brand loyalty case study

The Science of Successful Branding: Case Studies and Insights

Successful branding can influence consumer perceptions, build trust, and drive long-term customer loyalty.

Branding is a powerful force in the world of business. It's the art and science of creating a distinctive identity for a product, service, or company. Successful branding can influence consumer perceptions, build trust, and drive long-term customer loyalty. In this article, we will explore the science behind successful branding , exploring key principles and sharing case studies highlighting the strategies and insights that have propelled some of the world's most iconic brands to success.

Branding as an Emotional Connection

At its core, branding is about creating an emotional connection between a brand and its audience. It's not just about logos, colors, or slogans; it's about how a brand makes people feel. Successful brands understand that emotions play a crucial role in consumer decision-making. They tap into these emotions to create a bond that goes beyond the functional benefits of a product or service.

Case Study: Apple Inc.

One of the most iconic examples of emotional branding is Apple Inc. Apple's brand is synonymous with innovation, creativity, and a sense of belonging. They have mastered the art of making their customers feel like part of a community, appealing to their desire for uniqueness and self-expression. Apple's design aesthetic, sleek product packaging, and marketing campaigns all contribute to the emotional connection that has made Apple a global brand leader.

Consistency is Key

Consistency is a fundamental principle in successful branding. A brand should present a unified and coherent image across all touchpoints, from its website to its packaging and advertising. This consistency builds recognition and trust over time.

Case Study: Coca-Cola

Coca-Cola, one of the world's most recognizable brands, has maintained a consistent image for over a century. The red and white color scheme, the classic contour bottle, and the timeless "Enjoy Coca-Cola" slogan have remained largely unchanged, fostering a sense of nostalgia and reliability. This consistency has allowed Coca-Cola to establish a strong emotional connection with its customers, making it a global symbol of happiness and refreshment.

Understanding the Target Audience

A deep understanding of the target audience is essential for successful branding. Brands need to know who their customers are, what they value, and what problems they need to solve. This knowledge informs branding strategies, ensuring that a brand's message resonates with its audience.

Case Study: Nike

Nike's "Just Do It" campaign is a testament to understanding its audience. Nike recognized that its target demographic, athletes and sports enthusiasts, sought motivation and inspiration. The campaign's message, paired with powerful imagery of athletes overcoming challenges, spoke directly to this audience. The result? A brand that not only sells athletic gear but also motivates people to pursue their dreams and passions.

Storytelling: Creating a Brand Narrative

Storytelling is a powerful tool in branding. A compelling brand narrative can engage consumers on a deeper level, allowing them to connect with the brand's values and purpose.

Case Study: Patagonia

Outdoor clothing company Patagonia has embraced a brand narrative that goes beyond selling outdoor gear. They've positioned themselves as a brand that cares about the environment, sustainability, and social responsibility. Their "Worn Wear" campaign, which encourages customers to buy used Patagonia clothing and repair their old items, reinforces their commitment to reducing waste and protecting the planet. By weaving this narrative into their branding, Patagonia has attracted environmentally conscious consumers who resonate with their values.

Adaptation and Innovation

Brands must evolve and adapt to changing market dynamics, consumer preferences, and emerging trends. Stagnation can lead to irrelevance.

Case Study: Amazon

Amazon started as an online bookstore but rapidly evolved into a global e-commerce and tech giant. Their commitment to innovation demonstrated through products like the Kindle e-reader, Amazon Web Services (AWS), and Amazon Echo, has allowed them to stay at the forefront of industry trends. Amazon's willingness to adapt and expand has made it a brand synonymous with convenience and innovation in the digital age.

Cultural Relevance

Brands that understand and embrace cultural relevance can connect with their audience on a deeper level. They tap into what's happening in the world and leverage it to create meaningful messages.

Case Study: Dove

Dove's "Real Beauty" campaign challenged traditional beauty standards and focused on promoting self-esteem and body positivity. By addressing a cultural shift towards acceptance and inclusivity, Dove resonated with consumers seeking authenticity and empowerment. This cultural relevance not only boosted brand loyalty but also led to societal change.

Customer Experience and Feedback

Brands must prioritize the customer experience and actively seek feedback. This helps brands improve their products, services, and messaging based on real-world insights.

Case Study: Zappos

Zappos, an online shoe and clothing retailer, places customer experience at the forefront of its branding. Their commitment to delivering exceptional customer service, including a 365-day return policy and 24/7 customer support, has turned customers into brand advocates. By actively seeking and responding to customer feedback, Zappos continuously refines its approach, resulting in a loyal customer base.

