Loyalty programs

It’s been many decades now, but ever since the airlines created the virtual currency that is frequent flyer miles, many businesses have felt compelled to have some sort of rewards program in place at their businesses as well.  When it comes to these things, I don’t claim to be an expert at the programs themselves, nor at designing them, but it is a most opportune time to think like a customer and like a businessman, in tandem. 

Many of these rewards programs are fairly tame, in spite of their secret agenda, which is to get your email address and send you all sorts of promotional material which you may or may not covet.  I consider these types of programs to be harmless because they aren’t blatantly biased against the non-members. If you have a rewards card from, say, Dick’s Sporting Goods and buy something at Sports Authority, you can experience a small amount of regret if and when you learn that your rewards could have saved you 10%, but the important distinction is that Sports Authority doesn’t make you feel any less worthy for having made a purchase there.  And in fact, they shouldn’t!  Some loyalty programs do that, and it doesn’t feel very good.  I am not going to tell you how you should run yours.  I don’t consider myself qualified to do that.  I am not a professional marketing guru, but I am a professional customer.  I’m very good at that and I feel very qualified in that respect because I understand business and I understand being a consumer.  I know that a loyalty program, along with everything else that you do, must be good for the consumer and for the business owner.  It is the poster-child for the “two-way street.” 

As a person familiar with many drycleaners and their marketing practices, I want to share some things that I’ve seen.

As a very frequent flier, I want to tell you about my experiences with the airlines.

As a frequent cruiser, I want to tell you about their programs and how they have made be loyal.

As a person that frequents certain stores, I want to discuss the good and the bad

And as one who frequents other businesses that don’t do the loyalty programs, I want to tell you why that’s ok.

And then there’s the worse thing that you can do when you have a program in place.

These are all from the perspective of a professional customer with business sense.

Many of you give gifts to your best customers.  I have seen 3 or more tiers of gifts given out around the holidays.  I like this.  Its unlikely that anyone feels slighted if they don’t get a gift.  They probably aren’t aware that you do this.  The good customers feel special, as well they should!  I have felt slighted as a customer though, because no drycleaner that I have ever done business with has bothered to do this.  Many years ago, my then drycleaner sent out an email offering 50% off anything that I might have at their store if you pick it up on December 26th.  I had picked up everything two days prior.  I felt cheated, but a loyalty program should not be about offering significant discounts.  After all, these good customers are the people that already gleefully pay full price.  It should be about making them feel happy to be a customer.  This can be something as simple as a special parking space, or a special queue in the call office. 

I think that the most successful rewards programs dangle the potential benefits in front of their prospective members.  “You get these bennies if you spend $100 per month, but you upgrade to a special parking space and a gift on Thanksgiving if you spend $200 per month.”  This is hardly a discount; it is an enticement to spend more!  Cruise lines do this.   You get a nice array of goodies if you’ve spent 80 nights on cruise ships with a particular line, but when you have spent 100 nights, well, now you get free laundry and drycleaning, a little gift, a special departure lounge and a selection of hors d’oeuvre upon arrival.  These cost the giver very little money, but the goal of making the customer feel special has been met with a vengeance.

When I go to the grocery store and see two prices on something, “$2.00 (with your Stop & Shop card), $3.00 without.  I’m not really sure what they are trying to accomplish other than to entice membership and create loyalty.  I guess that make sense, except that I can’t help but wonder if the $2 price is a bargain or the $3 price is a non-member penalty.  It’s probably the former, but it makes me think.  Is there a profit margin either way?

I frequent certain places because they make me feel welcome.  They do not offer me a discount, a special parking space, 10% off on my next purchase or a free drink.  They just make me feel like I belong there.  Surely you have heard about how important it is to remember customers by name.  I am 100% certain that the two restaurants in my mind right now, offer meals that I could purchase for less money, much less, if I went elsewhere.  Why don’t I do it?  Because its not about the money.  10% off my next purchase is not an enticement.  It’s a game.  When you make a customer feel special, you have solidified him as a customer.  I don’t feel special at the grocery store because they sell me a $3 item for $2, I feel like part of the herd and perhaps happy that I escaped the opportunity to pay too much for something.  That can’t be the goal of a loyalty program!  I’ll leave the grocery store, happy that I got a deal, but they did nothing to make me feel unique.  I feel neutral.

