WEBVTT
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This is the one I was telling you about.
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It is the You will not believe this play so that I just found literally a link to literally their biggest.
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I'm telling everybody about this.
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Tell them I sent this is my biggest.
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Girl.
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I want to name something out loud that I think is the actual reason so many loyalty programs quietly underperform.
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And that is loyalty is what businesses want.
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It's not what customers are trying to give.
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So let us all sit with that one.
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Loyalty is what businesses want.
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It's not what customers are trying to give.
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I think this flips how most founders think about loyalty programs because when we sit down to design one, we're usually thinking about it from our side of the counter, right?
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How do we get more repeat purchases?
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How do we lock people in?
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How do we reward the customers who spend the most that they keep on spending?
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Which are all great questions from a business perspective, but they have very little to do with the person on the other side of the counter.
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Because customers are not actively walking around looking for businesses to bestow their loyalty upon.
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They are walking around making decisions based on ease, based on trust, and based on experience.
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If they leave a particular business, it is almost, almost never because someone else offered them a 15% off code or a free branded Stanley mug.
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It's because leaving felt easier than staying.
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And if they stay, it is because staying feels obvious and leaving would feel like losing something that they actually value.
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Welcome to Would Recommend.
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I'm Nikki McKnight, a customer experience strategist and founder of The Ops Shop.
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And this is the show about the businesses that people can't stop talking about and what they actually did to earn it.
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Today is a Nikki talks episode, but this time we're gonna go deep into some specific tactics or mechanisms that can help a business become the one that people would recommend.
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And today we're talking loyalty programs and why so many of them tend to feel more like a little plastic loyalty card that you always forget to bring inside and actually use.
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So it just stays in your car or in your purse, quietly gathering Nature Valley granola bar crumbs onto it.
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And I'm gonna start off by telling you a little story that involves my parents.
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My parents have this whole other life in Napa Valley that I get to hear about in real time, usually over FaceTime, usually while I am eating something significantly less exciting than what they're describing to me.
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And honestly, it's usually Mr.
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Noodles.
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And when they are in Napa, it is likely that you can find them at Del Dato Winery.
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And if you've never heard of Del Dotto, it's a family-run winery that does these barrel tastings inside of these limestone caves.
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They host these big events every year called uh Barrels and Beasts, and it's very over the top and very cool.
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And the whole thing looks like a scene from a movie where, you know, the winemaker falls in love with the plucky young marketing lady from Los Angeles.
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My parents have been going to Del Dado since 1997 and they've been members for many years.
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And the reason I bring up Deldado is when my parents drive for up for a visit, they stay on the property in a guest house.
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They're not at a hotel down the road, they're on the property.
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They get phone calls from actual humans that go something like, Hey, we just got a small allocation of that Rutherford Estate cab that you love last spring.
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Do you want us to hold a couple cases for you?
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When they arrive on site by themselves or with their friends, they get taken care of.
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They get private tours with members of the family.
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And all of this to say, this is not just an experience, it's a relationship.
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And my parents have a fantastic relationship with the folks at Del Dado.
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And every time my dad tells me about the latest thing that Del Dato has done for them, I have the same reaction, which is a mix of genuine happiness for them and a little bit of professional envy.
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Because as someone who spends their entire working life thinking about client experience, I can see what Del Dato is doing and what it takes.
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And I know exactly how few people are doing it.
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Today I'm going to walk you through the four most common models of loyalty programs, what happens when they go well, where they tend to fall apart, and what you can do about it if the one you're looking at or the one that you're building is starting to smell a little granola punch cardy.
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And let me get in my soapbox moment for one.
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The one that hurt me the most, which seems ridiculous, is my Starbucks birthday drink.
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It used to be a whole week, a whole birthday week, any drink, any size, any customization.
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Redeem it whenever you want during that seven-day window.
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Which, one, meant that my birthday felt like a birthday week, and that is great.
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But it was also great for my schedule.
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And they it's now redeemable only on the actual day of your birthday.
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And what Starbucks did there was small, but also not small, because they took a program that used to feel like a celebration, especially when I had my physical gold card and I got a physical birthday coupon in the mail.
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It used to feel like a celebration, and now it just feels like a coupon with an expiration timer.
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On paper, it's the same program.
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You get a free drink on your birthday.
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But it stings because shrinking it down to one day logistically, I don't think changes very much on their side of the table.
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It doesn't change the pricing.
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But for me, it feels like a completely different experience.
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It makes no sense at all from my side, but I'm sure it made sense on their side.
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So that's the tension I want you to hold in your head as we walk through these four models.
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The business is asking, how do we make customers stay?
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And the customer is asking, why would I?
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And the loyalty program that actually works is the one that answers the customer's question, not the business.
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All right, model number one in a loyalty program is spend-based tiering.
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And this is what Del Dato is doing with my parents.
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It is a spend-based tiered program.
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And the thing it is rewarding is relationship.
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The more of your life you spend with the business, the more visible and material the relationship becomes, right?
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This is a little bit of quid pro quo.
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You take care of us, we'll take care of you.
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The more you spend at my business, the more I, as a business, am going to feel incentivized to spend money on you and maintaining this relationship.
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And the consumer gets to enjoy additional perks that come with that.
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And another benefit I definitely see to spend-based loyalty programs is they help deal with this sometimes problem of customer entitlement, where you can sometimes have loyalty programs where people spend like$100 a quarter and they ask for everything and feel very offended when they don't feel like they're being taken care of, but they only pay for the loyalty program once a quarter and then do nothing else.
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Whereas spend-based membership or spend-based loyalty programs can sometimes avoid that because it does have the quid pro quo baked into it.
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So that you take care of me, I'll take care of you.
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I think helps everybody in the agreement feel better about what that treatment looks like or feels like.
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The version most of us have actually spent time with in terms of a spend uh based tier is airline miles, right?
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Aeroplan, Delta Sky Miles, United Mileage Plus, whatever you want to pick.
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The the free flight is not necessarily the reward.
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This it's the status.
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Once you hit Aeroplan Elite or whatever your version is called, you are getting priority boarding, you're getting complimentary extra checked bags, you're getting upgrades, you're getting lounge access.
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When something goes wrong, you get a phone number to talk to a real person.
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Um, and the airline is not just tracking how much you spend with them, it's treating you differently because of it.
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I can't tell you how many of my friends um are because they travel a lot, they're very specific with their airline mile program and they choose one very deliberately and they will make changes to their travel plans, maybe choosing a slightly more inconvenient flight to go with their chosen rewards program so that they can maintain status.
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A little story with my dad is when he was working in the United States, that first year he worked for that company, he probably traveled 300 out of the 365 days that year and hit multi-platinum status with a multitude of airlines because it made everything easier when he traveled.
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So the idea here is the same across every good version of the model, whether it is an airline or it's the Dell Dotto Winery or it's your favorite hotel loyalty program.
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You're not just chasing points to get points, you're building a track record, and that track record is going to massively influence how you get treated.
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Again, you take care of the business, they take care of you.