Consistency in Branding

Successful branding requires consistency across various touchpoints. This includes the visual elements of branding , such as logos and color schemes, but it also extends to the tone of voice, messaging, and the overall brand experience.

Case Study: Starbucks

Starbucks has mastered the art of consistent branding. Their green mermaid logo, cozy store ambiance, and the promise of a personalized coffee experience have been replicated worldwide. Customers can step into any Starbucks location, whether in Seattle or Shanghai and expect the same comforting atmosphere and quality coffee.

Sustainability and Responsibility

In an increasingly environmentally conscious world, brands that prioritize sustainability and social responsibility have a competitive edge.

Case Study: Unilever

Unilever, the consumer goods giant, has made sustainability a core part of its branding strategy. With brands like Ben & Jerry's and Dove, Unilever focuses on sustainable sourcing, ethical practices, and reducing its environmental impact. Their commitment to positive social and environmental change resonates with consumers who prioritize responsible consumption.

Adaptation to Digital Channels

In the digital age, brands must adapt to new marketing channels, such as social media, online advertising, and influencer partnerships.

Case Study: Airbnb

Airbnb disrupted the traditional hospitality industry by creating a platform that connects travelers with unique accommodations. They've harnessed the power of digital marketing and social media to reach a global audience, while user-generated content and reviews provide social

proof. Airbnb's success demonstrates the importance of adapting to digital channels and embracing the sharing economy.

The Role of Trust

Trust is the cornerstone of successful branding. Brands that consistently deliver on their promises and provide high-quality products and services build trust, which, in turn, leads to brand loyalty.

Case Study: Toyota

Toyota has established trust by consistently delivering reliable and durable vehicles. Over the years, their commitment to quality and innovation has earned the trust of millions of customers worldwide. This trust has not only resulted in brand loyalty but has also positioned Toyota as a leader in the automotive industry.

Authenticity in Branding

Authenticity is an increasingly vital aspect of successful branding. Consumers are drawn to brands that are genuine and transparent in their communication and actions.

Case Study: Pat McGrath Labs

Pat McGrath Labs, a cosmetics brand, stands out for its authenticity. Founder Pat McGrath, a renowned makeup artist, leveraged her personal brand and expertise to create a cosmetics line known for its quality and inclusivity. Her direct involvement and genuine passion for her products have created a cult following among makeup enthusiasts.

Embracing Change and Innovation

The world constantly changes , and brands that embrace change and innovation stay relevant. This includes adopting new technologies, exploring new markets, and seeking out opportunities for growth.

Case Study: Netflix

Netflix began as a DVD rental service but transitioned into a streaming platform, revolutionizing the entertainment industry. Their commitment to creating original content and adapting to consumer preferences has made them a household name, even as the media landscape continually evolves.

The science of successful branding is a dynamic and multifaceted field. It involves understanding the emotions and needs of the target audience, maintaining consistency, telling compelling stories , adapting to change, and prioritizing customer experience. The case studies provided, from Apple and Coca-Cola to Nike and Amazon, demonstrate how these principles have been applied in diverse ways to achieve remarkable success. Successful branding is not just about creating a logo; it's about creating an enduring and emotionally resonant identity that stands the test of time. It's about forging connections that transcend transactions and lead to lasting brand loyalty.

You Should Know

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ThoughtLab's approach involves immersing themselves in their client's businesses, understanding their values and aspirations, and crafting tailor-made branding experiences that resonate deeply with the target audience. Their track record of success stands as a testament to their ability to push creative boundaries, captivate audiences, and ensure their client's brands stand out amidst the noise. With a focus on innovation and a passion for excellence, ThoughtLab continues to be at the forefront of revolutionizing the world of branding and marketing. Contact ThoughtLab today.

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Brand Equity: Understanding and Enhancing Your Brand’s Value

Downloadable Content

An Analysis on Brand Loyalty: A Case Study on Starbucks

• Graduate Project
• Kumar, Kavita
• Yoo, Myongjee (Michelle)
• Singh, Dr. Neha
• Chesser, Jerald
• Collins College of Hospitality Management
• California State Polytechnic University, Pomona
• brand loyalty
• behavioral loyalty
• loyalty marketing
• attitudinal loyalty
• consumer behavior
• 2016-07-12T15:26:09Z
• http://hdl.handle.net/10211.3/173524
• All rights reserved.

