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Rewards by Themselves Aren’t Enough

By Kyle LaMalfa, Allegiance, Inc.

Engagement is about the relationship that a customer has with a brand and the brand with that customer. True engagement is built over time, through positive experiences, and most importantly, by listening to the voice of your customer.

As companies deal with the increasing costs, mounting data and rising consumer expectations surrounding rewards programs, many are asking the question, “How can I attract loyal customers without rewards programs?”

A more effective question may be, “How can I use my rewards program to benefit both my customers and my company?” If your rewards programs are successful at adding value to the customer experience, as well as profits to the company’s bottom line, then rewards programs should be embraced. However, if the rewards program is the only thing your company is doing to drive customer engagement, then you probably won’t like the answer to the question.

By themselves, rewards programs rarely create the full emotional attachment that brings true customer engagement. Engagement is built over time and comes from creating mutually beneficial relationships with customers. One of the keys to creating relationships is providing customers with direct access to company decision-makers through a feedback management system that demonstrates that the company cares about them and is indeed listening.

Adding Value

Engagement adds value to a brand’s strength, as engaged customers are more likely to share their positive experiences with friends, refer business, purchase more products more frequently, avoid competitors and forgive mistakes. Engaged customers will also let companies know when their products or service did not meet expectations. In this case, it is up to the company to respond to customers’ comments and concerns in such a way that customers know they’re more than a number on a rewards card.

In the case of negative customer experiences, trying to correct them by giving more rewards points will not further customer loyalty as intended. In fact, engaged consumers don’t necessarily want more miles or points to simply “fix” the problem. Engaged customers want to know that the company is going to do whatever it takes to ensure the mistake never happens again. Should the mistakes keep occurring, more points or miles will not help to further engagement. Negatively impacted consumers, regardless of how many points they have, will likely be flying another airline, staying at a different hotel or shopping at another retailer.

To understand the hearts and minds of its customers, companies need to encourage two-way communications and create a convenient way for customers to continually express their concerns, report problems or deliver praise. Research shows that companies that are effective at listening to their customers build loyalty and engagement over time. They take the information they receive from customers and make changes, whether it involves a specific individual in a bank branch, a customer service department or the entire company. When customers recognize that their concerns, suggestions or feedback are responded to and resolved, they begin to realize that they’re important to the organization, that their voice can make a difference and that they have a relationship with the brand.

Building True Engagement

While reward points can encourage transactions and add value to a brand; positive experiences and listening to customers will create engaged customers and add to a brand’s strength. Engagement is about the relationship that a customer has with a brand and the brand with that customer. Engagement programs work together with loyalty programs to fill the gaps and connect to people’s hearts and minds. True engagement is built over time, through positive experiences, and most importantly by listening to the voice of your customer.

Rewards programs can and do play a significant role in creating positive experiences. Providing discounts, coupons and freebies while focusing on developing an emotional connection with your customers, however, is a much more effective way to engagement. But the thing that will encourage your customers to talk about your brand and keep them buying again and again is your ability to reach their hearts through listening and responding to their needs, and consistently delivering quality products and customer service.

Download the full report at http://www.allegiance.com/resource-center/document-library/buying-loyalty-and-rewards-programs

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Summer 2012

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