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And where this model does really well is when the tiers actually correspond to a felt shift in how customers are being treated, right?
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Del Dado is not giving my parents a bigger discount because they've been in the membership longer.
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They're calling them my name, remembering what they bought last time.
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They're offering them a room on property.
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Aeroplane Elite, when it is working, is the person at the gate looking at your boarding pass and saying, welcome back, instead of that we're only boarding group two, you are group four.
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Go sit down.
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Right?
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The tiers have to be visible in treatment, not just in fine print.
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But like most things, there are pitfalls in the spend-based tier model.
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Um, first, the tier naming can be something really interesting, right?
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They typically get named things like silver, gold, platinum.
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It's at least imaginative naming convention.
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It sounds like a credit card, but it can make people feel less than, or it can make them feel like they're not good enough.
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And depending on what type of business you are, that could create an issue.
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And second, the perks at each tier are typically variations of discounts or dollar values, which at the end of the day is probably one of the least meaningful things you can offer somebody who has already told you with their wallet that they love your brand, right?
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A discount is just gonna say spend more to save more, which is not necessarily what a loyal customer wants to hear from a business that they love.
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And third, especially with aeroplan points or airline points, has been my experience at least, is that it is really hard to get to the fine print about what you have to do to go further.
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It's a it's a dashboard and you dig around and it's like I'm$72 away from something that I didn't know I needed, but also I have a bunch of points that are about to expire.
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So what do I do and not to not expire those things?
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So it can logistically for the consumer become a little messy.
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So if you are running a spend-based tier program, some things to think about.
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One, how are you naming the tiers?
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And can you name them in such a way that it means something in your brand world and not a way to create classes of customers that makes them feel stepped away?
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And I think, lastly, I think you need to put at least one perk at each tier that money genuinely cannot buy.
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Because otherwise you're just gonna get caught in the discount game again and it's spend more to get more.
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But if you can include something that a money can't buy, that is where that tier and a customer's pursuit of that tier makes a difference.
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So maybe it's early access, maybe it's a real human contact that they have, it's a room on property, it's a private tour, or an invitation, or access to something that the general public does not get invited to and can't get access to.
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Some things to think about.
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So, model number two in our loyalty program deep dive is the points per dollar.
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And I think this is one that a lot of people think of first when you think loyalty program.
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You spend money with a business, you earn points with that business, you redeem those points with that business.
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So, what this loyalty program is rewarding is transaction.
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Every dollar you spend is going to produce a fixed number of points, and every point is going to produce a fixed amount of redemption value or a discount, right?
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For every one, for every dollar you spend, you get one point.
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You can redeem 200 points, and then you get dollars off your purchase.
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So, one I think that people know really well for this is Sephora Beauty Insider.
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And I think what Sephora figured out is that its redemption catalog has to feel like a treat, not just a discount.
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With the program, you're not saving 15% on a moisturizer you were gonna buy anyway.
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You're trading points for limited edition palettes you cannot get any other way, or sample-sized versions of serums you've been curious about, or an experience with a makeup artist.
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So the points become currency, and the beauty insider catalog becomes a store that you can shop in only if you've earned your way in.
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And I maybe only shop at Sephora two or three times a year.
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I'm addicted to their stupid expensive skincare and their Anastasia Beverly Hills eyebrow gel.
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But it is genuinely the best part of the experience when I get up to the register and I get to see what the what the beauty insider points are.
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How many do I have?
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Can I get that sample?
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Because your girl loves a sample.
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And I get really excited about it.
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Starbucks rewards used to be this.
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I'd say now it's a fairly cautionary tale about the birthday drink.
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Because when you take a program that used to feel like a game and you turn it into an accounting exercise, you're not just gonna lose customer loyalty, you're gonna introduce this low, ambient resentment that follows every transaction.
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And every drink starts to feel a little worse because now there's this like running mental tally of what it used to be.
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So the pitfalls with points per dollar programs.
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There's usually three of them.
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The math gets opaque, so customers can't figure out what their points are actually worth without doing algebra.
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And sometimes when they do that math, it actually has the opposite effect of, oh my God, I've spent how much money with these people and I've gotten this this amount of points.
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I need to stop my spending.
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I need to curtail my spending.
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I need to stop making, or I need to start making coffee at home because I've spent how much?
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And I only get a$6 free drink.
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Also, redemption can start to feel like a bit like a scavenger hunt.
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So by the time that somebody figures out how to cash in, the reward, it feels smaller than the effect.
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Or the reward feels smaller than the effort that they put into it.
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And typically the reward itself is just a discount on more of the same thing that the customer was already buying.
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So it's not necessarily a reward, it's just a coupon.
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Which I'm not saying that coupons are bad in all scenarios, but when you start comparing brands and you start comparing models, a discount on something I was already going to buy can work a few times, but ultimately it's not the thing that's going to keep me coming back time after time.
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So if you are running a points program, some things to think about.
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Can you point the points at aspiration, not repetition, so that when customers come to redeem those points, it feels like they're unlocking something really cool and new instead of getting a break on something old?
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Can you make the redemption catalog feel like a gift shop, like an exclusive access, not just a discount rack?
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And can you reserve at least one redemption tier for something that money cannot buy, right?
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This is the thing that turns points into status symbols.
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Model number three is frequency-based.
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This is the punch card.
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This is old school.
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This is buy nine coffees, get the tenth one free.
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And it's one of the oldest loyalty designs that exist.
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And it still works, particularly at a small scale because it's extremely gloriously tangible, right?
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You can hold it, you can see the progress.
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You know exactly how close you are to the free thing.
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And where this model does really well is the corner coffee shop or the neighborhood sandwich place or the little um Pilates studio that you get your 10th class free.
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And the reason it works is not just I'm getting a free thing.
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It's because of where it's happening.
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It's because of the person handing you the free coffee is the same person who has been calling you by name for six months.
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The punch card is just a mechanism.
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The human that you're interacting with, that is the actual loyalty program.
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So what is being rewarded here is habit.
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And specifically, it's the habit of showing up somewhere where somebody already knows you.
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And this model can start to have some growing pains when you try to grow past one location or the second that the human part of this disappears.
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Like if you give this punch card to a 15 location chain, it turns into a piece of promotional junk mail.
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Um, the person behind the counter at store number seven has never seen you before.
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So that free coffee is just a free coffee rather than if you're going to your normal place and they're like, oh my gosh, Nikki, 10th coffee, it's free, it's on us today.
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Do you want your usual?
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When you lose that personalization, the whole design kind of collapses into just being that coupon.
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And I think it also breaks when that redemption moment is anticlimactic, right?
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Like, here's my fully punch card, here's a free drink, and there's no conversation.
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And it doesn't really feel like a win anymore.
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It just feels like something I'm checking off my list.
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So if you are running a frequency-based program, the fixes here I think are all about how do you protect the human element?
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Can you pair that punch mechanic, the punching of the card, with a named person on the team?
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So the card feels like it's theirs, not the stores.