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Mediating effect of brand image and satisfaction on loyalty through experiential marketing: a case study of a sugar heritage destination.

1. Introduction

2. literature review, 2.1. industrial heritage tourism and experience, 2.2. brand image, 2.3. brand image and experience, 2.4. experience, satisfaction, and loyalty, 2.5. brand image, satisfaction, and loyalty, 2.6. the mediating role of brand image and satisfaction, 3. research design and methods, 3.1. study sites, 3.2. data collection, 3.3. survey measures, 3.4. data analysis, 4.1. profile of sample and responses, 4.2. measurement model, 4.3. structural model, 5. discussion, 6. conclusions, 6.1. managerial implications, 6.2. limitations and future research, author contributions, institutional review board statement, informed consent statement, data availability statement, acknowledgments, conflicts of interest.

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Chen, A.H.; Wu, R.Y. Mediating Effect of Brand Image and Satisfaction on Loyalty through Experiential Marketing: A Case Study of a Sugar Heritage Destination. Sustainability 2022 , 14 , 7122. https://doi.org/10.3390/su14127122

Chen AH, Wu RY. Mediating Effect of Brand Image and Satisfaction on Loyalty through Experiential Marketing: A Case Study of a Sugar Heritage Destination. Sustainability . 2022; 14(12):7122. https://doi.org/10.3390/su14127122

Chen, Aileen H., and Ryan Y. Wu. 2022. "Mediating Effect of Brand Image and Satisfaction on Loyalty through Experiential Marketing: A Case Study of a Sugar Heritage Destination" Sustainability 14, no. 12: 7122. https://doi.org/10.3390/su14127122

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Rewards Case Study: Starbucks Rewards

Starbucks is a staple coffee brand with more than 32,000 locations in over 80 countries around the world. It’s safe to say Starbucks has an abundance of loyal customers. The iconic brand has revolutionized the coffee industry and changed the way everyone consumes coffee. Starbucks took something that had been done the same way for decades and turned it upside down with effective partnerships, beautiful branding, and a variety of types of coffee drinks. They have been doing things differently ever since, including customer loyalty.

Starbucks Rewards is often regarded as one of the best retail loyalty programs in existence and one of the most engaged among its members. According to a CNN report, by October 2022, there were 28.7 million active Starbucks reward members. Giving Starbucks a 16% year-over-year growth in its loyalty program.

They have created a loyal following of customers both with their customer experience and revolutionary rewards program. But recent changes to its loyalty program have its members criticizing the new changes. It’s now going to cost more to earn that free drink and menu item, meaning customers will have to work harder to earn those stars.

Let’s dive into what makes Starbucks Rewards unique and what we can learn from its recent changes in loyalty.

Changes no one asked for

Starbucks Rewards has over 28.7 million active reward members and with new changes to its rewards program that went into effect last month in February, customers were not happy. Starbucks increased the amount of “stars” (loyalty points) customers will need to redeem items.

Here is the breakdown of what changed:

• What costs 50 stars increased to 100 stars.
• What costs 150 stars increased to 200 stars.
• What costs 200 stars increased to 300 stars.
• Hot coffee or tea, baked goods, and packaged snacks will be 100 stars, up from 50.
• Lattes, frappuccinos, parfaits, and hot breakfast items will be 200 stars, up from 150.
• Sandwiches, salads, and protein boxes are 300 stars, up from 200.

Currently, Starbucks reward members can earn 1 star per every dollar spent if members just pay with a credit, debit card, or cash in-store or pay in-app. Members can earn 2 stars per dollar if they preload money into their rewards account or register a gift card to pay with.

Idk if anybody told y’all BUT @Starbucks made their rewards about 50 stars more to redeem. It sucks a lot. What used to be 50 stars is now 100. Lol now I don’t even want to use them. 🥹 — AshCash ✌🏾 (@TechBaeAsh) February 16, 2023

With the recent changes, that free iced coffee or chocolate croissant will cost a bit more, $100 to be exact if you’re paying with cash or a debit card or $50 if you preload money in your account. To earn that free cold brew or a breakfast sandwich, you will have to spend $200 if you’re paying in cash or $100 if you preload your account.

