Building a successful loyalty program goes beyond simple rewards, according to Andreea Redfern from Walnut, which is part of Accenture Song.
Redfern emphasizes that true loyalty is rooted in behavioral psychology rather than just the mechanics of a program. She explains that loyalty is deeply embedded in brain processes that influence customer decisions, often in ways they do not fully understand. Recognizing these psychological drivers not only reshapes how businesses create loyalty strategies but also what those strategies aim to accomplish.
Research identifies three fundamental drivers of loyalty, which Redfern refers to as the “three human truths.” However, she points out that many brands typically invest heavily in only one of these areas.
Reward Works
The first driver is the element of reward. Loyalty is linked to reward-driven neural networks where positive experiences encourage repeat behavior. This principle is foundational for many loyalty programs, which utilize points, incentives, and personalized offers to reinforce desired actions among consumers. However, Redfern warns that loyalty based solely on rewards is fragile. Should the incentive diminish in value, or if a competitor provides a better offer, customers can easily be swayed. In such cases, the relationship with the brand resembles a transaction rather than a loyal partnership.
Strong Habits
The second truth is the development of habits. Frequent interactions with a brand create automatic behaviors, reducing the cognitive effort involved in choosing the same option repeatedly. This automaticity may create an illusion of loyalty, yet it can be disrupted by changes in purchasing environments, such as the growing role of artificial intelligence in consumer choices. Redfern notes that the strength of these habits may wane when contexts shift, indicating that habit-driven loyalty is not immune to disruption.
Emotional Connection
The third and perhaps most significant driver is the emotional connection brands cultivate with their customers. Emotional loyalty is founded on experiences that resonate on a psychological level—factors like status, shared values, or a sense of belonging. According to behavioral science, individuals do not just select brands that satisfy functional needs; they lean towards those that reflect their identities and aspirations. Redfern argues that emotional loyalty is often the hardest to establish, as it involves understanding feelings that are not easily articulated or even consciously recognized.
Loyalty is more than a program; it encompasses a broader understanding of consumer behavior. Current industry insights reveal that many loyalty programs fall short, as evidenced by statistics showing that 54% of memberships remain inactive and 77% of programs fail within two years. Redfern attributes these shortcomings to a lack of comprehension regarding the complexities of loyalty, rather than mere technological failures.
To succeed, brands must grasp not only what drives purchases but also the underlying reasons that encourage loyalty. This involves integrating reward, habit, and emotional engagement in strategies and leveraging AI to enhance relationships, rather than merely streamlining interactions.
