Why loyalty programs
don’t create loyalty

dogs-2222801_1280Financial institutions began catching on to loyalty programs a couple of decades ago. Now they’re so common­place that “loyalty program” is part of everyday speech. Banks can even advertise with headlines like “Join our loyalty program” without fear that consumers will say, “Join your what now?”

But I submit that loyalty programs don’t create loyalty.

Most loyalty programs award points toward freebies and privileges. The digital age has made them a cinch to manage by automating accounting and obviating membership cards. Of course, that’s a two-edged sword. When a program is too effortless, it’s easy to forget you’re  in it.

But that’s not why I said loyalty programs don’t create loyalty. I said it because frequency, which they can create,* isn’t the same thing.

Frequency vs. loyalty

Frequency doesn’t mean loyalty. It’s not even a measure of loyalty. Loyalty is altogether something else.

To illustrate the difference, here’s an experiment you can try on your own, provided you have no regard for your personal safety. Simply do one of the following:

  • Tell a Harley owner that BMW makes a better motorcycle.
  • Tell a Steinway artist that Kawaii grand pianos are just as good.
  • Tell an iOS devotee that AOS is better, or an AOS devotee that iOS is better.
  • Tell a deli owner to substitute generic mayo for Hellman’s.
  • Tell a person in Guess jeans that Wranglers would look better.
  • Tell a Broncos fan to cheer for any other football team.

Chances are you’ll get a reaction that falls somewhere between, if you’re lucky, mocking disdain and, if you’re not, outright violence inflicted upon your person. That’s because there are some brands whose customers you just can’t drag away.

That is loyalty. And it wasn’t created by handing out points.

I must now bring up what isn’t on the above list or any list like it. A financial institution. I have to wonder why the heck not.

Don’t tell me it’s because all financial institutions deal with dollars, and that one dollar is like any other dollar. It is equally true, or nearly so, that a motorcycle is a motorcycle, a smartphone is a smartphone, and jeans are jeans. To be sure, the above are quality products, but building wild-horses-couldn’t-drag-’em-away loyalty takes more. By “more,” I refer to an unbeatable, overall experience. The kind that customers latch onto and cannot find, or believe they cannot find, anywhere else.

Don’t get me wrong. Short of loyalty, frequency is a pretty danged good second best, so I’m all for points programs. It’s just that I am also for not stopping there. The financial institution that delivers an unusual, relevant, substantive, positive experience will do more than increase adoption and frequency. It will produce bona fide loyalty.

The goal isn’t just to be different. That’s why banks haven’t had much luck trying to set themselves apart with contrivances, such as designing lobbies that don’t look like lobbies and calling tellers something cooler than “tellers.”

The goal is to be the kind of different that actually matters to customers.

I’m not saying it’s easy. Even less easy is being the first in your vertical to pull it off. But then, that’s why there’s only one Harley-Davidson.


* It’s not a given that a loyalty program will increase frequency. If you award points for transactions customers would have made anyway, you’re not increasing frequency. You’re increasing cost-per-sale.

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