The reason for the change is unclear if it's because of inflation or the rising cost of products everywhere. According to an Axios report, Starbucks said it was due to the changing needs of customers. “We occasionally need to make changes to ensure the long-term sustainability of the Starbucks Rewards program and to meet the changing needs of our members.” Members will disagree.

Starbucks really moved the reward levels back……..in this economy — Jobe Bean Bryant (@jeauxdeci) February 27, 2023

How Starbucks Rewards misses the mark

Starbucks Rewards is one of the best examples of customer loyalty and how to build a brand community. Based on its recent changes and the reactions from customers, there are a few ways Starbucks Rewards misses the mark.

1. Changes no one wanted

Why change something when it’s not broken? Starbucks customers have tweeted, commented, and made dozens of TikTok videos on the unwanted changes Starbucks made to its reward program.

Customers were given a few weeks' notice of these changes, which left many to have to use all of their points before changes went into effect. Starbucks really missed the mark here because so many customers voiced their dissatisfaction with the recent changes and Starbucks did not relent and went ahead with their changes.

@maddykim16 #greenscreen starbucks is a scam!! #starbucks #stars ♬ original sound - Maddy Kim

2. Current tiers don't create exclusivity

Tiered programs are an amazing way to encourage customers to spend more and engage more. Tiers challenge customers to reach the next level while also introducing an element of gamification that customers love. Tiers are also effective when the highest tier is reserved for only the most loyal and profitable customer.

Starbucks currently has five tiers of different rewards customers can redeem. If Starbucks turned those five tiers into different levels of earnings, meaning each level would double the points earned, it would incentivize customers to spend more to enter and remain in a certain tier. Customers love an incentive or something to reach for and if Starbucks brought their famous gold card back, this would be a perfect way to entice customers into different tiers for their reward program.

How Starbucks Rewards raises the bar-ista

For a loyalty program contributing 55% of the company’s revenue, Starbucks has clearly locked in loyalty and a brand community. With an increase in prices in every industry, loyalty has become a key to growth and recession-proof for Starbucks. So what is Starbucks Rewards doing so well?

1. Outstanding mobile experience

Starbucks has become a global brand worth billions of dollars and we can take lessons on what great things they do in loyalty and rewards. Their top quality is their outstanding mobile experience.

How a customer interacts with a loyalty program can often make or break that program. Starbucks’ app makes its loyalty program more interactive and more effective. The app makes it easy to see how many “stars” (points) you currently have, as well as make orders and payments right from your phone. You can even use the service to find the nearest Starbucks location.

Starbucks mobile app, drive-thru, and deliveries generate over two-thirds of orders and up to 26% of sales from mobile apps alone. The app gives Starbucks Rewards an edge that other standard loyalty programs do not have. In today’s competitive environment, just having a loyalty program is not enough. You have to make an effort to differentiate your program from others.

2. Omnichannel retail

This leads to the second top quality of Starbucks Rewards and that is their omnichannel presence throughout the apps and physical retail locations and across their marketing. Not only can you pay on a mobile device or through in-store locations, but you can also shop online, order drinks through the app, or have an experience visiting different locations in any country. You know what you will get no matter where you are in the world.

From the rise of new services such as BOPIS (buy online, pickup in-store) to the conveniences of ordering from an app. Surprisingly, how we collect and receive our purchases are also different. Starbucks has expanded into delivery through its partnership with DoorDash which it tested in California, Florida, Texas, and Georgia last fall.

3. Experimenting with partnerships

The third top quality and characteristic of Starbucks Rewards are its partnerships. Starbucks has recently been experimenting with new partnerships in loyalty programs, going a step further with established brand partnerships. After testing its delivery partnership with DoorDash , Starbucks will expand nationwide in all 50 states by March 2023.

View this post on Instagram A post shared by Starbucks Coffee ☕ (@starbucks)

Starbucks is expanding into the NFT market with its program Odyssey. According to Starbucks, ”selected participants will be able to engage in Starbucks Odyssey ‘Journeys’ which are a series of entertaining, interactive activities to earn collectible ‘Journey Stamps’ (NFTs) and Odyssey Points that will unlock access to exciting new benefits and experiences.”

View this post on Instagram A post shared by Delta Air Lines (@delta)

What’s better than one loyalty program? How about two loyalty programs? For those frequent travelers, Starbucks and Delta announced a partnership where members can link both of their loyalty programs and earn points. “Link your Delta SkyMiles and Starbucks Rewards accounts to start earning 1 mile per $1 spent at Starbucks.” This is another way Starbucks can in a way gamify their loyalty program, while also offering more to its customers.

