High Frequency Brand Engagement

Winning customer loyalty is high on the to-do list of every organization. Increasingly, Loyalty is defined by engagement as customers and fans of are distributed across a variety of platforms.  And one of the best ways of engaging and retaining customers over time is to implement an effective rewards program. But what defines a rewards program is changing.

A company that is successful at getting customers to keep coming back to it has much to gain. In The Value of Keeping the Right Customers, Amy Gallo, a contributing editor at Harvard Business Review, points out:

  • It’s 5 to 25 times more expensive to acquire a new customer than to keep the ones you already have.

  • Increasing customer retention rates by 5 percent can boost profits by 25 percent to 95 percent.

There are other advantages, too. Companies with strong brands typically capture only a fraction of the market opportunity available to them. A well-designed rewards program can keep your brand remain top of mind and help you gain a larger share of customer spend.

But creating a rewards program that works can be a fraught exercise. Just ask Chipotle. The Mexican restaurant chain launched its loyalty program, Chiptopia, in July 2016. Three months later, it closed it down. Why? It was too generous to be sustainable. People who signed up for Chipotle’s program could get four free burritos if they bought 12 burritos over three months. 

No company would want its rewards program to last only three months. However, there are numerous examples of brands who have gained immense benefits from their loyalty plans.

A successful rewards program can revitalize your company

Rewards programs don’t need to follow a predefined template. Here are two that show you innovative ways that can help a company succeed:

Starbucks

The company’s rewards program was launched 12 years ago and is a roaring success. Membership is growing at a rapid clip and currently stands at 20 million. The program’s success can be gauged from the fact that in 2019, it contributed to 40 percent of Starbucks’ sales.

What makes Starbucks Rewards work so well?  

It’s simple--there are three tiers, and you can earn one, two, or three Stars for every dollar you spend. You can exchange Stars for free food and drinks, and there are other benefits, as well. 

United Airlines

North American airlines account for only 20 percent of global capacity but half of global airline profit. Burkett Huey, an equity analyst with Morningstar, explains why, “The frequent flyer programs are really the golden goose of the airlines”. 

How much do these programs contribute to individual airlines? Recently, United Airlines pledged its United MileagePlus program as collateral for a $5 billion loan from Goldman Sachs and other banks.  

There’s a lesson here for firms in other industries. In addition to helping a company increase customer loyalty, a rewards program can also be highly profitable. 

The bottom line

Management consulting firm Accenture says that 90 percent of companies have a rewards program, and there are 3.3 billion memberships in the country. That’s about 29 per US household. It’s a crowded field, but if you can get your loyalty program to stand out with great value and utility for your customers, the rewards can be great.