Looking to make a few updates to your loyalty program? There are a few things you should know… If you’re not careful, there could be a volcano of negative sentiment waiting to erupt in the form of your customers.
Just ask Starbucks who recently announced this past month that it was changing its loyalty program structure from a frequency-based model to a model based on what customers actually spend instead.
For those of us who eat, sleep, drink, and live loyalty, announcements like this are never that much of a surprise. In fact, Starbucks’ recent announcement harkens back to the changes Southwest made to their frequent flyer program circa 2011. What seems to catch some companies off guard though is the customer backlash that ensues.
You’ve seen it, maybe even had a similar experience. It’s when your fiercely loyal customers turn on you and go from engaged to what I’m calling enraged by spouting mad declarations through social media, showing how their ex-favorite company has ripped their loyal heart out and eaten it… Raw.
So what is engraged? My definition: When a loyalty program member cares so deeply about the program and its brand that any unilateral change to the program’s core structure is viewed with outrage and a feeling of downright betrayal.
Seems fitting, right?
Hyperbole aside, for most companies, the decision to alter the foundational structure of a rewards strategy is a long time in the making. However, you can minimize the damage done by your “engraged” customers. The key lies in your mindset, advanced planning, and strategic over-communication well in advance.
Below are a few pieces of advice you should consider if you’re planning changes to an existing loyalty program or strategy you have in market today.
If you’ve done your due diligence in coming to the difficult decision to alter the fabric of a loyalty strategy, you’ve probably worked through a number of scenarios and put in the “hard yards” to get to that decision. You can take comfort in that fact and remember that the ensuing backlash will lessen with each passing day. After all, Southwest certainly lived to fly another day after their program changes. I suspect Starbucks will too.
A change in a program structure like the aforementioned can also serve as an opportunity for you to indirectly ask for a “hand raise” from your customers. Customers will choose with their actions whether they’re still in, or whether they choose to no longer do business with you. For a lot of companies, that’s scary. Some companies are reticent when it comes to recognizing the belief that all customers are NOT created equal. Those companies should remember though that the best loyalty programs – especially rewards-based ones – should be designed with a best customer in mind, not every customer. And sometimes, the definition of “best” can change and doesn’t always equal “most frequent.”
As a consultant, I often tell clients that the best time to craft your program’s exit strategy is before you even launch it. The same principle can be applied to situations where major changes are being made to the rules of a program structure. Realistically, the announcement of changes should be made at least a full 6 months AFTER the decision to make the change is made.
Why? That’s how long it takes to develop the right communications plan, analyze the legal (if any) and financial risks, and prepare and train your frontline employees to handle question and inquiries. If the plan is simply to issue a press release and make the change, then you should revisit it. It’s critical to be methodical and to take your time, or risk one of the worst case scenarios you’ve thought about come to pass.
All planning you do around communications, timing, and risk should be done with your mind squarely focused on the customer backlash. Looking at worst case scenarios and planning for them will help to minimize the impact such an announcement can have financially on your company’s bottom line. In essence, you need to be ready for whatever comes your way. Part of this planning is determining the size of the bone you can throw disgruntled customers when the inevitable complaints arise. That size should be determined by customer value and your frontline employees should be empowered to address complaint situations.
If you drop an atomic bomb on your customers’ loyalty, you can expect them to go nuclear. Ideally, customers should be notified that changes are coming at least 6 months before the effective date with subsequent communication streams aimed at promoting any new program benefits and helping customers realize the impact the changes will have on them. Your messaging should be as devoid of “spin” as possible, but still should accentuate the more positive reasons for the change (tied back to the customer) and should definitely highlight any new features or benefits that are also getting introduced.
For instance, Southwest highlighted how the new program structure would save the customer from having to endure expiring credits. The new points program had no expiration so long as a customer remained active. They also highlighted ways to earn even more based on new fare types and promotions.
When angered customers are left to their own devices, that’s when perceptions of a brand can tank. In one fell swoop, customers can show that not only did your company devalue the program they once loved, but now you’re being unresponsive to their complaints. The way to circumvent this perception is to provide them some recourse or platform to lodge their complaints. Take caution however – the expectation will be that a response will be provided. If you let them complain in a one-sided dialogue, then risk the perception of your brand getting even worse.
Generally, customers are hearty, adaptive, and most of all, not stupid. Loyalty programs have been around long enough for them to know that sometimes changes need to be made. If you take the time to remain positive about your decision, plan carefully, and most of all communicate strategically, you can minimize the impact sweeping changes may have and at the same time reaffirm your commitment and loyalty to your best customers.