A loyalty program should be about trying to capture that big tuna, or maybe just lots of little fish, all of them happy to choose you for their clothing care.  And it should be a way to recognize your top customers and to make those under the threshold desire more for spending more. 

I am 100k with United Airlines.  I always sit in the same seat, the staff addresses me by name, I get frequent free upgrades to first class, up to 4 days before my flight and I sit in a special section of the airplane.  It makes a very big difference.  But flashing these benefits is hardly the point.  Every now and then, I end up on a different airline.  It happened last week.  My flight was delayed and they put me on a Delta Airlines flight.  Great!  Another terrific benefit.  For me.  Now Delta Airlines has a unique opportunity, but they will drop the ball.  The chance of me purchasing a ticket on DL is extra-ordinarily slim.  I keep buying tickets with UA in order to maintain my status (like you want your customers to do.)  DL doesn’t know it, but I am their dream customer.  Do they seize the moment?  Absolutely not.  They do everything imaginable to make me more certain than ever that I should never fly on any other airline aside from United.  DL puts me in a seat in the back of the plane, where there is no legroom, foot room, or knee room.  I cannot use my laptop computer because there is no room between me and the back of the seat in front of me.  They want to charge me for luggage, a better seat, movies and an internet connection.  I succumb to none, aside from the feeling that UA treats me so much better.  It doesn’t matter if you think that I don’t deserve those things.  What matters is that UA thinks that I do.  Some airlines charge you to check a bag and even more money to carry one on.  The fare you pay is for a middle seat.  Aisles or windows cost more.  I understand as well as anyone that business must generate income.  That’s what it is all about.  But what if they generate the feeling of disgust?  Or contempt?  DL wants me as a customer, but instead of seizing that opportunity, they unwittingly prove to me that I should stay where I am.

This may sound perfect to you.  You take such good care of your customers that when they go somewhere else, no one can compare.  Perfect, right?  Perhaps not if the tables are turned.  And that is my point.  When an unknown customer comes into your door, is he/she treated like a chump?  No?  Good answer.  Now suppose that new customer is a potential $500 per month customer, trying to scope out a new cleaner.  Maybe he just moved into town?  Or maybe his drycleaner isn’t any good and he needs to make a change.  If you are in the role of Delta Airlines in my story (And I bet you are, every day), you must treat that person as a “big tuna” in waiting, because he just might be!  Treating this person like some nobody is the one thing that you should never do lest you wish to prove to him that doing business with the competitor is far better than doing business with you.  You are underscoring an unknown customer and labeling him as insignificant.  If he was a great customer, you would shower him with gifts and benefits, but what entices him to get there?  Only you can do that.

How did United do it with me?  Its great.  They sort of bought me.  About 10 years ago, I received in the mail, a Gold Card from them.  This was, at the time, their third tier in the Frequent Flier program.  I loved it and very much enjoyed the perks.  None of them was a discount.  It was all recognition.  I favored United on every flight that year.  At the end of the year, I was stunned to get down-graded to Silver!  I called them to protest.  I was certain that I had flown United more than ever because I like the benefits.  Their rebuttal was shocking, but is terrific food for thought.  The Gold Card the previous year was a gift, they said.  A comp.  They data-mined their database, just like you can do and discovered that I was a potential big customer.  They gifted the Gold Card (it was called Premier Executive back then) and gave me a taste of what travel could be like if I regularly purchased from them.  It worked like a charm!  Think about that.

And one more thing…, for more and more airlines – United Airlines among them – the distance traveled, “the miles”, has nothing to do with how many miles you fly.  Believe it or not.  It has to do with how much money you spend.  This can be valuable information for you.  We all have those customers that only buy the sale items.  Airlines are so price sensitive.  They know that most fliers are rare customers and shop for the lowest fare, regardless of the carrier.  This is like most of our customers, who spend less than $100 per year.  United figured this out.  They aren’t going to give you 3000 miles for flying from Boston to San Francisco.  Your loyalty level is a multiplier.  100k member earn 11 times the number of dollars that they spent as frequent flier “miles”.  It is virtual currency, as I said at the beginning of this article.  Platinum members earn 9 times the dollars spent.  The lowest level is 4 times.  This helps to minimize the value of a price reduction.

There is a lot to all of this and I wish that I had a perfect one-size-fits-all loyalty program for all drycleaners.  I didn’t set out to do that.  I set out to give you food for thought.  I hope that I’ve done that.