Have you ever heard the saying ‘Money can’t buy you happiness’? It turns out, money CAN buy you happiness, depending on what you buy with it. Science has discovered that money spent on products does give you happiness, but it is short-lived, and decreases over time. For instance, think of how happy you were with your first smartphone purchase. It was likely a revolutionary change in technology from your boring flip-phone! Suddenly, you could browse the internet seamlessly on your phone. And the apps! Also, you could type on a semi-real keyboard, right on the screen of your phone!
It was all so magical, like something out of the movies. Then a few months later, a newer version of your smartphone came out. With new features that your smartphone didn’t have. Suddenly, your smartphone was obsolete. And so was your happiness with the purchase.
If buying products doesn’t give us lasting happiness, then what can we spend money on in order to make us happy? Again, science has found the answer; If you want to buy happiness, spend your money on experiences. Here’s why this works; Let’s say you and you family have a trip planned to Italy for the Fall of this summer of next year. For all the time up till you leave for that trip, you and your family will plan out all the amazing sights and events you will enjoy while in Italy. Then while on the trip, you and your family will be experiencing Italy and all the wonderful sights and sounds. Then when you come home, and for all the years that follow, you and your family will relive the moments that you created while in Italy. As you and your family retell and relive the trip, your enjoyment of the trip will INCREASE over time. It’s precisely the opposite of when you spend money on products. Whereas your happiness with a product purchase decreases over time, your happiness with experiences such as travel typically increase over time.
So it stands to reason, if you want the members of your customer loyalty program to be happier as members, you should focus your loyalty program on offering members better experiences, as much as you offer products or discounts.
What does a customer loyalty program based around experiences look like?
You’re grocery shopping, and it’s time to buy cereal for your kids. They like Apple Circles and Honey Nut Loopies equally, so you typically grab whichever one is on sale. But not today. Because you just joined the ‘loyalty’ club for Apple Circles, and they sent you a $1.00 off coupon, so today is an Apple Circles day! For most brands that offer a customer loyalty program, this is typically what it looks like. Members sign up, get some coupons, and go on their way.
Unfortunately, simply handing out coupons or giving a price reduction doesn’t build loyalty to the brand, it builds loyalty to the offer. The problem with competing on price is that as soon as another brand offers a cheaper product, you lose business.
But for many products, offering a lower price can actually hurt business. Let’s apply this same ‘coupon’ mentality toward loyalty programs for say…..a luxury brand. Let’s say you just bought a new Ferrari for $400,000. Next year when the new models come out, you are personally invited to join Ferrari’s Loyalty Program. Which offer do you think a Ferrari owner would be more interested in:
1 – A 10% discount on new models.
2 – A chance to buy one Ferrari from a limited production run of 50 cars that’s being offered strictly to members of the Ferrari loyalty program. Each of the 50 Ferraris will be signed on the dashboard by Piero Ferrari, son of Ferrari founder Enzo Ferrari. In addition, the owner will be flown to Italy to tour the Ferrari production plant and view his Ferrari as it is being assembled, then join other members of the Ferrari loyalty program for a private dinner at the Ferrari Estate. The cost is one million.
If you’re buying a Ferrari, a lower price is likely a deterrent to purchasing the vehicle. Given this, Option B, even though it is almost three times as expensive than Option A, would likely be far more popular to Ferrari customers. Also note that with Option B, the experience is what’s so important. You’re not just buying a Ferrari, you’re buying a Ferrari that only 49 other people in the world will own. In addition, you’ll get to go to Italy and personally watch your vehicle being assembled, then you’ll have dinner with the Ferrari family at their estate. If you have enough money to buy a Ferrari, the added experience of such a trip would be well worth the additional money to you.
But this extreme example also illustrates why it is so important to focus your customer loyalty program on offering a better experience than it is a better price. Let’s go back to the Ferrari example for a minute. Let’s say you wanted Option A, the 10% discount on a new Ferrari. That would likely save you $25k-$40k. A huge amount of money! But would even this massive savings really make you any more loyal to the Ferrari brand? On the other hand, if you took Option B, you would get a trip to Italy to Ferrari’s production plant. You’d get to talk personally to the engineers and craftsmen that were assembling your vehicle for you. Then you’d get to go to the Ferrari Estate and talk personally to the members of the Ferrari family, learning more about them and the brand all along the way.
Option B would give you a much better experience with the Ferrari brand, and as a result, it would do a much better job of making you more loyal to the Ferrari brand. Even if you took the 10% discount off a Ferrari in Option A, that wouldn’t make you more loyal to the Ferrari brand, it would only make you more loyal to the OFFER. If Lamborghini came out with a loyalty program and offered a 20% discount on new models, well guess what you would do?
But when your brand creates a customer loyalty program based on giving members a better experience, it actually deepens loyalty to the brand. Let’s apply this thinking to our first example of shopping for breakfast cereal:
It’s a week later, and you and a friend are shopping together, and you’re on the cereal aisle. Since you are a member of the Apple Circles loyalty program, you have your $1.00 off coupon for Apple Circles in hand. You grab a box and smile to yourself, knowing that with this coupon, you’ll only be paying $1.86 for this box of Apple Circles. As you go to put the cereal in your buggy, you look over at your friend and notice she is buying a box of cereal that costs $4.57! What is she thinking?!? You decide it’s time to educate her.
