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Loyalty Programs Are More Than Just Repeat Business

The Hidden Revenue Engine

Loyalty Programs Are More Than Just Repeat Business

GUEST POST from Shep Hyken

Loyalty programs have evolved far beyond their humble beginnings as simple “earn and burn” points systems. While many still view them primarily as marketing tools to drive repeat business, today’s loyalty programs have become sophisticated revenue engines that can significantly impact a company’s bottom line.

Consider this surprising statistic from our annual customer service research: 46% of U.S. consumers are willing to pay more for companies that have good loyalty programs. Even more telling, 39% have chosen one brand over another, even if it is more expensive, simply to earn more points in a loyalty program.

The transformation of loyalty programs into revenue generators became especially apparent during the Covid-19 pandemic. While airlines were grounding their fleets, their loyalty programs were still generating substantial revenue through partnerships with credit card companies and other businesses. If you use a credit card tied to your favorite airline, you have experienced this firsthand. You don’t have to fly on the airline to continue to earn points and awards. This revelation led to some interesting valuations of these programs, sometimes worth more than the core business itself.

I had a chance to do an Amazing Business Radio interview with Aleksander Kaczmarek, the vice president of loyalty at CarTrawler. CarTrawler offers a technology solution that connects car rentals to brands such as American Airlines, Uber, Emirates, American Express, Hilton and many other brands you are familiar with. If you’ve ever bought an airline ticket or booked a hotel and were asked if you needed a rental car, you may have experienced CarTrawler.

According to Kaczmarek, modern loyalty programs are far more powerful than the points and awards most people think of. They’ve evolved from simple point-collection systems into sophisticated customer engagement platforms. Today’s programs leverage technology to create seamless experiences that encourage customers to interact with brands in multiple ways. For example, many retailers’ loyalty apps now include features like mobile payments, personalized recommendations and exclusive access to products or services.

Kaczmarek says revenue potential comes from three key areas:

Direct Program Revenue: This includes membership fees (think Amazon Prime or Walmart+) and partnership revenues from other businesses that want access to the program’s member base.
Increased Customer Spending: Loyalty program members typically spend more than non-members, partly because they’re trying to earn rewards and partly because the program makes it easier to do business with the company. (This is reflected in our research and the findings mentioned at the top of the article.)
Data Monetization: The insights gained from loyalty program data can help companies make better inventory decisions, create more effective marketing campaigns and identify new business opportunities.

According to Kaczmarek, the most successful programs share several characteristics that drive both customer engagement and revenue:

More than Points: They offer immediate value beyond points accumulation, such as priority service or exclusive access.
Emotional Connection: They create emotional connections through experiential rewards rather than just transactional benefits.
Partnerships with Other Businesses and Brands: They leverage partnerships to expand their value proposition beyond their core business.
Using Technology for a Better CX: They use technology to deliver a seamless customer experience across all touchpoints

However, companies need to strike a careful balance. Kaczmarek says, “There’s often debate about whether loyalty programs should focus on generating revenue or enhancing customer experience. The truth is, they need to do both.”

This dual focus is crucial because customers aren’t loyal to the program—they’re loyal to the experience the company provides. A great loyalty program can enhance that experience and drive revenue, but it can’t compensate for poor service or products.

Kaczmarek notes that the future of loyalty programs goes beyond anything we’re seeing today, especially in the travel industry. “Looking ahead, we’re seeing innovative approaches to loyalty programs emerge. Some cities and business districts are exploring ‘destination loyalty’ programs that reward customers for engaging with multiple local businesses. Others are creating coalition programs where complementary businesses share a single loyalty platform.”

So, whether you’re a small local business or a major corporation, loyalty programs can be more than just a customer retention tool. When properly designed and executed, they can become a significant source of revenue while strengthening customer relationships.

Just remember, the typical loyalty program doesn’t actually create loyalty. It is a marketing program that simply rewards and reinforces repeat business. True loyalty still comes from consistently delivering great experiences that make customers want to say, “I’ll be back!”

Image Credit: Shep Hyken

This article originally appeared on Forbes.com

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Instant Revenue

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Instant Revenue

GUEST POST from Mike Shipulski

If you want to grow the top line right now, create a hard constraint – the product cannot change – and force the team to look for growth outside the product. Since all the easy changes to the product have been made, without a breakthrough the small improvements bring diminishing returns. There’s nothing left here. Make them look elsewhere.

If you want to grow the top line without changing the product, make it easier for customers to buy the products you already have.

If you want to make it easier for customers to buy what you have, eliminate all things that make buying difficult. Though this sounds obvious and trivial, it’s neither. It’s exceptionally difficult to see the waste in your processes from the customers’ perspective. The blackbelts know how to eliminate waste from the company’s perspective, but they’ve not been taught to see waste from the customers’ perspective. Don’t believe me? Look at the last three improvements you made to the customers’ buying process and ask yourself who benefitted from those changes. Odds are, the changes you made reduced the number of people you need to process the transactions by pushing the work back into the customers’ laps. This is the opposite of making it easier for your customers to buy.

Have you ever run a project to make it easier for customers to buy from you?

