Do Loyalty Programs Create Loyalty?

Hello CX wizards,

Thank you for being here. If this was passed along to you by a friend, feel free to join the 3,105 folks that subscribe by clicking here:

Some real quick updates for this week!

1. It’s always a blast to be a podcast guest vs. host. Cody and I had a blast chatting with Eric from the DTC podcast. We chatted about thumb-stop strategies, incrementality, attribution, CX scoring, and so much more. Check it out here.

2. I’ll be at Expo East today for a bit–say hi if you see me!

3. CX folks: I’ve got a discord with 500+ CX leaders from brands across CPG. If you are in CX or a CX-adjacent role, feel free to join here.

Enough dilly-dallying; let’s get right into it.

Before we get into it, a quick shoutout to Gorgias, our sponsor for this week’s newsie.

Gorgias is my CX helpdesk of choice and what we use at JRB. If you have been here for a bit, you know how much I love Gorgias and why I think it’s an absolute must-have for any Shopify business. More on my fav Gorgias use cases here.

Gorgias isn’t only a helpdesk but is truly our “mission control center” for all things CX. It’s our one-stop-shop for all things customer. If you have any questions about how we use Gorgias or why we chose Gorgias, feel free to email me anytime.

Let’s get into it, shall we?

I’ll start with a bold theory that some will love and others will undoubtedly disagree with.

Broadly, I’ve yet to be convinced that loyalty programs do more than rewarding already loyal customers. Brand loyalty is a whole different story.

Essentially, most brands do an awful job at measuring incrementality on loyalty programs.

It’s important to decipher if customers are spending more money because of the points they are getting to do so, or if these programs self-select the customers that love the brand and reward them for purchases they’d be making anyway.

But let’s not get ahead of ourselves here. You didn’t necessarily come here for the Eli lecture, and I want to bring some data as well.

Let’s back up for a second. Why is a CX guy even talking about loyalty programs, and why do I have hot takes on this?

All excellent questions. One at a time, please.

Here’s what I’ll cover today.

How the worlds of CX & Retention collide:

When I started my career as a generalist without formal education, CX felt like my zone of focus because it felt easy and natural. Still, lots of the “best practices” I saw across the aisle on the retention side baffled me.

Why were we spending loads of money on rewarding our best customers when the idea focus could be narrowing down the traits to spot the next cohort of these superstars and nourish those?

Why do brands send gimmicky stickers as “surprise and delight,” thinking it’ll massively impact their retention when the folks masterminding this know it would do nothing for them personally? (I’m guilty of this myself)

Why do retention teams spend a massive chunk of their time focusing on lapsed customers with almost no chance of winning them back? (folks that hated the taste of your product etc.)

Why does a MIMOSA sound so fancy when all it is is spiked orange juice?

Hard-hitting questions. I know.

So much of the data we as a CX team were getting felt complementary to the retention side of the business, but it felt like retention was solely about spamming folks to “buy more sh*t.”

I was fascinated by the idea of leveraging real-world customer data to win those same customers back.

I loved the idea of listening to why customers have not repurchased (or why they have) and using that to continue talking to them throughout their journey with us.

Sounds crazy, right? 🙃

Shockingly, very few retention marketers were doing that.

Why? That’s a separate story for another day.

My research into loyalty programs for OLIPOP and JRB:

When venturing towards the retention side at OLIPOP, I was consistently tossed into the conversation around loyalty programs.

When I joined, we were working with a review platform that shall remain nameless (it rhymes with notpo), and they also had a loyalty program under their umbrella.

All the stats made sense. “Customers that join the loyalty program spend X% more with your brand.”

“Customers that earn points have X% higher AOV.”

Okay, that sounds great, right?

But here’s the question. Say you did not have a loyalty program, would these customers not spend that money with the brand?

Or would they be spending the money anyway, and higher AOV customers are the ones opting in to get points?

I.e., very few brands do the work to A/B test a similar audience and hold out 50% of them from the loyalty program to decipher if the program is adding more value or they are just paying for something that would have happened regardless.

Let me ask you a question:

If you loved Madewell jeans, would you opt-in for their rewards program?

Without a doubt, you would.

If you were on the fence about their jeans, would you buy them anyway because you got points for that purchase?

I know I wouldn’t.

If you loved OLIPOP, would you love an OLIPOP sticker?

Probably.

Would you continue to pay $35.99 for a 12-pack of soda monthly just for the $1 sticker?

Eek idk.

Now here’s the grey area: If there were two coffee shops on the same corner, a Starbucks and a local spot, would you choose SBUX for the points?

Maybe, I’d think about it.

But would that make me like Starbucks any more?

Definitely not.

Okay, Eli, but you just said it! YOU SAID PEOPLE WOULD SPEND MORE MONEY ON A BRAND IF THEY GET POINTS.