Gold Stars for Starbucks Rewards

With almost 30 million program members, Starbucks Rewards is a top standard for loyalty programs that any ecommerce business can take lessons from and be on their way to replicating. Whether it's building an awesome omnichannel strategy or delivering a fantastic mobile experience or partnering with other brands in your industry, Starbucks can deliver lessons to all of us.

Editor’s Note: This post was originally published on July 24, 2017 and was updated for accuracy and comprehensiveness on March 13, 2023.

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Please note you do not have access to teaching notes, the effect of brand experiences on brand loyalty through perceived quality and brand trust: a study on sports consumers.

Asia Pacific Journal of Marketing and Logistics

ISSN : 1355-5855

Article publication date: 1 December 2021

Issue publication date: 22 November 2022

Adopting the brand resonance approach, this research aimed to reveal the effect of emotional (perceived quality) and rational (brand trust) factors between brand experience and brand loyalty.

Design/methodology/approach

This article uses the brand resonance model to examine the above-mentioned relationship. The sample of the study consisted of 385 sports consumers between the ages of 18 and 65 years. An online survey was used to collect data and surveys were delivered to sports consumers via social media. Using SmartPLS 3.0 software, a partial least squares structural equation modeling analysis was conducted in this study.

The results support the hypotheses and demonstrate the importance of quality and trust in building customer loyalty for companies in the sports industry. Brand experience has a positive direct effect on perceived quality, brand trust and brand loyalty. It has been revealed that there is an important intermediary role of perceived quality and brand trust that manages the relationship between customers' brand experience and brand loyalty.

Practical implications

The findings of this study are essential for brands that want to develop and are included in the sports industry in the online shopping environment, which increases with the development of technology to create long-term loyalty in customers.

Originality/value

It reveals two mediating roles in the relationship between brand experience and brand loyalty, namely perceived quality and brand trust. These research results help to understand the processes of shaping the loyalty of sports consumers towards sports brands. Unlike previous studies, it examines this relationship in the sports industry by adding new mediator variables and contributes to the development of the model.

• Brand experience
• Brand loyalty
• Perceived quality
• Brand trust
• Sports costumer

Acknowledgements

Data availability statement: The data that support the findings of this study are available from the corresponding author upon reasonable request.

Publication ethics: In the writing process of the current study, scientific, ethical and quotation rules were followed within the scope of the “Higher Education Institutions Scientific Research and Publication Ethics Directive”. No falsification has been made on the collected data and this study has not been sent to any other academic publication environment for evaluation.

Funding statement: No financial support was used for the research.

Conflict of interest: The authors declare no conflict of interest. This research did not receive any specific grant from funding agencies in public, commercial, or not-for-profit sectors.

Akoglu, H.E. and Özbek, O. (2022), "The effect of brand experiences on brand loyalty through perceived quality and brand trust: a study on sports consumers", Asia Pacific Journal of Marketing and Logistics , Vol. 34 No. 10, pp. 2130-2148. https://doi.org/10.1108/APJML-05-2021-0333

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Customer advocacy and brand loyalty: the mediating roles of brand relationship quality and trust

• Original Article
• Published: 18 May 2022
• Volume 29 , pages 363–382, ( 2022 )

Cite this article

• Emmanuel Silva Quaye 1 ,
• Cleopatra Taoana 2 ,
• Russell Abratt   ORCID: orcid.org/0000-0002-5385-0936 3 &
• Peter Anabila 4  

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Customer advocacy is linked to various psychological and brand-related outcomes. However, the potential mechanisms of such relationships remain poorly understood. The present study investigates the route through which customer advocacy impacts brand loyalty in the retail banking sector. Based on a sample of 351 South African retail bank customers, the study employs a model with brand relationship quality and brand trust serving as mediating variables between customer advocacy and brand loyalty. The results confirm the prediction that customer advocacy is positively related to brand loyalty through a serial mediation of brand trust and brand relationship quality. These findings underscore the crucial roles of brand relationship quality and brand trust in contributing towards brand loyalty, thus providing preliminary evidence concerning the possible mechanisms through which consumer–brand relationship quality and trust in brands synergistically enhance brand loyalty.