If you want to make it easier for customers to buy the products you have, pretend you are a customer and map their buying process. What you’ll likely learn is that it’s not easy to buy from you.

1. How can you make it easier for the customer to choose the right product to buy?

Please don’t confuse this with eliminating the knowledgeable people who talk on the phone with customers. And, fight the urge to display all your products all at once. Minimize their choices, don’t maximize them.

2. How can you make it easier for customers to buy what they bought last time?

A hint: when an existing customer hits your website, the first thing they should see is what they bought last time. Or, maybe, a big button that says – click here to buy [whatever they bought last time]. This, of course, assumes you can recognize them and can quickly match them to their buying history.

3. How can you make it easier for customers to pay for your product?

Here’s a rule to live by: if they don’t pay, you don’t sell. And here’s another: you get no partial credit when a customer almost pays.

As you make these improvements, customers will buy more. You can use the incremental profits to fund the breakthrough work to obsolete your best products.

Image credit: Pixabay

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Thought Leadership Builds Firm Value

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by Braden Kelley

Consulting firms sell expertise, and their currency is trust. Large consultancies like Boston Consulting Group, Bain, McKinsey, Deloitte, Accenture and others make their money from being a trusted advisor to companies around the world. Why do companies trust them?

One reason is that companies always value an external perspective, and there is a large army of alumni from these firms in organizations around the world guiding their leadership to choose their former employer as that external perspective or that extra pair of hands needed in tackling a large strategic challenge.

But there are also several other considerations that factor into an organizations choice of a trusted advisor, including:

Previous experience
Industry expertise
Area of practice specialty (Strategy, HR, Innovation, Finance, M&A, Technology, etc.)
Personal relationships
Thought leadership

The resulting client work creates staffing plans within consultancies to provide billable hours for project execution. And, while most consulting firms spring to life and find early success because of the strength of their thought leadership, in general, over time most consulting firms tend to under-invest in thought leadership and as a consequence they find themselves vulnerable to new entrants nibbling around the edges of their core business and see their growth slow and eventually turn negative. Thought leadership generates the initial creation and success of the firm and leads to millions of dollars, or potentially even billions of dollars, of revenue for the consulting firm, but despite this fact, most consultancies under-invest in thought leadership.

Part of the reason for the inevitable decline in the firm’s thought leadership investments occurs because thought leadership is rarely anyone’s primary focus inside most consulting firms. Thought leadership is usually seen as the responsibility of the partners and principals of the firm AFTER they meet their revenue goals. How frequently are these people likely to have the time or energy to create the kind of quality and revolutionary thought leadership that leads to the sustaining or expansionary growth that every firm desires?

What we end up with is a level of thought leadership inside most firms that in the best case leads to a maintenance of the firm’s existing business, and in the worst case either no new thought leadership is created, or that which is created, is insufficient to maintain the firm’s current level of business.

A successful partner in most firms keeps their people busy and possibly creates some growth in billable hours for the firm, but rarely will you find that partners are able to create thought leadership capable of creating whole new lines of business. Not through any fault of their own, but because they simply don’t have the time to do it all.

To make things worse, the world is changing…

It used to be that information was scarce and external knowledge was valued by the client.

Now information is freely available and knowledge can thus be created within the client.

An increasing number of companies are therefore relying on their employees to educate themselves, while also creating their own internal consultancies, and relying less on external consultancies as a result.

At the same time, companies are becoming less open to being sold consulting services and instead more focused on becoming buyers of consulting services. And where do companies turn when they seek to be educated buyers of consulting services?

To the thought leadership they can find online from the different consulting firms in their consideration set. This is part of the reason for the rising importance of inbound marketing and content marketing as part of the marketing mix in all industries, but consulting firms are struggling to identify and provide the content necessary to help them maintain (and possibly extend) their success in this new environment.

And, even with all of these changes, most traditional consulting firms still hire traditional consultants and fail to hire people with established social media visibility, great content creation skills, the ability to get published, and the ability to help traditional consultants create both sustaining and revolutionary thought leadership. Firms are still hiring round pegs for their round holes to generate thousands of dollars a year in revenue and ignoring the square pegs with these skills that could generate millions of dollars in new revenue per year for the firm.

Marketing and advertising agencies operate in a similar client-firm ecosystem, but their value proposition is more tilted towards selling creativity and execution. In these industries we’ve seen huge consolidation driven by the need to acquire the new thought leadership, creativity and execution necessary to keep their existing clients, and we’re starting to see the same dynamics in the business consulting market.

The value of thought leadership and employees capable of creating and facilitating the execution of a great content marketing strategy driven by thought leadership, cannot be underestimated.

If anyone doubts the value boost of a thought leader to a firm, even outside the consulting market, ask yourself:

How much did Steve Jobs add to the value of Apple?

How much value did Jack Welch add to the value of GE?

How much value does Elon Musk bring to Tesla Motors?

Great thought leaders and thought leadership add a tremendous amount of value to the brand equity and the value of the firm, so why don’t consulting firms pay more attention to attracting or cultivating great internal thought leaders and thought leadership facilitators within their firms?

How much is a thought leader worth to you?

Do you need one?