As the U.S. economy remains unstable, rather than spending precious cash, brands need to get creative with the stable economy they totally control — their brand loyalty programs.
It’s been estimated that there are 48 trillion reward points worth $360 billion sleeping in customer accounts across the globe. In 2016, Business Insider reported that Starbucks had $1.2 billion of customer funds in its loyalty program, more money than some banks. Brands today sit on top of alternative economies that can become new creative platforms that drive growth and retain customers.
In this Q&A, Retail TouchPoints spoke with Verdes’ Greg Matson about his thoughts on brand loyalty programs and how brands should be thinking about loyalty in the post-COVID-19 economy.
Retail TouchPoints (RTP): Verdes worked with Spotify, Starbucks and Target on strategic thinking about their loyalty programs. What did your research into these brands reveal to you about brand loyalty? Are there any similarities between them that might be illustrative for brands/retail in general?
Greg Matson: A similarity we found was that the best loyalty programs weren’t about accumulating points, but instead leveraging the key strength of what the business and brands do best for its consumers. For AMEX, points are successful because they’re a financial institution. However, a company that provides an outstanding in-store experience should consider a program around enhancing that strength rather than only giving loyal shoppers more transactional points. The loyalty tactics, programs and offerings we found to be the most successful build deeper relationships rather than just more transactions.
RTP: In the short- and long-term, what effect has the coronavirus had on brand loyalty? What role do you see brand loyalty programs playing in the ‘reopening’ of the U.S. economy?
Matson: There are two things: For most businesses, this isn’t a moment for acquiring new customers. Instead, this is more of a moment of focus on the consumer base that already exists. A moment of both gratitude and loss prevention. It’s much more affordable to find ways to incrementally increase a repeat shopper’s purchases than it is to steal or earn a new one. Second, because loyalty programs deepen an already positive relationship and keep that mandatory source of revenue flowing, you’re also not spending on hard costs like you would when acquiring new customers, whether through advertising, PR or some other paid promotion.
RTP: We noted recently that JetBlue sold its loyalty points to Barclays Plc for $150 million, ‘making the brand among the first in the U.S. to use the method to raise cash as the coronavirus pandemic all but extinguished demand for travel.’ Do you see more brands doing that?
Matson: Love it. It’s like banana bread, making something amazing out of ingredients you might have thrown away, or not considered to have held its original value. These ‘loyalty economies’ can be reshaped and gamified, or they can be used to add value to products and services, while allowing brands to build new consumer allegiance loyalty through soft costs rather than spending hard cash on customer acquisition. It’s essentially a secondary currency that businesses should start getting creative with. It’s also worth noting that a lot of brands like American Airlines, JetBlue, Hilton HHonors and Capital One are letting consumers donate their unused credit card points and frequent flyer miles to charity in the form of travel credit or cash value with just a few clicks. The goodwill earned is a huge plus for brands, in this time when so many are reconsidering a brand’s role in their lives.
RTP: What factors do you believe consumers consider when becoming brand loyal? Is it all about the rewards customers get for being loyal? Is success only predicated on the savings or discounts consumers get, or does it go deeper?
Matson: Loyalty programs can leverage what the business does best. It doesn’t have to be purely monetary savings; rather, brands can offer consumers one-of-a-kind experiences, or early access to new products, or tours of facilities, meet-and-greets, etc. They can be conceived and implemented to allow businesses to more creatively manage resources and spending, because it’s an economy they control. And on social media, customers often share how appreciated they feel and the rewards they’re receiving, which only serves to attract new consumers who perhaps aren’t feeling the love for their current brand of choice.
RTP: What are the most important things brands should consider when it comes to leveraging the true power of their brand loyalty program?
- Points are great, but the objective should be a deeper relationship rather than another transaction.
- A reward can be anything as long as it’s an authentic offering. Rethink your loyalty program, treat it like a creative brief. Offer additional services, experiences, opportunities, etc.
- Talk to the ‘superfans’ of your brand first. They deserve rewards the most, and they will share it the most on social media. If you can serve their interests authentically, you can apply those learnings concentrically out to the rest of your audiences.
- Loyalty programs can be a moment of pure consumer-centricity for brands. They’re a conduit for one-way generosity without getting muddled in ROI and sales. Quid pro quo.
Greg Matson is a founding partner of Verdes, a boutique management consultancy and design studio that focuses on utility and culture. In 2015, he founded Verdes with Brennan McGrath, one of his childhood best friends, and Phil Graham, whom he met while at Mother New York, an early-stage investor in Verdes. Matson’s work has won best in category in I.D. Magazine, best in show at the One Show, and is in the permanent collection at MoMA. He has also authored Brownie’s Guide to Expertly Defined Ideas, a dictionary for defining ideas and brands.