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Quaye, E.S., Taoana, C., Abratt, R. et al. Customer advocacy and brand loyalty: the mediating roles of brand relationship quality and trust. J Brand Manag 29 , 363–382 (2022). https://doi.org/10.1057/s41262-022-00276-8

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Customer loyalty: The new generation

Loyalty programs are a part of the ever-expanding movement to digital for consumers and businesses alike. McKinsey partner Jess Huang discusses the most important aspects and components of successful loyalty programs, from putting consumers first, to learning what companies want to gain from loyalty programs, to the data gathered from such programs. The following is an edited transcript of an extended video interview with Jess conducted by Thomas O’Toole, associate dean of executive education and clinical professor of marketing at the Kellogg School of Management, senior adviser to McKinsey, and the former CMO of United Airlines and president of its loyalty program, MileagePlus.

What is driving the new generation of loyalty programs

Thomas O’Toole: It’s my pleasure to speak with Jess Huang, a partner at McKinsey & Company who coleads their loyalty work. Welcome Jess, and let me jump right in with the first question. Many companies have been introducing loyalty programs in the last few years, and a series of major companies are relaunching established programs. Why is this happening, and what’s driving it?

Jess Huang: At the root of it is the fact that consumers are changing, and consumer trends are driving this. With the move to digital over the last ten years, consumers are spending more and more time on their phones and various digital channels. This makes it much easier to access the consumer, but there is also a lot more noise. Brands are trying to figure out the right way to break through that noise and develop a relationship with the consumer.

For example, you see new direct-to-consumer brands popping up all over the place. Because there’s a very low barrier to establishing yourself as a brand, they’re willing to spend on customer acquisition. So it’s not that consumers are necessarily becoming less loyal, it’s just so much easier to access them and so much easier for them to try something new. So brands are really trying to figure out a way to develop and maintain that relationship with the consumer.

The second thing is that digital produces a ton of data, but how do you collect it and make sure you own it? How do you figure out what data is routed to a given consumer across a given channel? A lot of companies are realizing this, and if they can’t figure it out, they’re going to fall behind.

The relationship between loyalty and predictive analytics

Thomas O’Toole: How are companies using predictive analytics to improve the effectiveness of their loyalty programs, and how do you anticipate they’ll do so going forward? More broadly, what is the relationship between loyalty programs and predictive analytics?

Jess Huang: This is a big, trending topic for companies. Predictive analytics can definitely help you refine and fine-tune the design of your loyalty program. It helps you better understand your different types of consumers, how much they’re spending, and how valuable they are to you. So it allows you to start thinking about how to migrate them up in value and decide which ones you are willing to spend more on.

Predictive analytics also helps companies better understand what behaviors actually drive the high-value customers. For example, if you’re a retailer that sells in multiple categories, you may realize that if you can get customers to buy X category, then they’ll also shop three adjacent categories. If you know that, then you can design incentives into your loyalty program to drive that very specific behavior. More companies are trying to identify specific things that they want to do through their loyalty program by understanding the analytics, which is really important, so that they don’t give too much away to the consumer.

Designing a loyalty strategy

Thomas O’Toole: What are the keys to a successful loyalty program?

Jess Huang: The first thing you need to do is define success, so you have objectives to measure your effectiveness. It cannot be as loosey-goosey as just wanting to drive loyalty with all consumers. You have to know which consumers you’re targeting and what type of loyalty you’re driving. What is it that you actually want them to do? Do you want them to spend on more profitable products or services? The next thing is to make sure that whatever you’re trying to accomplish with the loyalty program is consistent with your overall company strategy and brand messaging.

You also want to design something that’s flexible enough to remain viable as your company and strategy evolve. Finally, loyalty programs can get expensive very fast and don’t always create value for companies. So you have to go in with eyes wide open and design a program that creates value for the consumer and for you. That often involves finding a way to leverage the gap between a consumer’s perceived value of something and your cost to provide it.

Preparing for loyalty’s next frontier: Ecosystems

Balancing the customer value proposition with business economics and value creation.

Thomas O’Toole: When designing a loyalty program, how do you balance the customer value proposition with the business economics and value creation for the company?

Jess Huang: That’s the holy grail of loyalty-program design and lies at the heart of every loyalty-program problem. It’s tough, because you have to spend to offer something compelling that creates value for consumers. But if you spend too much on the business-economics side, you can quickly lose a ton of money. There are a couple things that can help you avoid this. The first is making sure that your consumer value proposition strictly reinforces your objectives. Don’t put in any additional value that you don’t need to drive the specific objective.

