — including elements of rational value like currency, promotions, and partnerships — that can be used in new combinations to deliver greater value, stronger consumer loyalty and a bigger bottom line. Thus, as marketers, we need to push back against the idea that emotional rewards alone win the day.
 
Moreover, just because consumers love surprises and amazing experiences, that doesn’t mean they aren’t emotional about rational benefits. As evidenced by past public reactions to program currency changes, customers feel attached to earning and redeeming too.
 
The Case for Balance

Loyalty programs can’t thrive on emotional benefits alone. Take the Oprah example: Millions of TV viewers had to live vicariously through the lucky in-studio audience members. Similarly, only a small percentage of loyalty program members are ever dazzled by emotional experiences. They may read about them in brand content or social media, but the vast majority of consumers never access them.
 
That’s because emotional benefits are seldom as scalable as rational benefits. In most cases, extending emotional benefits to broad audiences would wreak havoc on a program’s financial foundations and/or exceed the company’s ability to consistently deliver them. In addition, emotional benefits that are scalable generally aren’t compelling enough to drive longer-term loyalty.
 
Listening to consumers also confirms the importance of balanced loyalty program designs. According to research by PwC, the worldwide professional services firm, 70 percent of global online shoppers name member-only discounts as their top loyalty program benefit. Collecting reward currencies and accessing hard benefits like free shipping lag closely behind at 61 and 58 percent respectively. Again, while emotional benefits play a role, rational benefits are greatly desired.
 
So what does that mean when it comes to loyalty program design? In short, both emotional rewards and rational benefits are vital. We’ve got to channel both surprise-and-delighter-in-chief Oprah Winfrey for the “wow factor” and astrophysicist Neil deGrasse Tyson for the rational and tangible. Striking this balance is critical to loyalty program design.
 
Figure 1: A basic model of balanced program building blocks.


Balancing Your Loyalty Program

The best programs integrate member touch points, an explicit value proposition, and a layered mix of engagement motivators. Below, we focus on the first two and save the complex discussion of engagement motivators for our white paper.
 
Creating a balanced loyalty program starts with member touch points. The best programs envelop members within the loyalty experience “wrapper.” This member-experience focus requires organizational commitment to making the program not just a marketing initiative but an enterprise-wide program that leverages and delivers on loyalty across all touch points.  
 
Throughout these brand interactions, personalization is key. For example, an email may take the form of a personal note, including the member’s name and asking for feedback about a recent experience. It’s through such personal connections that we build relationships. To the extent that marketers can leverage customer data, we can create the perception of personal relationships across millions of members.
 
A good example of this experiential wrapper plus personalization is Mr. Porter. When I first joined the online men’s retailer, I had to look twice when its logo suddenly transformed from Mr. Porter into my name, Mr. Barnett. Talk about personalization. After placing an order, I received my merchandise, a thank-you note and a pocket square as an unexpected gift. Today, I receive shopping-event invitations, free shipping, a weekly online style guide and more. In short, Mr. Porter offers a lifestyle, expressed across all member touch points, while delivering emotional and rational value.
 
Creating a Core Value Proposition

At the core of nearly all loyalty programs are explicit value propositions — usually a combination of hard benefits, soft benefits and utility. These elements — the very reasons members join and engage with loyalty programs — serve as the program’s core value proposition and should range from rational to emotional.
 
Hard benefits — for example, an evergreen discount — are easily monetized. Soft benefits may include early access to new products or services, exclusive content or customer prioritization. And utility benefits — say, the ability to place an order via a mobile app — make members’ lives better or easier.
 
Consider National Car Rental. Sure, members of its Emerald Club® loyalty program appreciate special offers, a.k.a. hard benefits, but they equally enjoy the program’s soft benefits and utility, in particular, the ability to skip the rental counter and select any car they like — usually with a free upgrade — from the Emerald Aisle. The explicit value proposition delivers rational value and gives members emotional choice and control.
 
To recap: Offering both emotional and rational benefits is vital to creating a strong loyalty program. That said, remember that most successful loyalty programs evolve; some initially offer rational benefits and layer on emotional benefits. Leave room too for future innovations and technology adoption. Finally, every company needs to be cognizant of a changing business environment and competitors — and adjust loyalty program features to suit. 
 

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