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Can you actually celebrate that 10th punch when it happens?
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You know, say it out loud, make a small deal of it, ring a bell.
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I don't know, depends on what it is.
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And then use that moment as a doorway into a bigger relationship.
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Maybe it's a new drink on the house next time to try.
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Maybe it's an invitation to a friends and family event.
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Maybe it's an early heads up on the seasonal menu.
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Because at the end of the day, that 10th punch, that that free thing on that card isn't the end of a sequence.
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It's the beginning of a bigger one.
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The card is just the vehicle.
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We're looking at the human now.
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And our final model is paid membership.
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And this is when the customer has already voted with their wallet before you've done anything.
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And what it is rewarding is commitment.
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An example I think everyone would recognize is Costco.
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Uh, you pay for the privilege of shopping there, right?
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Nobody makes you shop there.
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The second you swipe that membership card at the door, you have made a psychological commitment to justify that sign up, which means you're gonna shop more, you're gonna buy more, and you're probably gonna go there first.
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I think if you can go into a Costco and spend less than$100, you are a god amongst humans.
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Please tell me your secrets because I shop at Costco like three times a year, maybe four for like basics.
00:19:06.559 --> 00:19:08.079
And I literally can't take a cart.
00:19:08.160 --> 00:19:09.920
I have to like run past certain things.
00:19:10.000 --> 00:19:12.799
Otherwise, I absolutely am gonna pick up that Lego set I don't need.
00:19:12.880 --> 00:19:15.920
I'm absolutely gonna get that blender that I don't need.
00:19:16.160 --> 00:19:19.359
It's a it's it's a scary place sometimes at Costco.
00:19:19.519 --> 00:19:22.319
But another example of this is Amazon Prime, right?
00:19:22.559 --> 00:19:25.680
They took the same structure and scaled it to essentially the entire internet.
00:19:26.160 --> 00:19:31.119
The reason paid membership models work is that flips the burden of proof.
00:19:31.359 --> 00:19:35.200
In other loyalty models, the business is trying to convince the customer to come back.
00:19:35.359 --> 00:19:43.839
In this one, the customer is trying to convince themselves they made the right call to join and now they need to take advantage of it and make it quote unquote worth the money, right?
00:19:44.000 --> 00:19:47.759
Which ultimately for the business isn't an advantage.
00:19:48.079 --> 00:19:58.400
But the pitfalls here are two with this paid membership model of loyalty program, is the perks can start to feel less worth the fee over time.
00:19:58.880 --> 00:20:12.559
I think Amazon Prime may be flirting with this a little bit, with the free shipping is getting slower, the exclusive content is getting worse, and then the membership starts to feel indistinguishable from just being a regular customer.
00:20:12.720 --> 00:20:22.480
Um, and also like everything else that comes under the Amazon Prime label, like Prime Video, Amazon Music, all these other things, a lot of people aren't using that.
00:20:22.799 --> 00:20:33.920
So if they're just thinking about, can I get Prime free one-day shipping or whatever it is, and they stop using that, well, then it's not worth it to me to keep paying for this membership.
00:20:34.160 --> 00:20:46.720
If a non-member can get essentially the same experience, just with slightly more friction, then the membership also starts to lose its perceived value because the membership is just like a hurdle someone has to jump over.
00:20:46.960 --> 00:20:55.039
So if you are running a paid membership program, the fixes are one, give your members something non-members literally cannot get.
00:20:55.279 --> 00:20:58.000
Not just cheaper, not just earlier, but different.
00:20:58.240 --> 00:21:09.759
The other thing is I think you need to celebrate the anniversary of them joining because that is the moment members are most likely to ask themselves whether it's still worth it.
00:21:10.000 --> 00:21:15.680
And when you do that, you can make that renewal feel like a moment of appreciation, not an auto charge.
00:21:16.000 --> 00:21:36.319
And as a quick sidebar, I think this is another like opportunity to, you know, really uh solidify this relationship is when that notice of renewal goes out, and there should be one, it should not just be a notification of, hi Nikki, your Amazon Prime subscription is gonna renew at whatever rate it is on this date.
00:21:36.400 --> 00:21:37.599
Click here to modify.
00:21:37.839 --> 00:21:41.200
Like I that with that, I'm probably gonna go, ah, do I really need it?
00:21:41.279 --> 00:21:41.759
I probably don't.
00:21:41.839 --> 00:21:43.599
I can just cancel it, I'll get it again later.
00:21:43.839 --> 00:21:50.000
But if a message like that, or even my Costco membership, again, I don't shop there that often, so it's it's it's out of mind most of the time.
00:21:50.160 --> 00:21:59.279
But if I got an email that's like, hey, it's about to renew, don't forget you have access to this, or here's what you've done, here's what you've spent your money on, here's all the benefits you've enjoyed so far.
00:21:59.359 --> 00:22:20.079
Like, I Something with Amazon Prime, if they said, hey, you've saved X thousands of dollars in shipping costs by buying from Amazon, like that would be a number that I would look at and go, Oh, if I'm gonna save 3,000 in shipping and I'm paying$100 a year or whatever it is, that's gonna make me probably keep that charge just in case.
00:22:20.720 --> 00:22:33.279
So the difference between a card that just quietly bills you and an email that says, hey, here's what your membership got you this year and here's what's ahead, that's the difference between churn and I'm gonna keep it for another year.
00:22:34.319 --> 00:22:36.000
So here's here's the through line.
00:22:36.079 --> 00:22:37.920
Here's the main theme I want you to leave with today.
00:22:38.079 --> 00:22:44.079
Remember, loyalty is what businesses want, not what customers are trying to give.
00:22:44.400 --> 00:22:50.000
Which means the goal of a loyalty program is not actually to get customers to be loyal to you.
00:22:50.400 --> 00:22:57.279
The goal is to make staying the obvious choice and to make leaving feel like losing something they value.
00:22:57.759 --> 00:23:01.920
Spend-based tiers, they're gonna do that by rewarding the relationship.
00:23:02.079 --> 00:23:04.480
Quid pro quo, you support me, I'll support you.
00:23:04.799 --> 00:23:10.640
Points per dollar does it by rewarding transactions in a way that feels like a treat.
00:23:11.039 --> 00:23:17.200
Frequency does it by rewarding habit, and paid membership is gonna do it by rewarding the commitment up front.
00:23:17.359 --> 00:23:27.440
So four different mechanisms doing four different jobs, and every one of them can produce customers who genuinely rave about you, or customers who are gonna churn and drop you the second something cheaper shows up.
00:23:27.599 --> 00:23:31.119
So the difference is not gonna be the model that you pick.
00:23:31.440 --> 00:23:36.640
The difference is whether the model is answering the customers' questions or the businesses.
00:23:36.880 --> 00:23:42.640
The difference is whether the model is going to be serving the customer or serving the business or serving both.
00:23:42.960 --> 00:23:43.200
Right?
00:23:43.440 --> 00:23:47.839
Going back to Deldato, my parents don't rave about Deldato because they get a discount on wine.