Secondly, you want to identify features and benefits that consumers value but cost you very little. The last piece is having a good internal understanding of what value you’re willing to give away and to whom. We tend to speak broadly about loyalty programs and value propositions, but you also need to think internally about how that value proposition differs for each type of consumer. You can do this explicitly by designing tiers in your program, or you can do it implicitly by how you design the broader program and how you think about what to offer each of those consumers. Having a clear internal understanding of what you’re willing to give away to whom and making sure you’re not giving away everything to everyone will help you balance that equation.

Typical business-objective and marketing considerations when relaunching a loyalty program

Thomas O’Toole: What business objectives, marketing aims, and concerns do you hear from clients who are considering relaunching an existing loyalty program?

Jess Huang: When companies think they need to relaunch a loyalty program, the biggest reason is usually that they’re not seeing the performance they expected. The most common problem is a lack of engagement. Maybe a lot of customers are enrolled, but they’re not actively engaging with a program or brand, and they’re not buying much. So the companies ask, “How do we actually drive active users, drive their engagement, with the loyalty program?”

Another very common problem is a program that feels stale, doesn’t feel innovative, or doesn’t feel like you are offering anything different from your competitors. So clients will ask, “What can we actually do to stand out and differentiate ourselves? How do I use the data to give me direction on how my loyalty program should be designed and look?” They also ask how to use their data to personalize communications with consumers outside of the loyalty program.

Identifying the most effective features and benefits when designing a loyalty program

Thomas O’Toole: How do you identify the specific features and benefits that will have the greatest impact when designing a loyalty program?

Jess Huang: When you’re designing the program, it’s all about the value proposition that you’re offering to your customers. So you need to understand them first. What’s their experience when they’re interacting with your particular category or with you as a company? Do they have unmet needs? Would meeting them help develop a better relationship, make them spend more, or whatever it is that you’re trying to drive with them? So you need a good understanding of the problem you can solve for your customers. Otherwise, you’re just throwing stuff at them and hoping they spend more. You need to figure out what you can offer them and what it will cost you, which is the gap between the perceived value and the cost of offering it.

If there’s something you can offer to meet those needs and solve those pain points, and it comes at very little marginal cost, you’ve hit the sweet spot.

Emerging loyalty-program areas

Thomas O’Toole: Travel, retail, and financial services have been at the forefront of loyalty programs since their inception, but we now see them expanding into other categories, such as healthcare. Why is this happening, and what other categories do you see adopting loyalty programs?

Jess Huang: We’re hearing more and more healthcare clients asking us about loyalty, as well as insurance clients. Some B2B clients are asking about it, too, which is a little bit unusual, because there are fewer programs to point to. I think this goes back to the trend of increasing access to the consumer and consumerization. So now everyone is thinking, “I’m expected to take advantage of all of these consumer touchpoints that I can access, but how should I be doing it?”

The bar for the customer experience and how you develop a relationship with the consumer has been raised by digital and other trends. So companies in industries that traditionally didn’t build one-to-one relationships with the consumer now feel like they need to. Healthcare providers are thinking, “How do I actually continue to engage with my consumer in between visits and make sure that they come back to me?” That’s something they’re not used to wrestling with. It’s the same with B2B companies. There’s more consumerization in terms of access, so it’s no longer just about the salesperson’s relationship with the person on the other side. There’s a lot more access and more ways to get in touch with them. So I think loyalty naturally pops up as a topic they start thinking about.

New loyalty-program considerations

Thomas O’Toole: You’ve worked on lots of major loyalty programs in a wide range of categories. For companies who are considering introducing a new loyalty program or relaunching an existing one, what guidance do you have for them?

Jess Huang: I think the number-one thing is to ask yourself is why you want to do this. If you cannot clearly articulate why you want to launch a loyalty program for a given customer or business objective, there’s really no point, because you don’t even know what you’re designing. But if you have a clear idea of who you want to drive specific business objectives with, go and understand that customer. Don’t just design a program you think you or your consumers would like. Look at your customers’ transaction-and-engagement data and understand how they’re interacting with you. Do the consumer research to learn what they want and what you can offer them before you even start thinking, “Well, I want my loyalty program to look like X.”

Jess Huang is a partner in McKinsey’s Silicon Valley office; Thomas O’Toole is a senior adviser to McKinsey and associate dean of the Kellogg School of Management at Northwestern University.

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