Question: Since most loyalty programs involve some sort of comp (discount) what do you propose instead as the incentive?
Answer: Whatever they want – except my money!
If you want to be successful long term, you have got to have an ongoing conversation with your guests in order to understand:
- Who they are (segmentation)
- What they want from their relationship with you - period!
- Where they are.
- Why they choose you.
- When they visit you. Frequency.
- How they feel about the experience they receive from you.
- How you fit into their lives.
Loyal guests (read raving fans) will tell you that they are not looking for discounts. They are looking for things from their relationship with you that mean/bring more value to the relationship, not their wallet. And they must be in direct correlation to the value they feel, that they bring to the relationship. The guest is saying, “If I bring you hundreds of dollars of business each week, you better do more for me than buy me a cup of coffee once in a awhile.”
Other things can include, members only events, information, acknowledgment of their contribution to your relationship, first offerings, input into the process and to be a part of things going on, etc. This is about relationships, not money! If you continue to play in the price/money mud pit, you will never get out without some major pain.
Marty Neumeier wrote in his book ‘Zag” (must read!) the same six reasons why loyalty programs don’t work, as I have used to denounce the use of discounts in general.
1) Most Loyalty programs are based on discounts, which ‘train’ existing guests to expect lower prices and wait out normal pricing,
2) They attract loyal guests who would happily pay a premium,
3) They discourage new guests by making them feel punished or excluded,
4) They encourage competitors to retaliate with me-too programs,
5) They reduce profit margins, which
6) Reduces the company’s ability to serve guests at formerly higher levels.
The truth is, loyalty can’t be programmed.
Two more of the biggest factors why discounts are not a long term strategy that we have yet to cover are the lost opportunity cost, and loading up on the ‘low return’ guest versus the ‘higher return’ guest, in terms of their lifetime profit contribution to your operation. I intend to address these in a post very soon.