{"id":1414,"date":"2018-06-20T23:44:08","date_gmt":"2018-06-21T03:44:08","guid":{"rendered":"https:\/\/www.yupingliu.com\/wordpress\/?p=1414"},"modified":"2018-06-20T23:48:30","modified_gmt":"2018-06-21T03:48:30","slug":"reducing-the-loyalty-gap","status":"publish","type":"post","link":"https:\/\/www.yupingliu.com\/wordpress\/2018\/06\/20\/reducing-the-loyalty-gap\/","title":{"rendered":"Reducing the Loyalty Gap"},"content":{"rendered":"

Although loyalty programs seem to be everywhere, many question whether such programs are indeed effective marketing tools. Strengthening the case for the skeptics, recent news report a restaurant that shut its doors in just a few months because it offered a ridiculously generous loyalty program<\/a>. This is of course an extreme case. In reality, loyalty program providers can fairly easily keep program costs under control through smart program design<\/a> involving the right combination of program currency, point ratio and reward structure.<\/p>\n

Some loyalty program problems are not so straightforward however and can be much more subtle and challenging to deal with. One such example is the concern that loyalty programs foster loyalty to the program rather than to the company. That is, \u201cI love Starbucks Rewards\u201d may end up ringing more true than \u201cI love Starbucks\u201d. In the long run, this is bad news for the company because it makes the business overly dependent on the loyalty program. If a competitor decides to offer a more attractive program, customer attrition is likely to happen. What can businesses do to reduce this loyalty gap and make loyalty program members more loyal to the company rather than just to the program? I want to share with you some insights from a research project I conducted with a colleague in Belgium.<\/p>\n

Why the Loyalty Gap?<\/h3>\n

In the project, we combined loyalty program member behavior with survey data to see what behavioral patterns contributed to each type of loyalty. The analyses showed some intriguing reasons why company loyalty and program loyalty may not be in sync. First of all, earning points fast within the program contributed positively to both program and company loyalty, not surprising since fast point earning also meant frequent purchase of the company\u2019s products and services. What is interesting, however, is that point earning speed contributed more to company loyalty than to program loyalty. That is, everything else being equal, frequent point earning within a loyalty program is more conducive to company loyalty than to program loyalty<\/strong>. This is good news and means that encouraging consumers to accumulate more within a loyalty program is good for business.<\/p>\n

Earning behavior is only part of the picture, however. Our research finds that redemption matters too, but in a more complex manner. Whether a high redemption rate increases or decreases the loyalty gap depends on the consumer\u2019s earning speed.<\/strong> For those slow to average earners, redeeming more of the points earned reduces the loyalty gap and brings company loyalty more on par with program loyalty. But for fast earners, a high redemption rate actually increases the loyalty gap and makes individuals more loyal to the program rather than to the company.
\n
In the loyalty program circle, high redemption is often believed to mean high program engagement and therefore is something to be encouraged. Our research suggests that encouraging high redemption may not be a desirable strategy for everyone. For heavy program hitters, encouraging more redemption may actually create a cohort too loyal to the program without corresponding growth in company loyalty.<\/p>\n

Designing Program Communication to Reduce Loyalty Gap<\/h3>\n

\"recognition<\/p>\n

In the second part of the project, we ran a field experiment to see what else businesses can do to reduce the program-company loyalty gap. We tried different program communications that emphasized the monetary, hedonic (fun) or recognition nature of rewards. We found that emphasizing monetary rewards increased program loyalty but had the detrimental effect of lowering company loyalty<\/strong>.<\/p>\n

Emphasizing the fun and recognition nature of rewards produced much more desirable outcomes. Both types of communications increased company loyalty more than program loyalty. From a practice standpoint, this means that your business wants to be careful with how you communicate your loyalty program to members. Emphasizing your appreciation and recognition of customers and emphasizing non-monetary aspects of rewards are better if you want to build loyalty to the company.<\/p>\n

Key Take Aways<\/h3>\n

When your business runs a loyalty program, the ultimate goal should be growing customer loyalty to your business rather than to the program itself. Based on our research, there are a few things that you can do to achieve this goal:<\/p>\n

    \n
  • Encourage faster point accumulation in the program;<\/li>\n
  • Encourage higher redemption only among slow to average point earners;<\/li>\n
  • Downplay monetary messages in your program communication;<\/li>\n
  • Instead, focus on recognizing your customers and on non-monetary aspects of your rewards.<\/li>\n<\/ul>\n

     <\/p>\n","protected":false},"excerpt":{"rendered":"

    When your business runs a loyalty program, the ultimate goal should be growing customer loyalty to your business rather than to the program itself. This article shares some research insights on what behaviors lead to the loyalty gap and what your business can do to reduce that gap.<\/p>\n","protected":false},"author":1,"featured_media":1415,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[28,8,9,10,26],"tags":[90,212,209,62,210,211],"class_list":["post-1414","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-best_practices","category-customer_loyalty","category-crm","category-loyalty_programs","category-research_insight","tag-customer-loyalty","tag-earning-speed","tag-loyalty-gap","tag-loyalty-program","tag-loyalty-program-design","tag-redemption-rate","post-archive"],"yoast_head":"\nReducing the Loyalty Gap | Ping! >> Loyalty Science in Practice<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.yupingliu.com\/wordpress\/2018\/06\/20\/reducing-the-loyalty-gap\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Reducing the Loyalty Gap | Ping! >> Loyalty Science in Practice\" \/>\n<meta property=\"og:description\" content=\"When your business runs a loyalty program, the ultimate goal should be growing customer loyalty to your business rather than to the program itself. 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