A Marketing Truism: Fooling with a Loyalty Program Will Create Customer Backlash

Customer loyalty programs tied to frequent purchasing thrive across nearly all consumer product categories. In fact, these have become so popular many marketers have no choice but to offer them. Unfortunately, what may have started out as a promotional strategy for helping build customer loyalty, has often turned into an expensive burden for an organization. For example, the airline industry found trouble when frequent flier rewards programs led to an enormous number of travelers flying for free.

Because loyalty programs are so prevalent in marketing, a generation of customers has now come to expect it. While the original loyalty programs were designed to be more like sales promotions, where customers received only short-term benefits such as special coupons with specific expiration dates, today customers view loyalty program as a necessity if they are to buy a marketer’s product.

While loyalty programs are widely used, some marketers, who see the cost of maintaining such programs as being much higher than the benefit of obtaining greater sales, have chosen to make changes to their program. Their goal in doing so is to realign the cost-benefit ratio in their favor, so the company is realized more benefit than the customer.

But in the social media age, making such changes almost guarantees customer backlash. For instance, as discussed in this story from Fortune, Starbucks adjusted its loyalty program in a way that appears to have a direct impact on customers who purchase less expensive coffee. The previous program awarded points based on the number of purchases while the new program rewards points based on total spending. The loser of this change appears to be the customer who purchases the least expensive “tall” coffee and while it benefits those who splurge on a Frappuccino and other elaborate concoctions.

As expected, customers immediately took to social media to voice their displeasure. While taking a hit on social media and in the news media does not look good, don’t expect Starbucks to reverse course. This is a business decision and one that likely was needed to be made.

For Discussion: Mylan’s EpiPen Pricing Controversy
In the Tug-of-War For the Future of Retailing Online Seems to Be Winning