00:23:48.079 --> 00:23:56.000
They rave about Deldato because they know their names, remember their preferences, and treats them like people who belong there.
00:23:57.599 --> 00:24:04.640
I stopped raving about Starbucks rewards for many reasons, but ultimately it's because Starbucks stopped rewarding what it used to reward.
00:24:04.799 --> 00:24:13.839
The math shifted, the birthday week shrank to a birthday day, and what used to feel like a little bit of a treat just feels like an audit.
00:24:14.319 --> 00:24:17.839
The question we're sitting with is not, you know, what model do I pick?
00:24:17.920 --> 00:24:22.559
The question is: am I designing this to get my customers to be loyal to me?
00:24:23.039 --> 00:24:29.200
Or am I designing this so that staying with me is genuinely the best call they can make.
00:24:29.440 --> 00:24:30.160
And that is it.
00:24:30.319 --> 00:24:40.559
For today's Nikki Talks episode of Would Recommend, if this one landed for you, the best thing you can do is send it to another founder who is either building a loyalty program or wondering why the one they have isn't working.
00:24:40.799 --> 00:24:41.839
This is how the show grows.
00:24:42.000 --> 00:24:43.119
One recommendation at a time.
00:24:43.279 --> 00:24:46.240
Also, please rate, review, and subscribe on your podcast for writer of choice.
00:24:46.319 --> 00:24:48.079
If you're on Spotify, leave a comment on the episodes.
00:24:48.160 --> 00:24:52.960
I love leaving comments on Spotify episodes for people, and you know, I would love to get that back from y'all.
00:24:53.119 --> 00:25:03.519
And if you want to sit down with somebody and actually look at your program or the program you're thinking about building and figure out what system and how to make it work for you, that's exactly what my spark session is for.
00:25:03.680 --> 00:25:06.880
90 minutes, your real stuff, no fluff, and we walk the whole thing together.
00:25:07.039 --> 00:25:09.039
You can book it at the link in the show notes.
00:25:09.200 --> 00:25:10.400
I'm Nikki McKnight.
00:25:10.559 --> 00:25:16.799
This is Would Recommend, and I'll be back next week with more on how to help your business become the one that people can't stop talking about.
00:25:17.119 --> 00:25:17.680
Bye!
00:00:01.439 --> 00:00:03.120
This is the one I was telling you about.
00:00:03.439 --> 00:00:10.160
It is the You will not believe this play so that I just found literally a link to literally their biggest.
00:00:11.599 --> 00:00:12.640
I'm telling everybody about this.
00:00:12.880 --> 00:00:14.720
Tell them I sent this is my biggest.
00:00:17.280 --> 00:00:18.000
Girl.
00:00:23.440 --> 00:00:31.120
I want to name something out loud that I think is the actual reason so many loyalty programs quietly underperform.
00:00:31.519 --> 00:00:35.520
And that is loyalty is what businesses want.
00:00:36.000 --> 00:00:39.119
It's not what customers are trying to give.
00:00:39.840 --> 00:00:41.359
So let us all sit with that one.
00:00:41.520 --> 00:00:42.960
Loyalty is what businesses want.
00:00:43.280 --> 00:00:45.679
It's not what customers are trying to give.
00:00:45.920 --> 00:00:55.359
I think this flips how most founders think about loyalty programs because when we sit down to design one, we're usually thinking about it from our side of the counter, right?
00:00:55.520 --> 00:00:57.119
How do we get more repeat purchases?
00:00:57.200 --> 00:00:58.159
How do we lock people in?
00:00:58.320 --> 00:01:01.520
How do we reward the customers who spend the most that they keep on spending?
00:01:01.759 --> 00:01:10.480
Which are all great questions from a business perspective, but they have very little to do with the person on the other side of the counter.
00:01:10.640 --> 00:01:16.959
Because customers are not actively walking around looking for businesses to bestow their loyalty upon.
00:01:17.200 --> 00:01:24.000
They are walking around making decisions based on ease, based on trust, and based on experience.
00:01:24.159 --> 00:01:33.680
If they leave a particular business, it is almost, almost never because someone else offered them a 15% off code or a free branded Stanley mug.
00:01:33.840 --> 00:01:37.680
It's because leaving felt easier than staying.
00:01:37.840 --> 00:01:46.239
And if they stay, it is because staying feels obvious and leaving would feel like losing something that they actually value.
00:01:46.480 --> 00:01:47.680
Welcome to Would Recommend.
00:01:47.760 --> 00:01:52.319
I'm Nikki McKnight, a customer experience strategist and founder of The Ops Shop.
00:01:52.480 --> 00:01:58.159
And this is the show about the businesses that people can't stop talking about and what they actually did to earn it.
00:01:58.319 --> 00:02:09.360
Today is a Nikki talks episode, but this time we're gonna go deep into some specific tactics or mechanisms that can help a business become the one that people would recommend.
00:02:09.599 --> 00:02:19.360
And today we're talking loyalty programs and why so many of them tend to feel more like a little plastic loyalty card that you always forget to bring inside and actually use.
00:02:19.520 --> 00:02:25.840
So it just stays in your car or in your purse, quietly gathering Nature Valley granola bar crumbs onto it.
00:02:26.080 --> 00:02:30.639
And I'm gonna start off by telling you a little story that involves my parents.
00:02:31.280 --> 00:02:44.319
My parents have this whole other life in Napa Valley that I get to hear about in real time, usually over FaceTime, usually while I am eating something significantly less exciting than what they're describing to me.
00:02:44.400 --> 00:02:45.439
And honestly, it's usually Mr.
00:02:45.520 --> 00:02:45.840
Noodles.
00:02:46.000 --> 00:02:50.800
And when they are in Napa, it is likely that you can find them at Del Dato Winery.
00:02:50.879 --> 00:02:57.759
And if you've never heard of Del Dotto, it's a family-run winery that does these barrel tastings inside of these limestone caves.
00:02:57.919 --> 00:03:03.759
They host these big events every year called uh Barrels and Beasts, and it's very over the top and very cool.
00:03:03.919 --> 00:03:15.120
And the whole thing looks like a scene from a movie where, you know, the winemaker falls in love with the plucky young marketing lady from Los Angeles.
00:03:15.360 --> 00:03:20.319
My parents have been going to Del Dado since 1997 and they've been members for many years.
00:03:20.639 --> 00:03:28.400
And the reason I bring up Deldado is when my parents drive for up for a visit, they stay on the property in a guest house.
00:03:28.479 --> 00:03:31.120
They're not at a hotel down the road, they're on the property.
00:03:31.280 --> 00:03:40.080
They get phone calls from actual humans that go something like, Hey, we just got a small allocation of that Rutherford Estate cab that you love last spring.
00:03:40.319 --> 00:03:42.479
Do you want us to hold a couple cases for you?
00:03:42.719 --> 00:03:47.840
When they arrive on site by themselves or with their friends, they get taken care of.
00:03:48.080 --> 00:03:50.800
They get private tours with members of the family.
