Why there’s much more to loyalty schemes than just bribing customers

Speaking at our show Loyalty 3.0 during The Drum Media Summit last week, James Calvert, chief data strategy officer at M&C Saatchi London, who was responsible for revamping Costa’s 11-year-old loyalty scheme, said those based merely on transactions and communications will eventually fail.

“When customers see the value exchange as purely transactional, you lose that emotional connection and that feeling of belonging, [and] then its [loyalty] performance fades over time,” Calvert said.

Costa built upon loyalty points by handing out free coffee and cake, adding a pre-order functionality and migrating members from a physical card to an app.

“For success, loyalty shouldn’t just be a comms thing or a transactional thing – it has to come together and integrate into the entire experience. It needs to go in-store and into products to truly create loyalty behavior,” he said.

Calvert was joined on the show by Alycia Mason, chief US customer experience at McDonald’s. When Mason was tasked with launching the fast-food chain’s debut rewards program, she wanted to reframe loyalty as providing customers with an easier and simpler McDonald’s experience rather than being about freebies.

“Value isn’t just about points and free food. Value is also recognizing customers for their loyalty by providing them with an easy experience through the app,” she said.

McDonald’s Rewards app does hand out points for purchase but also has delivery and pre-order functions, as well as an option to add card details for a seamless payment experience. Mason said it was essential that the loyalty experience could be executed in-store. “We needed to make sure that [the rewards program] could come to life in the restaurants,” she said.

James Parker, chief solutions officer at Jellyfish, said the best loyalty schemes are ones that can act as a vehicle to tell brand stories and make members feel like part of a club.

For Parker, the cycling apparel brand Rapha has a program worth learning from. The paid-for scheme offers standard benefits such as free coffee and access to exclusive products, but it also brings the community together with a member-only forum and bike rides. “Those are the types of loyalty schemes that are really successful, where everything is about telling brand stories in different ways. Those are the schemes that are really useful,” Parker said.

Parker urges brands not to look to loyalty to win category growth. “The real truth of loyalty schemes is that they try to connect multiple transactions together in order for marketers to make better decisions about price, place, product and promotion,” he said.

Loyalty schemes have been pitched as one way for brands to collect first-party data in preparation for cookie depreciation in 2024. But Mason disputed this, saying that loyalty shouldn’t be seen as a “silver bullet.”

“If brands are thinking this is the solution to get after third-party lack of data, then they are asking the wrong question. They should be about being more relevant to your consumer base,” she said. “You can collect it all, but if you are just using it for media and reach you are missing the potential of loyalty schemes.”

Calvert, Parker and Mason spoke as part of The Drum Media Summit 3.0 show. You can catch up with all the content here.