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The Debate on Customer Loyalty and the Future of Points

 

The Great Customer Loyalty Points Debate

If you have pondered the future (and potential extinction) of points-based customer loyalty programs, it’s worth taking note of a debate that briefly raged at the recent Loyalty Academy Conference hosted by The Wise Marketer.

Loyalty Academy, a newer entry to the loyalty space, is an annual confab of loyalty practitioners from 16 countries gathering to share best practices and discuss the future of customer retention and engagement. This year’s event also proved to be the perfect forum for an Oxford-style debate that posed a question on many loyalty marketers’ minds:

Are points-based loyalty programs still necessary to build customer loyalty and foster profitable behavior change?

This is far from an academic question. Many brands today that are considering a new program are not automatically assuming they need a proprietary loyalty currency. And some with legacy programs are evaluating the place points will play in the future. In February Coca Cola put this question in the spotlight when it announced a decision to sunset the point-based aspect of their long-running “My Coke Rewards” program to focus instead on more experience-based offerings.

The Debate Begins

The Loyalty Academy discussion on points pitted Nicole Harris of Maritz (pro) against Phil Rubin of rDialogue (con), each of whom had agreed to represent a particular viewpoint for the purpose of the debate. Rubin opened with the argument that traditional points-based loyalty programs no longer fully meet the needs of the customers they were created to entice. He also noted that their value as the primary tool of loyalty marketers has diminished as the market has shifted focus more toward optimizing emotional connection and customer experience.

Harris came at her pro-points argument from a strong human sciences perspective. She cited how a program currency can enable a brand to leverage both medium maximization theory and goal gradient hypothesis to engage customers. She went on to note that points programs also allow you to engage the social brain, as consumers will often publicly discuss how many points or miles they have earned in your program, even though they’d never discuss how much money they have in the bank.

From the perspective of the 4D Loyalty Framework, Rubin essentially argued that Mercenary Loyalty is less effective than it once was, and that brands need to be more social and programs need to be more engaging – thus moving towards True and Cult Loyalty. This is a hard case to refute – brands cannot rely any longer on mercenary loyalty alone.

After the Dust Settled

So what conclusions can we draw from this debate? While Rubin made a salient point about points, it is also true that points remain an incredibly useful tool to direct and influence humans to behave in a specific way. In any human endeavor, including marketing programs, the brain needs some system to hook into and to commit to. Points are great for that — they give consumers a framework for understanding expectations, a game to master and to beat, and a means to track progress toward goals. Are points the only way to do this? No, certainly not. But, in the loyalty space at least, they are the most proven approach of this kind to drive behavior.

While a hand vote at the end of the debate gave a decisive win in favor of the pro-points argument, a savvy loyalty marketer would tell you that both points and experiences are essential in any loyalty program offering. Rick Ferguson, CEO of The Wise Marketer, summed up the debate saying: “(Harris) and Rubin agreed that essentially both sides were right. Points programs are still a valuable tool, but (the) argument that points alone are no longer sufficient to win true brand loyalty resonated with the audience.”

To learn more about the advantages of a multi-loyalty strategy (points + engagement), check out our video on the 4 Dimensional Loyalty Framework.

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