00:03:50.960 --> 00:03:56.319
And all of this to say, this is not just an experience, it's a relationship.
00:03:56.639 --> 00:04:01.360
And my parents have a fantastic relationship with the folks at Del Dado.
00:04:01.680 --> 00:04:12.960
And every time my dad tells me about the latest thing that Del Dato has done for them, I have the same reaction, which is a mix of genuine happiness for them and a little bit of professional envy.
00:04:13.120 --> 00:04:22.480
Because as someone who spends their entire working life thinking about client experience, I can see what Del Dato is doing and what it takes.
00:04:22.720 --> 00:04:26.079
And I know exactly how few people are doing it.
00:04:26.319 --> 00:04:42.879
Today I'm going to walk you through the four most common models of loyalty programs, what happens when they go well, where they tend to fall apart, and what you can do about it if the one you're looking at or the one that you're building is starting to smell a little granola punch cardy.
00:04:42.959 --> 00:04:44.560
And let me get in my soapbox moment for one.
00:04:44.720 --> 00:04:49.439
The one that hurt me the most, which seems ridiculous, is my Starbucks birthday drink.
00:04:49.680 --> 00:04:55.600
It used to be a whole week, a whole birthday week, any drink, any size, any customization.
00:04:55.759 --> 00:04:59.199
Redeem it whenever you want during that seven-day window.
00:04:59.439 --> 00:05:04.399
Which, one, meant that my birthday felt like a birthday week, and that is great.
00:05:05.439 --> 00:05:08.319
But it was also great for my schedule.
00:05:08.959 --> 00:05:12.879
And they it's now redeemable only on the actual day of your birthday.
00:05:13.199 --> 00:05:26.480
And what Starbucks did there was small, but also not small, because they took a program that used to feel like a celebration, especially when I had my physical gold card and I got a physical birthday coupon in the mail.
00:05:26.720 --> 00:05:31.120
It used to feel like a celebration, and now it just feels like a coupon with an expiration timer.
00:05:31.279 --> 00:05:32.959
On paper, it's the same program.
00:05:33.199 --> 00:05:36.480
You get a free drink on your birthday.
00:05:36.879 --> 00:05:45.120
But it stings because shrinking it down to one day logistically, I don't think changes very much on their side of the table.
00:05:45.199 --> 00:05:46.639
It doesn't change the pricing.
00:05:46.800 --> 00:05:50.560
But for me, it feels like a completely different experience.
00:05:50.879 --> 00:05:55.920
It makes no sense at all from my side, but I'm sure it made sense on their side.
00:05:56.079 --> 00:06:00.639
So that's the tension I want you to hold in your head as we walk through these four models.
00:06:00.879 --> 00:06:03.600
The business is asking, how do we make customers stay?
00:06:03.680 --> 00:06:06.000
And the customer is asking, why would I?
00:06:06.399 --> 00:06:12.800
And the loyalty program that actually works is the one that answers the customer's question, not the business.
00:06:12.959 --> 00:06:18.959
All right, model number one in a loyalty program is spend-based tiering.
00:06:19.519 --> 00:06:22.240
And this is what Del Dato is doing with my parents.
00:06:22.319 --> 00:06:24.240
It is a spend-based tiered program.
00:06:24.319 --> 00:06:27.360
And the thing it is rewarding is relationship.
00:06:27.600 --> 00:06:34.879
The more of your life you spend with the business, the more visible and material the relationship becomes, right?
00:06:35.040 --> 00:06:37.120
This is a little bit of quid pro quo.
00:06:37.199 --> 00:06:39.279
You take care of us, we'll take care of you.
00:06:39.439 --> 00:06:49.040
The more you spend at my business, the more I, as a business, am going to feel incentivized to spend money on you and maintaining this relationship.
00:06:49.199 --> 00:06:52.879
And the consumer gets to enjoy additional perks that come with that.
00:06:53.279 --> 00:07:19.040
And another benefit I definitely see to spend-based loyalty programs is they help deal with this sometimes problem of customer entitlement, where you can sometimes have loyalty programs where people spend like$100 a quarter and they ask for everything and feel very offended when they don't feel like they're being taken care of, but they only pay for the loyalty program once a quarter and then do nothing else.
00:07:19.199 --> 00:07:28.560
Whereas spend-based membership or spend-based loyalty programs can sometimes avoid that because it does have the quid pro quo baked into it.
00:07:28.720 --> 00:07:30.959
So that you take care of me, I'll take care of you.
00:07:31.120 --> 00:07:38.240
I think helps everybody in the agreement feel better about what that treatment looks like or feels like.
00:07:38.480 --> 00:07:45.279
The version most of us have actually spent time with in terms of a spend uh based tier is airline miles, right?
00:07:45.360 --> 00:07:48.720
Aeroplan, Delta Sky Miles, United Mileage Plus, whatever you want to pick.
00:07:48.879 --> 00:07:52.959
The the free flight is not necessarily the reward.
00:07:53.120 --> 00:07:54.720
This it's the status.
00:07:55.360 --> 00:08:06.480
Once you hit Aeroplan Elite or whatever your version is called, you are getting priority boarding, you're getting complimentary extra checked bags, you're getting upgrades, you're getting lounge access.
00:08:06.720 --> 00:08:10.240
When something goes wrong, you get a phone number to talk to a real person.
00:08:10.800 --> 00:08:17.360
Um, and the airline is not just tracking how much you spend with them, it's treating you differently because of it.
00:08:17.519 --> 00:08:40.080
I can't tell you how many of my friends um are because they travel a lot, they're very specific with their airline mile program and they choose one very deliberately and they will make changes to their travel plans, maybe choosing a slightly more inconvenient flight to go with their chosen rewards program so that they can maintain status.
00:08:40.320 --> 00:08:56.000
A little story with my dad is when he was working in the United States, that first year he worked for that company, he probably traveled 300 out of the 365 days that year and hit multi-platinum status with a multitude of airlines because it made everything easier when he traveled.
00:08:56.320 --> 00:09:05.200
So the idea here is the same across every good version of the model, whether it is an airline or it's the Dell Dotto Winery or it's your favorite hotel loyalty program.
00:09:05.360 --> 00:09:14.399
You're not just chasing points to get points, you're building a track record, and that track record is going to massively influence how you get treated.
00:09:14.639 --> 00:09:16.879
Again, you take care of the business, they take care of you.
00:09:16.960 --> 00:09:25.279
And where this model does really well is when the tiers actually correspond to a felt shift in how customers are being treated, right?
00:09:25.440 --> 00:09:29.200
Del Dado is not giving my parents a bigger discount because they've been in the membership longer.
00:09:29.360 --> 00:09:32.799
They're calling them my name, remembering what they bought last time.
00:09:32.879 --> 00:09:35.519
They're offering them a room on property.
00:09:35.759 --> 00:09:44.639
Aeroplane Elite, when it is working, is the person at the gate looking at your boarding pass and saying, welcome back, instead of that we're only boarding group two, you are group four.