Maybe. Maybe they would.

But most brands don’t do the math even to figure out if the juice is worth the squeeze. It’s labeled as a loyalty program but usually does not create real brand loyalty.

Additionally, because there is a cost associated with the points program (platform + discounts/rewards), the incremental net revenue of having one vs. not having one is questionable.

Gotcha, but what is brand loyalty anyway?

Here are the three questions I asked myself as I ventured into this thought process at JRB:

1. Are there any components of the old-fashioned loyalty programs that we do like?

2. How do we create a word-of-mouth flywheel that creates brand evangelists vs. front-loading revenue that could be coming to us anyway?

3. Traditional loyalty programs are very low on the hierarchy of needs. E.g., “like our FB page, get points, review our product and get points.” How do we climb higher towards community and self-actualization?

How to unlock real loyalty with community + loyalty program:

Are there any recognizable traits of potential super-fans that we can see pretty early in their customer journey so that we can nourish super-fans and turn them into evangelists?

For example, we can:

• Find customers that love their experience with JRB (good review, NPS promoter, etc)

• Give them the ability to share with a friend and gain from doing so

• Keep them engaged with the brand through continuous educational messaging

• Cultivate a community of people with similar interests and goals

As I started navigating this topic, I read a ton of psychological studies and research on this, but these two were my favorites:

The Long-Term Impact of Loyalty Programs on Consumer Purchase Behavior and Loyalty by Yuping Liu

MIT Sloan 1997 - Do Customer Loyalty Programs Really Work?

We can argue if a point-based loyalty program “juice” is worth the squeeze, and it certainly can depend on the brand, but I’ll leave you with two things:

1. Do the math to make sure it makes financial sense

2. Don’t assume that points and discounts in exchange for reviews and likes on Facebook create brand loyalty

I’ll chat about our community and loyalty plan in next week’s newsie. It’s been a long time coming, so I am excited to share.

That’s it for this week!

Any topics you’d love to see me cover? Drop a reply!

Appreciate you more than you know,

Eli 💛

For this week’s CX Chronicles, I’m thrilled to be chatting with Molly Meetz, Director of Partnerships and CX at Fresh Sends. Molly is doing magical things with Fresh Sends, and she is a part of the CX discord community, so I am excited to feature her here!

Thanks for stopping by, Molly!

What is your CX Philosophy?

Our mission at Fresh Sends is to help people feel seen, known, and loved. We want the voice of the brand to spread throughout every message we send to a customer, so it was an easy starting off point for developing our CX department.

We hope every customer feels like they’re messaging or chatting with a friend instead of the stereotypical dreaded customer service rep. It is incredible how fast showing them we are real genuine humans can tear down people’s walls when they originally come out of the gate swinging, and assuming we won’t be interested in helping them and making it right, even if we need to go outside of our normal policy to do it.

I believe having empathy and reading through the lines is one of the best ways to win people over. We relate to them, let them know we are also frustrated or excited with them, and they (almost) always leave a Fresh Sends fan for life.

We have such a strong community of people who are our biggest cheerleaders out in the real world, they feel a real connection to us as a brand and we want CX to be an extension of that.

A huge piece of advice I’ve taken away from meeting so many influential CX folks this year (thanks to you, Eli!) is to make sure every person your team speaks with leaves that experience as a brand fan.

They may not love your product(s) or order again, but it’s important to us to make them feel such a deep connection to Fresh Sends and our mission that they champion us when they get the opportunity to.

Your favorite Fresh Sends CX story?

That is extremely hard to narrow down! Since we are sending gifts to people for any number of different reasons, we really get to see those big milestones in their lives and celebrate or cry with them. It’s one of the reasons I love my job so much.

My favorite stories are the ones where we end up really connecting with our customers on a deep level, even if they started the thread because of a problem (and a little salty).

We had a gentleman reach out to us trying to inquire about who sent his wife a Fresh Send. We got to the bottom of it, and he let us know his wife wasn’t home to see the bouquet, but he’d show it to her.

We sent a new bouquet when she was back since she was caring for an ill family member. He ended up purchasing a bouquet for her for Mother’s Day as well and sent us a picture of her holding it, beaming from ear to ear. He would write us lengthy emails, letting us know how much it meant to her after everything she had recently gone through.

Another story: Through a glitch in our system that happened to pull an old order's address instead of the intended address, we had a woman very unexpectedly receive a send. We let her know it was a glitch and to enjoy the blooms when they arrived!

She responded by letting us know that it felt serendipitous. She was going through a hard time emotionally, and the bouquet really turned that around and gave her something bright to lift her mood. We started our “surprise and delight” program after this so we could hopefully continue to lift up our customers when they really need it.

We truly consider all of our customers to be a part of our community, and we love that they let us watch these parts of their lives and trust us to be a part of them!