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Why Loyalty Cards Don't Work

The path to long-term loyalty is more psychology than marketing.

Key points

  • When it comes to loyalty, most brands focus on simple programs, such loyalty cards.
  • However, these are largely ineffective, since they are non-proprietary, cold, and impersonal.
  • Brands that display a pro-social orientation to their consumers stand the best chance at garnering long-term loyalty.

Each year, hundreds of people get the Harley-Davidson logo tattooed on their bodies. You may not be a tattoo person, but you can appreciate the love and dedication that a decision like this requires. Why would anyone get a tattoo of a corporate brand?

Photo by Nathan Dumlao on Unsplash
Source: Photo by Nathan Dumlao on Unsplash

For companies, this kind of love and dedication is big business. Brands that are high on loyalty procure higher lifetime value from consumers, benefit from glowing word-of-mouth referrals, and as a result, spend much less on customer acquisition.

But how do brands get there? When you think about brand loyalty, what's the first thing that comes to mind? If you're like most people, it's loyalty programs. These are programs, such as a special loyalty card to use at the supermarket, an account with an online brand, or a mileage number with an airline company. They are everywhere. But do they work? Largely, no.

Why is this? And if not through loyalty cards, how do brands actually come to be beloved enough to have their logos adorned on the consumer's body?

Why Loyalty Cards Don't Work

There are two main issues with loyalty programs. The first is that there is nothing proprietary about them. Any competitor can offer a loyalty program. If a company comes up with some really great perk, its competitor can quickly copy it. The programs are ubiquitous and so they don’t really help a company stand out. All in all, they're a dime a dozen.

The second issue is more important and more psychological: they're transactional. At their core, they're telling the customer, "If you do that, I’ll do this. If you buy this, we’ll give you this perk. Fly this many miles, and we'll give you this."

Photo by Blake Wisz on Unsplash
Source: Photo by Blake Wisz on Unsplash

While it might be fair, this kind of cold dynamic does not inspire feelings of long-term trust, bonding, and loyalty. No one is going to rush out and get a tattoo of the airline that gave them the best perk for reaching 10,000 miles. There's even some evidence suggesting that the costs of maintaining these programs are often passed to the consumer, making the products and services needlessly more expensive.

In addition, some of the most beloved brands—from Trader Joe’s to Southwest Airlines—have seldom used a formalized loyalty program at all.

Beyond The Record-Keeping

While there's no formula for reaching "logo tattoo" level loyalty, the general strategy goes beyond these transactional dynamics. For these more enduring connections, customers must think of the brand in the same way they think of a close friend or family member. This comes down to the psychology of reciprocity, and how the brain processes simple social interactions.

Photo by Sam Manns via UnSplash
Source: Photo by Sam Manns via UnSplash

Imagine that when a close friend calls you up and needs to vent about something for 10 minutes. You start by telling them, “OK, since you just vented for 10 minutes, that means I get to commiserate with you for 10 minutes at a later date.” Sounds pretty silly, right?

Instead, brands that inspire loyalty go beyond this kind of record-keeping. They tap into brand warmth. They demonstrate an interest in the long-term well-being of the customer, above and beyond the immediate sale. It means treating the consumer, at every touch point, as a red-blooded human whose needs you actually care about, just as you would a close friend.

The e-commerce shoe company Zappos made this approach famous in its call center, where employees would talk to customers not just about their deliveries, but about whatever they’d like. The record for the longest phone call with a customer? Over 9 hours. A sale wasn’t even made.

The pet supply company Chewy.com distinguished itself during the pandemic by telling consumers that instead of returning products they didn’t want, to donate them to a needy family instead. These consumers were reimbursed for these returns just the same. In both of these cases, the focus is on the well-being of the customer at the expense of the sale.

Going Beyond Loyalty Programs

Overall, loyalty cards are relatively ineffective at inspiring strong feelings of loyalty. Their use is commodified, and ubiquitous, and the feelings they do inspire are cold, impersonal and transcational. Loyalty is a deeply psychological enterprise, and overall, they're a poor way of tapping into neuroscience-based branding.

The brands that inspire a stronger connection are able to go beyond these simple, transactional systems. Instead, brands that are able to maintain a more pro-social orientation to their consumers stand the best opportunity for cultivating feelings of trust and dedication.

And in some cases, even a brand logo tattoo.

This post originally appears on the neuroscience of branding blog

References

Malone, C., & Fiske, S. T. (2013). The human brand: How we relate to people, products, and companies. John Wiley & Sons.

Portal, S., Abratt, R., & Bendixen, M. (2018). Building a human brand: Brand anthropomorphism unravelled. Business Horizons, 61(3), 367-374.

Dowling, G. R., & Uncles, M. (1997). Do customer loyalty programs really work?. Sloan management review, 38, 71-82.

Liu, Y. (2007). The long-term impact of loyalty programs on consumer purchase behavior and loyalty. Journal of marketing, 71(4), 19-35.

Uncles, M. D., Dowling, G. R., & Hammond, K. (2003). Customer loyalty and customer loyalty programs. Journal of consumer marketing.

Johnson, M., & Misiaszek, T. (2022). Branding that Means Business: Economist Edge: books that give you the edge (Vol. 1). Profile Books.

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