00:09:44.720 --> 00:09:45.200
Go sit down.
00:09:45.360 --> 00:09:45.519
Right?
00:09:45.600 --> 00:09:49.840
The tiers have to be visible in treatment, not just in fine print.
00:09:50.480 --> 00:09:54.960
But like most things, there are pitfalls in the spend-based tier model.
00:09:55.200 --> 00:09:58.960
Um, first, the tier naming can be something really interesting, right?
00:09:59.120 --> 00:10:01.759
They typically get named things like silver, gold, platinum.
00:10:01.919 --> 00:10:03.840
It's at least imaginative naming convention.
00:10:04.000 --> 00:10:11.919
It sounds like a credit card, but it can make people feel less than, or it can make them feel like they're not good enough.
00:10:12.000 --> 00:10:15.919
And depending on what type of business you are, that could create an issue.
00:10:16.159 --> 00:10:30.960
And second, the perks at each tier are typically variations of discounts or dollar values, which at the end of the day is probably one of the least meaningful things you can offer somebody who has already told you with their wallet that they love your brand, right?
00:10:31.039 --> 00:10:38.240
A discount is just gonna say spend more to save more, which is not necessarily what a loyal customer wants to hear from a business that they love.
00:10:39.200 --> 00:10:51.039
And third, especially with aeroplan points or airline points, has been my experience at least, is that it is really hard to get to the fine print about what you have to do to go further.
00:10:51.200 --> 00:10:59.120
It's a it's a dashboard and you dig around and it's like I'm$72 away from something that I didn't know I needed, but also I have a bunch of points that are about to expire.
00:10:59.200 --> 00:11:02.080
So what do I do and not to not expire those things?
00:11:02.879 --> 00:11:07.279
So it can logistically for the consumer become a little messy.
00:11:07.519 --> 00:11:12.000
So if you are running a spend-based tier program, some things to think about.
00:11:12.159 --> 00:11:13.840
One, how are you naming the tiers?
00:11:13.919 --> 00:11:24.399
And can you name them in such a way that it means something in your brand world and not a way to create classes of customers that makes them feel stepped away?
00:11:24.879 --> 00:11:33.120
And I think, lastly, I think you need to put at least one perk at each tier that money genuinely cannot buy.
00:11:33.440 --> 00:11:37.679
Because otherwise you're just gonna get caught in the discount game again and it's spend more to get more.
00:11:37.759 --> 00:11:47.759
But if you can include something that a money can't buy, that is where that tier and a customer's pursuit of that tier makes a difference.
00:11:47.840 --> 00:11:58.879
So maybe it's early access, maybe it's a real human contact that they have, it's a room on property, it's a private tour, or an invitation, or access to something that the general public does not get invited to and can't get access to.
00:11:59.279 --> 00:12:00.799
Some things to think about.
00:12:01.600 --> 00:12:06.320
So, model number two in our loyalty program deep dive is the points per dollar.
00:12:06.559 --> 00:12:09.840
And I think this is one that a lot of people think of first when you think loyalty program.
00:12:10.480 --> 00:12:16.320
You spend money with a business, you earn points with that business, you redeem those points with that business.
00:12:16.480 --> 00:12:20.480
So, what this loyalty program is rewarding is transaction.
00:12:21.120 --> 00:12:30.559
Every dollar you spend is going to produce a fixed number of points, and every point is going to produce a fixed amount of redemption value or a discount, right?
00:12:30.639 --> 00:12:34.240
For every one, for every dollar you spend, you get one point.
00:12:34.559 --> 00:12:40.320
You can redeem 200 points, and then you get dollars off your purchase.
00:12:40.559 --> 00:12:45.440
So, one I think that people know really well for this is Sephora Beauty Insider.
00:12:45.759 --> 00:12:50.960
And I think what Sephora figured out is that its redemption catalog has to feel like a treat, not just a discount.
00:12:51.039 --> 00:12:54.960
With the program, you're not saving 15% on a moisturizer you were gonna buy anyway.
00:12:55.039 --> 00:13:04.320
You're trading points for limited edition palettes you cannot get any other way, or sample-sized versions of serums you've been curious about, or an experience with a makeup artist.
00:13:04.480 --> 00:13:12.639
So the points become currency, and the beauty insider catalog becomes a store that you can shop in only if you've earned your way in.
00:13:12.879 --> 00:13:16.399
And I maybe only shop at Sephora two or three times a year.
00:13:16.480 --> 00:13:20.720
I'm addicted to their stupid expensive skincare and their Anastasia Beverly Hills eyebrow gel.
00:13:21.039 --> 00:13:26.720
But it is genuinely the best part of the experience when I get up to the register and I get to see what the what the beauty insider points are.
00:13:26.879 --> 00:13:27.679
How many do I have?
00:13:27.840 --> 00:13:28.799
Can I get that sample?
00:13:28.879 --> 00:13:30.559
Because your girl loves a sample.
00:13:30.720 --> 00:13:32.320
And I get really excited about it.
00:13:32.639 --> 00:13:35.360
Starbucks rewards used to be this.
00:13:35.679 --> 00:13:40.399
I'd say now it's a fairly cautionary tale about the birthday drink.
00:13:40.480 --> 00:13:54.639
Because when you take a program that used to feel like a game and you turn it into an accounting exercise, you're not just gonna lose customer loyalty, you're gonna introduce this low, ambient resentment that follows every transaction.
00:13:54.799 --> 00:14:01.120
And every drink starts to feel a little worse because now there's this like running mental tally of what it used to be.
00:14:01.679 --> 00:14:04.559
So the pitfalls with points per dollar programs.
00:14:04.639 --> 00:14:05.759
There's usually three of them.
00:14:06.000 --> 00:14:11.759
The math gets opaque, so customers can't figure out what their points are actually worth without doing algebra.
00:14:11.919 --> 00:14:19.919
And sometimes when they do that math, it actually has the opposite effect of, oh my God, I've spent how much money with these people and I've gotten this this amount of points.
00:14:20.080 --> 00:14:21.440
I need to stop my spending.
00:14:21.600 --> 00:14:23.120
I need to curtail my spending.
00:14:23.279 --> 00:14:27.120
I need to stop making, or I need to start making coffee at home because I've spent how much?
00:14:27.279 --> 00:14:29.840
And I only get a$6 free drink.
00:14:30.720 --> 00:14:34.080
Also, redemption can start to feel like a bit like a scavenger hunt.
00:14:34.159 --> 00:14:40.960
So by the time that somebody figures out how to cash in, the reward, it feels smaller than the effect.
00:14:41.200 --> 00:14:45.200
Or the reward feels smaller than the effort that they put into it.
00:14:45.519 --> 00:14:52.240
And typically the reward itself is just a discount on more of the same thing that the customer was already buying.
00:14:52.320 --> 00:14:55.039
So it's not necessarily a reward, it's just a coupon.
