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Business Unplugged™
This blog features Carol Roth's tough love on business and entrepreneurship, as well as insights from Carol's community of contributors.

Loyalty Programs: You’re Doing it Wrong

Written By: Carol Roth | No Comments
The difference between loyalty and bribery

Customer loyalty is a huge buzzword and a critical focus for most businesses.  Loyal customers are the holy grail for most businesses. However, most brand and customer loyalty programs totally miss the mark.

A key focus of many programs is rewarding customers for points spent on purchases.  However, when you use this as the cornerstone of your loyalty program, your customers become fans of your program instead of your brand.  This more closely resembles bribery and while bribery can be highly effective in the short term, it almost never works over the long-term.  If and when another competitor offers more points per purchase, then you are at risk of losing your customers.  This is the loyalty equivalent of competing on price (oy!).

Moreover, the traditional reward-for-purchases system also ignores influencers who perhaps don’t spend as much with you directly, but may indirectly be responsible for a significant portion of sales through their evangelism.  Making these influencers second class citizens of your loyalty efforts is a gigantic mistake that is made by even the largest publicly traded companies and multi-national brands.

My firm (Intercap Merchant Partners) has been developing and monetizing enthusiasts/raving fans and influencers for brands for half a decade- and what we have found is that in today’s busy world, this goes beyond just a rewards system.  To create brand advocates and deepen relationships, it often involves creating a bridge between a company’s products/services and their customers through focusing on the customers’ lifestyle needs.  In some cases, this involves bringing in content, products and partnerships that are outside of what you are directly selling. 

Social media is focused on dialogues, but for those to be most impactful to businesses, those dialogues need to translate into revenue, profit and real evangelism.  This means both paying attention to the ongoing conversations of your customers and creating methods to make your brand relevant and important to your customers’ lives.

So, the next time that you offer a customer one point per dollar spent, ask yourself if you are really generating loyalty to your company?

Article written by
Carol Roth is a national media personality, ‘recovering’ investment banker, investor, speaker and author of the New York Times bestselling book, The Entrepreneur Equation. She is a judge on the Mark Burnett (Shark Tank, The Voice, Survivor, The Apprentice) produced technology competition series, America's Greatest Makers, airing on TBS and Host of Microsoft's Office Small Business Academy show. Previously, Carol was the host and co-producer of The Noon Show, a current events talk show on WGN Radio, one of the top stations in the country, and a contributor to CNBC, as well as a frequent guest on Fox News, CNN, Fox Business and other stations. Carol's multimedia commentary covers business and the economy, current events, politics and pop culture topics. Carol has helped her clients complete more than $2 billion in capital raising and M&A transactions. She is a Top 100 Small Business Influencer (2011-2015) and has her own action figure. Twitter: @CarolJSRoth