Loyalty Programs Don’t Work. Poppycock.

When KB-Resource asked me to review Howard Tiersky’s book, Winning Digital Customers: The Antidote to Irrelevance, I called my review How Do Customers Love Thee? Let Howard Tiersky Count the Ways.

It’s a very good book, but it is like many other books that have as their central theme the need to understand customers (who are getting more and more difficult to understand each day).

For example, in that review I cited a red paper by Kevin Roberts, the Executive Chairman of Saatchi & Saatchi, written in 2015 where he talked about “Lovemarks.” The red paper is called “Brand Loyalty Reloaded” and it is highly recommended reading in addition to Tiersky’s book (maybe more).

The essential thought behind Lovemarks was disarmingly simple:

Take a brand away and people will find a replacement.

Take a Lovemark away and people will protest.

In other words, a brand is pretty worthless without love. It was the Saatchi agency’s way of trying to differentiate themselves when they talked about branding. Very clever, and very good. But was it true?

Because if you really think about it, do customers have to love what they buy?

There is a lot of talk about brands and creating love, but there is also equal discussion about what marketing people call “brand  loyalty,” not brand love. Why is that? Are the two the same thing? What’s going on here?

How Do I Love Thee, Let Me Count the Ways

Elizabeth Barrett Browning’s sonnet is something most people probably don’t know anymore, but it is the essence of trying to understand love (“I love thee to the depth and breadth and height My soul can reach”). Of course, no one loves a product like that as far as I know. And therein lies the problem: words, and what they really mean.[1]

Companies strive to gain customer loyalty which is different than customer love. I mean, people throw the word “love” around casually, but they are NOT the same. Loyalty is a business transaction. Love is a personal transaction. And that’s not just semantics.[2]

So when I read Tiersky’s latest piece — “THE LOYALTY FALLACY: WHY LOYALTY PROGRAMS ARE NOT AS USEFUL AS MOST PEOPLE THINK” posted on his website — I was surprised. Because trashing loyalty programs as “not useful” is not only a false conclusion, it actually the opposite of the original premise in his book: There are no sellers. There are only buyers.” So, companies should get to know customers better.

In other words, it’s really not about love: it’s about loyalty.[3]

Tiersky’s Twists and Turns

There’s no doubt Tiersky’s book is a pretty good read for people trying to win customers. But his move away from loyalty programs doesn’t make sense.

He tells us there is a problem with loyalty programs — that they “are generally not delivering customer loyalty, if by loyalty we mean creating an emotional bond and sense of commitment from the customer toward the brand.”

But is that what loyalty is? An emotional bond and sense of commitment?

When you look up “loyalty,” the dictionary confuses the issue by defining it as “the quality of being loyal.” So what is “loyal?” Firm and constant support or allegiance to a person or institution. In the cases we’re discussing, it’s purchasing behavior — behavior that is constant. You show your support for a product by purchasing it. Whether you love it or not isn’t the question. The purchase is the measurement.

Therefore, Tiersky’s definition is incorrect. Emotion has nothing to do with loyalty. The operative word for being loyal is being supportive.

MarketNet Division of Interline Creative Group, Inc. has been running loyalty programs for over 15 years. They monitor their manufacturing client’s transactions in the programs carefully and consistently. They can tell you point blank that loyalty programs work, especially when cash is involved.

MarketNet collects thousands of verbatim comments on their efforts. This one sums up the transactional value of a loyalty program:

“I Love this program, however, it is not why I sell the product.

I sell your product because it’s a great product.”

In other words, there’s no amount of “cash” or “points” or whatever that moves a bad product. The loyalty is just another word; the love is actually for the cash.

“Love the cash!” is one of the most frequently used sentences in MarketNet’s research. But there’s something else happening in these transactions that might be what Tiersky is alluding to. When you read a comment like – “My husband lost his job back in January so the extra cash comes in handy! Thank you” – that’s a human comment, an emotional one! It is an expression of love, or is it?