00:14:55.279 --> 00:15:11.759
Which I'm not saying that coupons are bad in all scenarios, but when you start comparing brands and you start comparing models, a discount on something I was already going to buy can work a few times, but ultimately it's not the thing that's going to keep me coming back time after time.
00:15:12.000 --> 00:15:16.320
So if you are running a points program, some things to think about.
00:15:16.559 --> 00:15:27.200
Can you point the points at aspiration, not repetition, so that when customers come to redeem those points, it feels like they're unlocking something really cool and new instead of getting a break on something old?
00:15:27.600 --> 00:15:35.919
Can you make the redemption catalog feel like a gift shop, like an exclusive access, not just a discount rack?
00:15:36.159 --> 00:15:40.639
And can you reserve at least one redemption tier for something that money cannot buy, right?
00:15:40.799 --> 00:15:43.519
This is the thing that turns points into status symbols.
00:15:43.679 --> 00:15:45.759
Model number three is frequency-based.
00:15:46.000 --> 00:15:47.120
This is the punch card.
00:15:47.200 --> 00:15:48.000
This is old school.
00:15:48.080 --> 00:15:50.639
This is buy nine coffees, get the tenth one free.
00:15:50.799 --> 00:15:53.360
And it's one of the oldest loyalty designs that exist.
00:15:53.600 --> 00:15:58.639
And it still works, particularly at a small scale because it's extremely gloriously tangible, right?
00:15:58.720 --> 00:16:00.480
You can hold it, you can see the progress.
00:16:00.559 --> 00:16:02.639
You know exactly how close you are to the free thing.
00:16:02.799 --> 00:16:11.440
And where this model does really well is the corner coffee shop or the neighborhood sandwich place or the little um Pilates studio that you get your 10th class free.
00:16:11.519 --> 00:16:15.919
And the reason it works is not just I'm getting a free thing.
00:16:16.240 --> 00:16:18.159
It's because of where it's happening.
00:16:18.320 --> 00:16:24.799
It's because of the person handing you the free coffee is the same person who has been calling you by name for six months.
00:16:25.039 --> 00:16:27.120
The punch card is just a mechanism.
00:16:27.360 --> 00:16:30.879
The human that you're interacting with, that is the actual loyalty program.
00:16:31.039 --> 00:16:33.840
So what is being rewarded here is habit.
00:16:34.080 --> 00:16:39.919
And specifically, it's the habit of showing up somewhere where somebody already knows you.
00:16:40.720 --> 00:16:48.879
And this model can start to have some growing pains when you try to grow past one location or the second that the human part of this disappears.
00:16:49.039 --> 00:16:54.559
Like if you give this punch card to a 15 location chain, it turns into a piece of promotional junk mail.
00:16:54.720 --> 00:16:58.480
Um, the person behind the counter at store number seven has never seen you before.
00:16:58.639 --> 00:17:07.039
So that free coffee is just a free coffee rather than if you're going to your normal place and they're like, oh my gosh, Nikki, 10th coffee, it's free, it's on us today.
00:17:07.119 --> 00:17:08.559
Do you want your usual?
00:17:09.680 --> 00:17:14.720
When you lose that personalization, the whole design kind of collapses into just being that coupon.
00:17:14.880 --> 00:17:19.920
And I think it also breaks when that redemption moment is anticlimactic, right?
00:17:20.000 --> 00:17:23.920
Like, here's my fully punch card, here's a free drink, and there's no conversation.
00:17:24.079 --> 00:17:26.160
And it doesn't really feel like a win anymore.
00:17:26.240 --> 00:17:28.720
It just feels like something I'm checking off my list.
00:17:28.960 --> 00:17:36.960
So if you are running a frequency-based program, the fixes here I think are all about how do you protect the human element?
00:17:37.680 --> 00:17:43.599
Can you pair that punch mechanic, the punching of the card, with a named person on the team?
00:17:43.759 --> 00:17:46.640
So the card feels like it's theirs, not the stores.
00:17:47.279 --> 00:17:50.079
Can you actually celebrate that 10th punch when it happens?
00:17:50.160 --> 00:17:52.880
You know, say it out loud, make a small deal of it, ring a bell.
00:17:52.960 --> 00:17:54.480
I don't know, depends on what it is.
00:17:54.640 --> 00:17:59.359
And then use that moment as a doorway into a bigger relationship.
00:17:59.519 --> 00:18:01.839
Maybe it's a new drink on the house next time to try.
00:18:02.000 --> 00:18:04.160
Maybe it's an invitation to a friends and family event.
00:18:04.319 --> 00:18:06.799
Maybe it's an early heads up on the seasonal menu.
00:18:07.119 --> 00:18:14.480
Because at the end of the day, that 10th punch, that that free thing on that card isn't the end of a sequence.
00:18:14.640 --> 00:18:17.279
It's the beginning of a bigger one.
00:18:17.440 --> 00:18:18.799
The card is just the vehicle.
00:18:18.880 --> 00:18:20.400
We're looking at the human now.
00:18:21.119 --> 00:18:24.799
And our final model is paid membership.
00:18:25.039 --> 00:18:30.480
And this is when the customer has already voted with their wallet before you've done anything.
00:18:30.559 --> 00:18:33.279
And what it is rewarding is commitment.
00:18:33.920 --> 00:18:36.480
An example I think everyone would recognize is Costco.
00:18:36.640 --> 00:18:39.119
Uh, you pay for the privilege of shopping there, right?
00:18:39.279 --> 00:18:40.480
Nobody makes you shop there.
00:18:40.640 --> 00:18:53.680
The second you swipe that membership card at the door, you have made a psychological commitment to justify that sign up, which means you're gonna shop more, you're gonna buy more, and you're probably gonna go there first.
00:18:53.920 --> 00:18:59.920
I think if you can go into a Costco and spend less than$100, you are a god amongst humans.
00:19:00.000 --> 00:19:06.400
Please tell me your secrets because I shop at Costco like three times a year, maybe four for like basics.
00:19:06.559 --> 00:19:08.079
And I literally can't take a cart.
00:19:08.160 --> 00:19:09.920
I have to like run past certain things.
00:19:10.000 --> 00:19:12.799
Otherwise, I absolutely am gonna pick up that Lego set I don't need.
00:19:12.880 --> 00:19:15.920
I'm absolutely gonna get that blender that I don't need.
00:19:16.160 --> 00:19:19.359
It's a it's it's a scary place sometimes at Costco.
00:19:19.519 --> 00:19:22.319
But another example of this is Amazon Prime, right?
00:19:22.559 --> 00:19:25.680
They took the same structure and scaled it to essentially the entire internet.
00:19:26.160 --> 00:19:31.119
The reason paid membership models work is that flips the burden of proof.
00:19:31.359 --> 00:19:35.200
In other loyalty models, the business is trying to convince the customer to come back.
00:19:35.359 --> 00:19:43.839
In this one, the customer is trying to convince themselves they made the right call to join and now they need to take advantage of it and make it quote unquote worth the money, right?
00:19:44.000 --> 00:19:47.759
Which ultimately for the business isn't an advantage.
