Customer Loyalty: As a Business, Should You Really Bother?

An article in the Harvard Business Review (HBR) magazine from 1995 began with a rather bold comment about customer rewards programs, stating that they’re “reviled” in business circles because of their perceived cheapness.

While conceding that they do work to build a relationship between two parties, HBR concluded that mid-90s loyalty schemes were short-term, badly implemented, and ignored the entire purpose of a rewards program, i.e. to keep customers around for longer.

Nearly two decades on, has anything changed?

Starbucks Rewards

It’s fair to say that mega-corporations like Amazon don’t really bother with customer loyalty – and don’t need to. Granted, being able to get Prime with Amazon Video and all sorts of other perks might seem like a great deal, but it’s still part of a service that’s paid for by the customer.

By definition, rewards schemes are designed to do exactly that – re-pay the client or customer for sticking around and making more purchases. A good example is Starbucks Rewards, which gives customers one “star” per dollar spent. These stars can then be redeemed for goods.

In the online world, loyalty schemes can be a bit easier to produce rewards for, as they can be entirely digital. The video game companies Nintendo, Sony, Valve, Microsoft, Google, and Ubisoft all offer virtual incentives for playing or buying games.

In Nintendo’s case, all the player has to do is complete “missions,” such as completing animal requests in Animal Crossing: Pocket Camp or clearing chapters in Fire Emblem Heroes. These missions reward completion with points that can be exchanged for physical items, like pin badges, and encourages sustained, long-term engagement with the product.

A similar type of scheme occupies online casino fans too. The industry is well-known for providing regular bonuses to cut through the noise of a crowded marketplace.

The BonusFinder New Zealand website reveals that operators sometimes offer deposit rewards, such as Wildz Casino’s 100% bonus of up to $500.

Regular depositors on the Neon Vegas site also have a chance to claim a prize every time they pay money into their account too. This is usually free turns on slot games.

A Positive Review

The question is, do these schemes – any of them – actually work? For businesses, the answer seems to be a resounding yes. According to digital services company KPMG, of customers that met the definition of “loyal,” 86% would recommend a business to somebody else, 66% would write a positive review, and 46% would show contrition to a company if they somehow made a mistake.

In a related survey from HubSpot, loyal customers are 50% more likely to try a new product or service – and also spend 31% more.

Of course, loyalty schemes actually need to provide something of value to customers in order to make them worth the effort. Starbucks Rewards might be considered a bit too expensive for the more casual coffee drinker, with 25 stars (equal to $25) needed for the most basic return – an added shot of milk, sauce, or espresso.

For the more hardcore fan though, and given how expensive Starbucks drinks can be, 25 stars might seem like nothing at all. So, creating a rewards scheme needs an understanding of customer demographics too.

Overall, while the biggest of companies, with their almost guaranteed customer base, might not bother with loyalty campaigns, they can be a boon for just about everybody else.