Building a loyalty programme? Beware of cuckoos

Then along comes one of nature’s super hustlers, the common cuckoo. She sneakily lays her egg in the warbler’s nest, hoodwinking the tiny host to do the brooding then slog her guts out to feed an enormous and voracious fledgling, and everything goes south.

What’s that got to do with your customer loyalty programme? More than you might think.

The right loyalty programme can work wonders for a business. It encourages recency, frequency and value of purchase. It defends against the competition by offering a differentiating reason to prefer. It’s a way to reward valued customers with a stake in the success of the company by sharing upside. It’s able to affiliate customers closer to the brand. But good loyalty programmes are more the exception than the rule, and the wrong loyalty strategy can do serious damage to your brand.

So learn a lesson from the warbler and the cuckoo: your loyalty programme must be the natural child of your brand. Your strategy should be bespoke. It should focus on your customers’ priorities (what they value most), your business dynamics (how you make money) and your brand values (why you exist).

Take the example of Sephora, the LVMH-owned cosmetics giant, enjoying massive growth in the USA. The French brand differentiated itself originally with its "assisted self-service" in-store experience, encouraging customers to try products freely before purchasing. This led to greater customer experimentation, driving multi-product baskets and the creation of a fan base of avid beauty junkies. The brand’s 10-million strong Beauty Insider membership programme, linking online sales with the all-important store experience, is a natural extension of the Sephora proposition. Tiered member benefits are heavily biased to the most active customers and they’ve recently added VIB Rouge, a high-end third level for shoppers who spend over $1,000 in a calendar year! This offers invitations to private events, full-size free gifts (not just samples), complimentary beauty studio access in any store, and unlimited free shipping for online purchases.

The generosity of the offer is impressive, but so is the commitment from a growing segment of customers. This is what true beauty junkies expect from the brand they love and it is driving Sephora’s sales growth to become one of LVMH’s most successful businesses worldwide.

What can we learn from this? With the Beauty Insider programme the interests of Sephora’s business and its loyalty programme are totally aligned. The customer offer is symbiotic across channels and the overall brand experience is enhanced.

Unlike brand warbler and its cuckoo programme.

So when we partner with clients to build or refresh their loyalty strategy we ask:

• What is your brand’s purpose?
• How is that purpose experienced by customers today?
• What do your customers love about you? What do they dislike?
• What most distinguishes you competitively?
• Which customer behaviours or choices do you most wish to reward?

Terry Hunt is founding partner at The Future Customer