00:19:48.079 --> 00:19:58.400
But the pitfalls here are two with this paid membership model of loyalty program, is the perks can start to feel less worth the fee over time.
00:19:58.880 --> 00:20:12.559
I think Amazon Prime may be flirting with this a little bit, with the free shipping is getting slower, the exclusive content is getting worse, and then the membership starts to feel indistinguishable from just being a regular customer.
00:20:12.720 --> 00:20:22.480
Um, and also like everything else that comes under the Amazon Prime label, like Prime Video, Amazon Music, all these other things, a lot of people aren't using that.
00:20:22.799 --> 00:20:33.920
So if they're just thinking about, can I get Prime free one-day shipping or whatever it is, and they stop using that, well, then it's not worth it to me to keep paying for this membership.
00:20:34.160 --> 00:20:46.720
If a non-member can get essentially the same experience, just with slightly more friction, then the membership also starts to lose its perceived value because the membership is just like a hurdle someone has to jump over.
00:20:46.960 --> 00:20:55.039
So if you are running a paid membership program, the fixes are one, give your members something non-members literally cannot get.
00:20:55.279 --> 00:20:58.000
Not just cheaper, not just earlier, but different.
00:20:58.240 --> 00:21:09.759
The other thing is I think you need to celebrate the anniversary of them joining because that is the moment members are most likely to ask themselves whether it's still worth it.
00:21:10.000 --> 00:21:15.680
And when you do that, you can make that renewal feel like a moment of appreciation, not an auto charge.
00:21:16.000 --> 00:21:36.319
And as a quick sidebar, I think this is another like opportunity to, you know, really uh solidify this relationship is when that notice of renewal goes out, and there should be one, it should not just be a notification of, hi Nikki, your Amazon Prime subscription is gonna renew at whatever rate it is on this date.
00:21:36.400 --> 00:21:37.599
Click here to modify.
00:21:37.839 --> 00:21:41.200
Like I that with that, I'm probably gonna go, ah, do I really need it?
00:21:41.279 --> 00:21:41.759
I probably don't.
00:21:41.839 --> 00:21:43.599
I can just cancel it, I'll get it again later.
00:21:43.839 --> 00:21:50.000
But if a message like that, or even my Costco membership, again, I don't shop there that often, so it's it's it's out of mind most of the time.
00:21:50.160 --> 00:21:59.279
But if I got an email that's like, hey, it's about to renew, don't forget you have access to this, or here's what you've done, here's what you've spent your money on, here's all the benefits you've enjoyed so far.
00:21:59.359 --> 00:22:20.079
Like, I Something with Amazon Prime, if they said, hey, you've saved X thousands of dollars in shipping costs by buying from Amazon, like that would be a number that I would look at and go, Oh, if I'm gonna save 3,000 in shipping and I'm paying$100 a year or whatever it is, that's gonna make me probably keep that charge just in case.
00:22:20.720 --> 00:22:33.279
So the difference between a card that just quietly bills you and an email that says, hey, here's what your membership got you this year and here's what's ahead, that's the difference between churn and I'm gonna keep it for another year.
00:22:34.319 --> 00:22:36.000
So here's here's the through line.
00:22:36.079 --> 00:22:37.920
Here's the main theme I want you to leave with today.
00:22:38.079 --> 00:22:44.079
Remember, loyalty is what businesses want, not what customers are trying to give.
00:22:44.400 --> 00:22:50.000
Which means the goal of a loyalty program is not actually to get customers to be loyal to you.
00:22:50.400 --> 00:22:57.279
The goal is to make staying the obvious choice and to make leaving feel like losing something they value.
00:22:57.759 --> 00:23:01.920
Spend-based tiers, they're gonna do that by rewarding the relationship.
00:23:02.079 --> 00:23:04.480
Quid pro quo, you support me, I'll support you.
00:23:04.799 --> 00:23:10.640
Points per dollar does it by rewarding transactions in a way that feels like a treat.
00:23:11.039 --> 00:23:17.200
Frequency does it by rewarding habit, and paid membership is gonna do it by rewarding the commitment up front.
00:23:17.359 --> 00:23:27.440
So four different mechanisms doing four different jobs, and every one of them can produce customers who genuinely rave about you, or customers who are gonna churn and drop you the second something cheaper shows up.
00:23:27.599 --> 00:23:31.119
So the difference is not gonna be the model that you pick.
00:23:31.440 --> 00:23:36.640
The difference is whether the model is answering the customers' questions or the businesses.
00:23:36.880 --> 00:23:42.640
The difference is whether the model is going to be serving the customer or serving the business or serving both.
00:23:42.960 --> 00:23:43.200
Right?
00:23:43.440 --> 00:23:47.839
Going back to Deldato, my parents don't rave about Deldato because they get a discount on wine.
00:23:48.079 --> 00:23:56.000
They rave about Deldato because they know their names, remember their preferences, and treats them like people who belong there.
00:23:57.599 --> 00:24:04.640
I stopped raving about Starbucks rewards for many reasons, but ultimately it's because Starbucks stopped rewarding what it used to reward.
00:24:04.799 --> 00:24:13.839
The math shifted, the birthday week shrank to a birthday day, and what used to feel like a little bit of a treat just feels like an audit.
00:24:14.319 --> 00:24:17.839
The question we're sitting with is not, you know, what model do I pick?
00:24:17.920 --> 00:24:22.559
The question is: am I designing this to get my customers to be loyal to me?
00:24:23.039 --> 00:24:29.200
Or am I designing this so that staying with me is genuinely the best call they can make.
00:24:29.440 --> 00:24:30.160
And that is it.
00:24:30.319 --> 00:24:40.559
For today's Nikki Talks episode of Would Recommend, if this one landed for you, the best thing you can do is send it to another founder who is either building a loyalty program or wondering why the one they have isn't working.
00:24:40.799 --> 00:24:41.839
This is how the show grows.
00:24:42.000 --> 00:24:43.119
One recommendation at a time.
00:24:43.279 --> 00:24:46.240
Also, please rate, review, and subscribe on your podcast for writer of choice.
00:24:46.319 --> 00:24:48.079
If you're on Spotify, leave a comment on the episodes.
00:24:48.160 --> 00:24:52.960
I love leaving comments on Spotify episodes for people, and you know, I would love to get that back from y'all.
00:24:53.119 --> 00:25:03.519
And if you want to sit down with somebody and actually look at your program or the program you're thinking about building and figure out what system and how to make it work for you, that's exactly what my spark session is for.
00:25:03.680 --> 00:25:06.880
90 minutes, your real stuff, no fluff, and we walk the whole thing together.
00:25:07.039 --> 00:25:09.039
You can book it at the link in the show notes.
00:25:09.200 --> 00:25:10.400
I'm Nikki McKnight.
00:25:10.559 --> 00:25:16.799
This is Would Recommend, and I'll be back next week with more on how to help your business become the one that people can't stop talking about.
00:25:17.119 --> 00:25:17.680
Bye!
