Want to build loyalty? Think economics not just emotions.

Punch line: Marketers have long attempted to build relationships by engendering emotional loyalty. However, true loyalty requires better understandings of economics and behaviors.

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Excerpted from Fast Company’s, “What Marketers Are Getting Wrong About Loyalty”

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The biggest mistake brands make with loyalty programs is to model them on human loyalty.

It’s time not to make loyalty more “human,” in the traditional way, but to treat it as a question of economics and behavior.

This requires models that take into account:

  • DECISION-MAKING: One thing to know about human decision-making is that we want to be happy. And we prefer many small repeated gains over anything else. Knowing what mental accounts its customers are using and how they manage them helps a company maximize the impact of its offers.
  • BUSINESS DESIGN: The first thing to know is how a loyalty program will make money. Loyalty programs succeed when they simultaneously contribute to the bottom line and have a high negative churn rate.
  • EXPERIENCE DESIGN: At its simplest, experience design is about the quality of users’ experience with a product or service: ease of use, beauty, convenience, utility, simplicity. Improvements can revolve around adding a “software layer” over a company’s core business (as Target does), combining digital and analog offerings (Tesco Price Check) … or coming up with complimentary offerings (Amex Open Forum).

Instead of one-size-fits all, these new models are designed for diversity and customization … and they turn the entire company experience into customer benefit.

Edit by JDC

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