“Why are you paying so much for that cereal?” You ask. “That’s almost $5, I’m paying less than $2 for mine!”
Your friend leans over and looks at what cereal you bought. “Honey, you couldn’t pay me to buy that stuff”. “What?!? Why not?”, you ask. Your friend then takes your box of Apple Circles and starts walking you through the ingredients, and how bad they are for your kids. Artificial sweetener this, high-fructose corn syrup that, too much sugars, too much carbs, not enough vitamins, etc etc. You can feel your face dropping as you learn that you were about to feed your children poison in a box.
“Wait a minute!”, you exclaim, “How do you KNOW all this!?!?”
You friend then tells you about her loyalty program. The one she’s involved with didn’t give her a coupon off that $5 cereal, instead, it gave her access to her own nutritional expert as well as a community of dietitians and online resources that educate her on what exactly goes into the foods she and her family eat. She receives education about ingredients and the effects they have on her health, so she can make more informed opinions when grocery shopping.
She points at two ingredients in your Apple Circles. “Just FYI, these have been shown to produce irritability and drowsiness in children under 10”. On cue, your 9 year-old grabs your pants leg and starts tugging “Mooooommmmmm! We’ve been in here ALL DAY! I want to go home now now NOW!!!!!” You look down at your watch, you’ve been in this store for 6 minutes. Your friend raises her eyebrows at you in a very “I told you so” way.
By offering a better experience, your friend’s program is able to generate more sales at a higher price-point. The reason why is because your friend’s loyalty program creates an experience for her that actually deepens loyalty toward the brand. Your friend appreciates the fact that her brand is giving her access to educational materials that allow her to better understand how the ingredients found in the foods she buys impacts the health of her family.
Your loyalty program saved you a dollar on a box of cereal. Your friend’s loyalty program showed her which products to buy in order to have a healthier family. Which approach do you think does a better job of building true brand loyalty?
What are some examples of customer loyalty programs built around offering experiences to members?
Those were a couple of hypothetical examples, now let’s look at a couple of real-world examples of customer loyalty programs that offer better experiences for members. The first is Reebok’s Unlocked customer loyalty program, which launched in 2019. Unlocked is a tiered, points-based loyalty program. Meaning as you collect more points, you can move up a tier, and each tier has additional rewards. Starting with level 2, the program offers experiences as rewards, including access to special workouts, online access to personal trainers, access to cooks and recipes, and early access to new products.
Notice that these rewards are experiences, but more importantly, they are experiences that are consistent with the Reebok brand and how its customers would use its products. People that buy Reebok shoes and apparel are likely to be more active and more interested in healthy living and eating. So offering experiences based around activity, exercise, eating and cooking, is a perk that has value for members. Whether its a customer loyalty program, or a brand ambassador program, you should always offer perks that add value to the member. Give members access to advice, materials, even experiences that regular customers do not have. This creates excitement and interest in becoming a member. Which is what you want.
Sephora’s Beauty Insider loyalty program is another that has experiences and events as part of its rewards structure. At introductory levels of the program, perks are centered on shopping discounts, free shipping, etc. But as members accumulate more points, they unlock new benefits such as special events, in-person experiences with brand founders, etc.
Notice too that for both Sephora and Reebok’s loyalty programs, experiences are offered at higher levels, as a premium that members are encouraged to work for. This positioning suggests that in both cases, the brands understand that experiences can create a deeper connection with the brand, and also serve as a way to identify its most passionate customers.
Science tells us that money spent on experiences creates lasting happiness that increases over time. Knowing this, doesn’t it stand to reason that adding relevant experiences to your customer loyalty program will increase member happiness with not only the loyalty program, but with your brand as well?
I find this concept to be very true in my marketing experiences. I really like the example of the Ferrari – I work in the luxury sector and you find this to be very true for people, especially when money is no object. And I can see how this thinking can translate into additional demographics because everyone should be treated with this high priority.
Hi Jaclyn, nice to see you here! You’re exactly right, for luxury brands it’s especially more important to focus on experiences rather than price when crafting a customer loyalty program. That’s precisely why I used the Ferrari example because it’s so much easier to see how this would work for a high dollar sports car versus a box of cereal,
Additionally, research has shown that money CAN buy lasting happiness, as long as the money is spent on experiences, versus products. The same theory applies here, 3 months from now, you’re probably not going to remember the coupon you got from being a member of a loyalty program, but you probably will remember the private concert that you got to attend just for the customer loyalty program you are a member of! So providing experiences as a reward through your customer loyalty program really does help to create more loyal customers!
True. Living in Las Vegas, we often get ‘comps’ from resorts; buy one get one free buffets, 10% off hotel room, $X of free-play, 10X points, or whatever. While those coupons/comps are coming in, we are all about visiting that location. We are loyal to them. When they dry up, we visit whatever other location is offering up something fun and tasty.
Hi Troy, I love this comment! These offers don’t build loyalty to the brand, they build loyalty to the OFFER! It’s the same thing with these ‘punch card’ promotions you see at many fast food restaurants, where if you buy X number of items then you get a free item.
This trains us to look for the best coupon, so we will only do business with a brand as long as they give us the best coupons. The second a competitor beats them, we are gone.
But if we have true loyalty to the BRAND, that goes deeper than a simple coupon or comped pass. We will stay with them even at a possibly higher price point, because we are loyal to the brand, not the offer.