Why customer satisfaction is more important than rewards

02 October 2019

In a move away from points collection and rewards, recent suggestions are that customer satisfaction lies at the heart of loyalty[i]. Some have even suggested that it’s the single biggest predictor of how loyal a customer may be[ii]. How ironic, then, that loyalty teams tend to regard customer satisfaction surveys as an annual box ticking event. In fact, little attention tends to be paid to understanding good customer experience in considerations of loyalty. It is more likely that, because members who redeem rewards are known to return, focus is often directed on developing and changing enticing and aspirational reward structures. Usually, there is a limit to what can be offered and a lot of conversation about whether it is too generous.

We may be missing a trick, here, though. Redemption is important, yes. But recent work on loyalty suggests customer satisfaction is more important. As someone who has analysed a lot of loyalty data, I have always been astounded that loyalty programmes are still successful, given how low the redemption rates are across a range of industries and offerings. So, of course, it makes perfect sense that something other than redemption is driving a loyalty engagement. As my philosophy lecturer used to say, this makes redemption a necessary but not a sufficient element of loyalty membership.

If the desire in loyalty activity is for members to move from a state of recognition to deep relational loyalty[iii], then actually more attention needs to be paid to developing meaningful customer experience. The Hilton Honours programme is perceived so well with members partly because of the attention that is paid to ensuring that the nature of member experience is the same, wherever in the world you stay. Plus, the experiences that you can redeem for loyalty points give a lift. But making cocktails, camel rides or a game of golf as a reward for an awful lot of points earned are, let’s be really clear, a nice add on. They are not the crux of the relationship because most members neither accrue that many points or redeem them. And anyone who thinks a free Wi-Fi in an hotel can act as the glue of a meaningful relationship is a little misguided. And I’m not so sure that customers are so fickle, as has been suggested[iv]. But it’s certainly the case that if loyalty isn’t married with a good experience, then customers don’t feel valued – and this is definitely not the route to loyalty.

Creating a whole world of experience that taps into a sense of belonging – an emotional response – is more important than Wi-Fi. And measuring this – and acting on what is said – is one of the most important things that loyalty professionals can do.  

 

Written by Lou King, Data & Analytics Consultant