Customers feel trapped in bad loyalty programs

Trapped in Loyalty ProgramsLoyalty is evolving quickly with the help of cloud, social, and mobile, but many loyalty programs have been around, unchanged, for decades. These programs are simply not delivering what they should. If not dynamic and individualized, they are surely suffering from diminishing returns and getting lost in the noise of ubiquitous loyalty programs.

While ubiquity is an issue, there’s something worse than being lost in the shuffle. There are programs, typically in the industries that have been in the loyalty game the longest, that incent behavior without creating a positive experience for the customer. Think of airlines and hotels and you have great examples of plenty of repeat business from customers who aren’t truly fans of a brand.

The Walker Loyalty Matrix

Walker loyalty matrix

Walker is a well-known customer intelligence consulting firm that put together a Loyalty Matrix, which is comprised of four quadrants of loyalty. Walker’s matrix lays out the argument that poorly designed or deployed loyalty programs trap customers and may only seem to be working.

In reality, only the truly loyal customer who has a great attitude, combined with favorable behaviors (e.g. repeat business, advocacy), has high value and low risk for the brand.

Creating the truly loyal

The customers who bring the most value for a brand are in the upper right of the Loyalty Matrix. The truly loyal are already in the ideal category, but need to be continually surprised and delighted if they’re to stay in that place. The accessible customer just needs to be encouraged to think of a brand first and to develop habits that make them truly loyal. The trapped can be moved to truly loyal by finding ways to surprise and delight based on their individual tastes and preferences (this whitepaper on customer loyalty management explains how).

Walker loyalty matrix + added insightWhat about the high risk? Before deciding to invest in high risk customers—those who have the combination of a poor attitude toward the brand and are unlikely customers—a brand should focus on the other three quadrants and get the program working first before reaching out to the hardest ones to reach.

The Walker Matrix with this added insight looks like this:

Your organization has the opportunity to capitalize on this plan, but it may involve starting over or building on to your existing loyalty program. The value, though, outweighs the cost of becoming less and less relevant as your competitors move forward.

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Categories: Loyalty, Marketing

Author:Jeanne Roué-Taylor

I'm fascinated by disruptive technology and its impact on our world. I manage sales operations for an excellent startup with a unique team of highly experienced data scientists.

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3 Comments on “Customers feel trapped in bad loyalty programs”

  1. June 3, 2013 at 6:25 am #

    Jeanne,

    Great post. I can tell you from experience this trend is happening. I’ve moved from being a former Continental Airlines “Truly Loyal” customer (I’d have done anything they asked me to), to a current United Airlines “Trapped” consumer (notice I didn’t say customer). The difference is night and day, and United just adopted the same loyalty program as Continental (I have the same number and everything), but that is the only thing they do to try and keep me loyal. They just offer me points for my flights and the once-in-a-lifetime option of getting a credit card for more points.

    No delight from the employees around my loyalty. No surprises. No interesting options for more frequent behavior. None of that. It has been a really interesting “lab” to experience. Unfortunately, I’m at a United hub city, so I don’t see them doing a lot differently. They feel they have us locked in (or trapped) based on availability and price. They may be right — for now.

    • June 3, 2013 at 7:17 pm #

      Ron, that’s a very common problem for airlines. They’ll need to break out of the traditional models and customer segmenting to make a difference.

  2. June 7, 2013 at 5:24 am #

    While generally directional, this model of customer behavior is close to twenty years old; and it is not contemporary with respect to defining customer advocacy. Advocacy research takes into account the impact of informal word of mouth and brand favorability. Further, customers can’t be ‘trapped’ in a loyalty program, because they have opt-out or switch opportunity, as with most supplier selections. For reference, I’d suggest the following as starting points:

    http://www.customerthink.com/blog/loyalty_programs_are_they_enhancing_or_undermining_customer_behavior

    http://www.customerthink.com/blog/a_holiday_present_cheerful_benefits_of_an_advocacy_based_customer_relationship

    http://www.customerthink.com/blog/modeling_customer_behavior_what_works_what_doesnt_and_why_in_the_real_world (Note: Walker’s is ‘Model W’)

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