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What customer loyalty really means

What customer loyalty really means

“Do you collect hearts?”. For years, this question at the Tengelmann grocery store check-out in was regarded as the pinnacle of creativity among bonus programs in Germany. Everyone else was still using the old coupon system. Customers were credited with points and then rewarded for their loyalty. In the 1990s, digitalization made the business model more efficient, but did not challenge its basic principles. Loyalty programs were boring, but reliable. This remained true until new technologies and new players showed what customer loyalty really means. Amazon and other large platforms have set new standards with uncompromising customer centricity.

Trend towards loyalty sustainability

The platform economy of the 21st century is making traditional loyalty programs look old. It does not rely on campaign-driven coupons, but on long-term relationships and ideally turns customers into members. Brands need to respond to this, says Martin Grass, Chief Operating Officer of CRM expert Defacto. The trend is clearly turning away from the “discount spiral towards sustainable loyalty”, he explains.

Even large brands cannot compete with the data power of Amazon or Facebook. What they lack in algorithms they have to make up for with creativity and service. Europe’s largest hotel group Accor, for example, is replacing its dusty old bonus program “Le Club” with a loyalty platform that goes beyond its traditional core business in 2020. Regular guests will not only get an upgrade or a free breakfast, but also tickets for international events. Premium department stores like Breuninger in Stuttgart or Oberpollinger in Munich are offering free parking in the city center. At Oberpollinger, what was once a bargain-hunter card has now become a status symbol for luxury shoppers. The top category “Royal” (annual purchases of at least 10,000 euros), for example, includes free parking during business hours.

Reward with bonus points

However, the flagship company of the new loyalty movement is not a traditional brand, but an online shop: Keller Sports in Munich. The sporting goods mail order company has developed a program that the German magazine “brand eins” describes as a “mixture between Amazon Prime and an airline bonus program.” Premium customers pay 10.00 euros per year and receive a club membership with special offers and collections. An additional 30 euros per month includes fitness club membership.

Keller Sports also recognized the trend towards gamification at an early stage. Its app rewards the most active athletes among its customers with bonus points, while collecting data at the same time. Co-founder Jakob Keller is delighted: “If we know that someone goes to the gym three times a week and has never been jogging, then we don’t have to show them any running accessories,” he said in an interview with the magazine “brand eins”. His digital manager Benjamin Risom is already thinking about the next stage of evolution: “At some point a virtual assistant may remind me to take a break or to buy new shoes after a certain number of miles walked.”

The bottom line:

In the Amazon era, bonus programs are the best way to maintain control over customer data. But brands have to work harder than before. Instead of simple discount strategies, service and creativity are required.

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