Fundamentals of modern loyalty

To earn customer loyalty, offer community, not rewards

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The irony of most of today’s customer loyalty programs is that they aren’t about loyalty at all. They have more to do with an economic transaction than with true affinity for a brand. For example: some companies allow you to earn points for following them or writing a product review. This sort of bribery usually attracts the least loyal and least valuable audience — people mostly interested in claiming the reward not invested in the brand.

True loyalty is emotional and irrational and leads to customers feeling like they’re part of an exclusive membership group which then leads them to become loyal subscribers or consumer network participants. People appreciate being part of a club — and feel badly when they’re not. Consider, for example, sneakerheads waiting in line all night to score a coveted item. They don’t do it to make money on resale; they do it for the in-crowd bragging rights. And think of everyone who has a hard time canceling their overpriced and underutilized fitness club memberships; as I myself can attest, leaving those communities can be hard.

Membership represents a shift from buying goods in the hopes that others will admire them and you (conspicuous consumption) to investing in oneself: access, belonging, taste, experience, privacy, knowledge, self-actualization. In the modern aspiration economy, consumers are fans, influencers, hobbyists, environmentalists, and collectors. The best membership strategies, which trade on social and cultural capital, are designed for them.

The pinnacle of consumer club experiences might be scoring an invitation to the Château de Saran, an estate that is the centerpiece of the Moët Chandon empire. “You cannot pay to come and stay,” explains Stephane Baschiera, the president and CEO of the Champagne house. “You have to be asked.” Members of Prada’s private club are similarly hand-picked by the brand.

These initiatives can happen beyond luxury as well. Any brand can cultivate a select group of people who are passionate about what it stands for and seeks to do in the world. Your focus might be hobbies like coffee making, running or self-care rituals; issues like gender equality and sustainability; or simply certain aesthetics. Customers are already doing some of this work: Instagram and Facebook are full of buy-sell-trade groups focused on specific fashion labels, like Girlfriend Collective or Ace and Jig, while various YouTubers have connected around everything from watches to cleaning, makeup to gaming.

The keywords are not necessarily prestige and exclusivity but identity and belonging. People take pleasure in the intimacy of consuming together and interacting with a like-minded community. When the brands themselves are organizing that “club” — and offering access to new product drops and events, more hands-on service or even the smallest of perks — the experience gets even better.

Here are a few hallmarks of successful membership strategies to keep in mind:

Membership is micro. To prevent reverse network effects and maintain a high signal-to-noise ratio, brands often focus on specific customer sub-segments and overdeliver for them. This works particularly well for brands that sell easily commodified products. For example, the fashion basics retailer Uniqlo keeps itself fresh and relevant to trend-conscious customers through collaborations with a range of fashion and streetwear designers, artists, furniture designers, and restaurants. IKEA recently released a line of furniture specifically for its gaming community. Adidas Creators Club is a membership program that gives select customers access to “the best of Adidas,” like vouchers, discounts and free shipping.

Membership is myth-making. Häagen-Dazs was launched in the 1960s by two Polish-Jewish immigrants living in the Bronx borough of New York City. The words don’t mean anything, in any language, but the European-sounding name gave cultural biography to a brand trying to stand out in the saturated ice-cream market and turned a mundane product into an aspirational one, linking consumers interested in  old-world artisanship and sophistication. Another example comes from American Express. Before 1999, the “Centurion Amex” was just an urban legend. An invitation-only card with no credit limit didn’t exist. But when American Express launched its Black Card, myth become reality and the company’s best brand ambassador.

Membership is meet-ups. Groups that do a good job of connecting members with one another — virtually or in person — are sticky and grow stronger over time. For example, Poshmark’s Posh ’N Sip local events give sellers the opportunity to share their experiences in inventory management, customer service, photography tips, and other areas and learn from their peers. Fitbit encourages its members to coach one another in exercise regimes. And, since its inception, lingerie brand Lively has been hosting get-togethers that promote the idea that its customers are a community of women supporting and empowering one another.

Membership is maintenance. Research shows that consumers prefer small repeated gains and incremental rewards over big infrequent ones. So membership programs need to offer a steady stream of touchpoints. Last year, Yoox Net-a-Porter doubled its personal shopping and client relations team to more than two hundred, across locations in New York, California, London, Dubai and Hong Kong. Customers who use this service (i.e. join the club) are able to call on stylists 24/7, preview and reserve items before they go live on the site, customize items and attend virtual talks and designer events.

Loyalty programs — that effectively bribe people into buying more of your products — are lazy. In the modern aspiration economy, people develop true brand affinity only when it gives them a sense of community. Done right, membership strategies are an effective way to achieve that goal.