Why loyalty-card programs should just die

Sep 18 2017

Three ways to build customer trust without stamp cards

How many loyalty cards do you have in your wallet? Between coffee-shop stamps and gas station points and consumer rewards, it’s likely there’s quite a few (in fact, the average American is a member of 29 loyalty programs — even though they’ll only use half of them this year).

Just one look at the recent Air Miles fiasco and it’s clear that these programs are a hassle for companies, too.

Study after study has shown why they just don’t work. You essentially discount your brand in exchange for customer data, which feels cheap and tawdry. In the long run, it doesn’t yield economic returns — studies have shown that companies with a higher spend on loyalty programs earn, on average, 10 per cent less than competitors. The reality is, do any of the cards you have really compel you to head back to the store?

For companies, I think a dose of brutal honesty is in order. In the end, loyalty programs are about gathering information from your customers. If you want that precious data, be up front about it and give them a compelling reason to share it.

Real loyalty, in my mind, starts with showing buyers you have integrity, heart and soul — a purpose, personality and sense of values that transcend your logo. Eighty-nine percent of consumers in the U.S. say it’s shared values that drive their brand loyalty, not discounts.

And this is where corporate social responsibility — i.e. charitable and giving programs — and loyalty unexpectedly converge. These are usually thought of as two separate initiatives, but they don’t have to be. With a loyalty program that’s tied into a giving program, you enable customers to actually give back instead of getting punches on a card or piling up miles they’ll never use.

David Segal opened his fresh-fast-food location in Ottawa this summer. Julie Oliver / Postmedia News

I’ve thought about his a lot lately. I was never exactly happy with DavidsTea’s Frequent Steeper program — not only was it complicated to manage, it cost us millions of dollars in product each year and did nothing to drive our already-loyal customers to the store. When I launched my newest venture, I wanted to get this right. We recently rolled out a very different kind of loyalty program at Mad Radish: for every order a customer places on our app or online, a serving of fresh vegetables is donated to a local food charity on the customer’s behalf.

After trying it for two months — and giving away more than 1,000 servings of produce — I don’t think we’ll ever go back to a “Buy 9 Get the 10th Free” model. For other entrepreneurs looking to reboot their loyalty programs, here are a few principles we learned along the way.

Pick the right partner
If you’re going to tie loyalty with giving, it has to truly make sense for you and your customers. The right initiative should be intrinsic to your core business and its mission, not an afterthought. It’s not just about presenting a novelty cheque to charity once a quarter.

For our program, for instance, we partnered with Community Food Centres Canada (CFCC), a national nonprofit focused on giving low-income families in need access to fresh, healthy food. Rather than giving away canned and processed stuff, they build community food centres where the emphasis is on creating a space where people come together, cook together and eat together. Our business is about proving that healthy food can be delicious, so this was a natural fit.

Consider keeping it local
I think there’s something empowering and gratifying about helping people in your own backyard. This makes sense from a giving perspective, but also from the perspective of energizing your customer base to take part.

I have tremendous admiration for one-for-one giving programs like those at Warby Parker and Tom’s shoes for making a huge difference in the lives of people around the globe. At the same time, one of the things I love about working with CFCC is that we’re donating fresh vegetables to people an hour away.

Increasingly, companies — even those with global reach — are thinking locally when it comes to giving, for these very reasons. Telus, for one, has branded its charitable efforts “Give Where You Live,” investing in hyper-local causes (such as the Bipolar Disorder Society of BC) and challenging employees to donate volunteer hours.

Incorporate technology and make it real
Here’s where giving programs can take a cue from loyalty initiatives, especially in terms of integrating technology and gamification. Being able to track and quantify your individual charitable impact adds a level of personal investment and commitment. We spent a great deal of time developing an app that logs each donation so that users can see in real time how many servings of veggies we’ve given away and what their own contribution is.

The idea of wedding a loyalty program to corporate giving may feel a little unconventional. But, really, if the alternative is trying to bribe customers with stuff they don’t really want or value, then why not give it a try? At the end of the day, it represents a way to build a bigger, more meaningful kind of loyalty, not just with buyers but with the community at large.

David Segal is the founder of Mad Radish and a retail thought leader. He’s best known for bringing radical innovation to a 5,000-year-old product category with the launch of DAVIDsTEA.

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Author: Courtesy of David Segal