Wrong Turn

Tiersky’s article tries to expand on what he calls a “fallacy” around loyalty by inviting us to think about “the world’s most successful brands” which he suggests would include Apple, Netflix, Google, and Amazon. He goes on to state, “These brands have one thing in common: they don’t have loyalty programs.”

He then asks a very provocative question: “With loyalty programs being so popular, why are the most successful companies choosing not to have them?”

He then answers his own question: “One reason is that customer loyalty programs don’t actually generate true loyalty.”

But Tiersky never proves it. Furthermore, note that he has just added an adjective to the word loyalty. What is “true” loyalty? Can there be “false” loyalty?

Tiersky takes a wrong turn when he uses Amazon’s Prime® as his further proof, saying, “While some people may think of Amazon Prime as a loyalty program, it’s really a subscription. Amazon doesn’t give you points for making purchases or give you discounts for spending a certain amount of money.”

Tiersky, like others, confuses the issue by ignoring the definition of the words in play.[4] His definitions of “loyalty” may be true; however, the mistake he makes is not diving deeper into loyalty programs. He is playing with semantics when he calls Prime a subscription and not a loyalty program.

Besides, when you are Apple or Netflix or anyone with a powerful brand, you ARE the loyalty program itself.

As a Prime member, you pay a subscription fee of $119 per year to gain access to benefits such as free two-day shipping, Amazon music and video, etc. When you do a loyalty program, you get rewards for what you purchase. In both cases, there’s a money transaction at the base of whatever you want to call the program.

It’s About the Money. It’s Always About the Money.

Just as when you purchase an iPhone. You pay Apple money – a lot of money in some cases – and you gain access to everything iPhone. It’s a financial transaction and you can call it love or loyalty or whatever (can you imagine saying “I love my iPhone to the depth and breadth and height My soul can reach.”). Love is never about “me.” It’s about “you.”

Tiersky makes the same mistake Jeff MacDowell, the director of the Luxury Products Group, LLC, made in bashing loyalty programs (spiff programs). The Human Side of the Spiff was a piece I wrote in rebuttal to MacDowell, and his mistake was not really understanding what’s really behind the financial transaction itself in a loyalty or reward program: human behavior.

Behavior is the Thing

Not only does Prime generate subscription revenue for Amazon, it also influences their customers’ purchasing behaviors, resulting in an even greater economic impact.

Tiersky himself admits this. “Research shows that Amazon Prime subscribers place an average of 25 orders per year, while non-members only make 14 purchases per year.” Is that loyalty or subscription driven behavior?”

Ask anyone who runs a loyalty program or spiff program as MarketNet does, and repeat sales are currency of loyalty programs. That can only come from human behavior.

“I’m not here to say that loyalty programs are bad,” Tiersky writes further, “or that you shouldn’t have one, but maybe there’s something we can all learn from the top brands who are choosing to do things differently?”

Of course, who could not be for learning something different? But before you can learn something different, you have to learn what you are talking about. A wiser man than either of us said “Knowledge is Comparison.”

Because his post is really bashing loyalty programs as a pitch for his book (ie., ready my book and you won’t need a loyalty program). As I wrote in my review, is a pretty good book, but it is only one of many books on understanding customer behavior and what motivates people to buy things.

Brands come and go, but people will always buy things. As the father of direct marketing, Bob Stone, noted: “People buy things for one of two reasons. To protect what they have, or to gain something. When you understand that, you’re on your way to understanding purchasing behavior.”

Love has nothing to do with it. It never did.


[1] See my blog, The Intended and Unintended Consequences of Words.

[2] See my other blog, WHAT’S LOVE GOT TO DO WITH A B2B BRAND?

[3] Whether or not you can buy love has been debated through history, and it’s a debate that we really don’t want to discuss in this article about loyalty.

[4] In Selling the Why and Why It Ain’t So I discussed the same thing Simon Sinek’s TED® talk about Why, which Sinek gave in 2009. Sinek created a whole business around the word “why” and made a good living. But the world changed, and the “why” is no longer the key reason people are buying. The “what” and the “how” are equally important these days.

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