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Insight: You don’t need a loyalty program – except when you do

Over at Skift, contributor Deanna Ting provides an excellent primer on the reasons to have – or not have – a formal customer loyalty program. The article also quotes experts who argue what we at the Wise Marketer have been arguing for years: that while not every company needs a loyalty program, every company needs a loyalty strategy. That’s because maintaining a focus on current and potential best customers is the surest way to use your marketing dollars efficiently to drive business results.By Rick Ferguson

Ting begins by pointing out the many successful companies who thrive without a formal loyalty program: from behemoths such as Apple to well-known travel brands such as Four Seasons hotels to smaller travel brands such as Allegiant Air. The crucial point to note here – which is the theme of Ting’s article – is that while none of these brands may have a formal points-based loyalty program, each has a loyalty strategy. Apple’s loyalty strategy, for example, is based on over-delivering on the fundamental loyalty driver of product quality and connecting every Apple device to the Apple iOS. Four Seasons, meanwhile, focuses on a loyalty strategy of best-customer recognition.

“Four Seasons Hotels & Resorts President and CEO J. Allen Smith told Skift last year, when asked about the company’s loyalty strategy: ‘…Loyalty programs are defined by “I accumulate points and then I get something of value for that that I can redeem.” Truthfully, that’s not what our customers are looking for. Our customer is looking for recognition: “Know who I am, and provide personalized services to me.”‘ He added: ‘For our best customers, we know who they are and in many cases, we have, in effect, affiliated them with someone within Four Seasons that will facilitate their reservations in other properties, movement around the world, whatever the case may be. As they go from property to property, people will know who they are.'”

Only Smith knows how successful a soft recognition loyalty strategy works for Four Seasons. The key point is that Smith has an articulated loyalty strategy – an approach to building long-term customer relationships. If this strategy is successful, then why incur the startup and operating costs of a formal loyalty program?
For many brands, however, a loyalty strategy requires customer data in order to identify, understand, and influence the behavior of best customers – and no marketing mechanism has proven more effective in undertaking this activity than a customer loyalty program.

“The catch, however, is that if a company chooses not to have a formal loyalty program, it can be more having a formal loyalty program is not only low-cost but also often more effective in terms of gathering that data. David Flueck, senior vice president of global loyalty for Marriott International, said data is a coveted asset for any company. ‘Your loyalty program allows us to use data to personalize the on-property experience… we use machine learning to personalize marketing messages so we put out personalized offers to our members,’ he said. ‘For us, being able to have the data on 100 million members allows us to be much more targeted and to deliver the right marketing and right experiences to the right members at the right time.”

This last imperative articulated by Flueck – the imperative to “deliver the right marketing and right experiences to the right members at the right time” – is the driving force behind every successful loyalty program. Any brand that can accomplish this same objective without a formal loyalty program certainly doesn’t need one. But regardless of the need for a loyalty program, no business can long survive without a strategic approach to customer loyalty.
As Ting puts it: “Loyalty, yes. A formal loyalty program? Not necessarily. Customer loyalty is important for any business, but the means of getting that loyalty will be different for each company.”

We couldn’t agree more. Kudos to Ting for framing the debate so effectively.

Rick Ferguson is Editor in Chief of the Wise Marketer Group

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