Loyalty Programs Get Scary: When Loyal Customers Turn Into Monsters

It's a dark, cold night. We're gathered outside around the campfire. There's a noticeable uneasy feeling lurking in the air.

So with flashlight in hand, our scary story begins...

...Once upon a time there was a consumer that met a brand and became its devoted customer.

The brand also expressed it's love for the customer with a loyalty program and promise of valuable rewards.

But the brand failed to live up to its loyal customer's expectations.                                          

And so, what was once a devout customer turned into a beastly creature that threatened the brand, eager to gain revenge.

So what became of the brand and customer that were once in love?

It’s one of the oldest stories in the book, and a good reminder for brands out there on what can happen when you don’t deliver on customer expectations. Your most loyal customers can go from brand advocates to brand detractors – something we refer to as the Dr. Jekyll/Mr. Hyde predicament. But don't fret too much, you still have the power to choose how your story ends.

The Chilling Tale of One Coffee Rewards Program

This story stood the test of time yet again when Starbucks recently made some major changes to its rewards program, catching some of its loyal customers off guard.

Its old program let customers earn 2 points (stars) for every dollar spent. Once their first point was earned, customers became green level members. Green level members received things like free in-store refills and birthday deals. After a customer accumulated 300 stars during a calendar year, they bumped up to gold status. Gold members received a free drink or pastry for 125 stars, were given opportunities to earn double stars monthly, and a personalized membership card.

With the new Starbucks loyalty program there’s no tier status, instead it’s set up to allow customers to start utilizing points sooner in smaller amounts. For example, earning just 25 stars gets you add-ons like flavored syrup, while 50 stars lands you a free coffee, hot tea or bakery item. But in order to receive the most popular items for free, like a handcrafted drink or hot breakfast sandwich, customers must earn 150 stars – 25 points higher than the previous program. And boy was Starbucks in hot water with its most die-hard members after they realized the value of their stars had decreased.

Some customers even went to bed with enough points for a free breakfast sandwich or two and woke up to those being taken away.

Really the majority of people taking the biggest hit with the new Starbucks rewards program are its most avid customers, as they are the ones that rack up enough points to become gold members, earning the fancy free drinks. It all comes together to create the perfect formula, turning Starbucks’ most loyal customers (Dr. Jekyll) into its harshest critics (Mr. Hyde).

This new Starbucks rewards iteration has been active for less than 6 months, so the jury’s still out. We’ll see what the future holds and the impact it makes on what were once Starbucks’ most loyal customers.

The Benefits of Loyal Customers

To understand the true severity of situations where loyal customers feel let down or betrayed, it’s important to first take a look at what the real life benefits of loyal customers actually are:

• Brand Advocates - 84% of consumers share information as a way to support brands they care about, and 75% of loyal customers will recommend a brand to friends and family.
• Increased Spend - 43% of consumers spend more with the brands and companies they are loyal to, and will spend 67% more than new customers over time.
• Higher Engagement - 61% of loyal customers go out of their way to buy from specific brands, 60% will make more frequent purchases and 50% will purchase more products.
• Valuable Data - 30% of customers who feel high levels of trust and loyalty are willing to hand over personal data, and 41% are up for sharing their purchase data.

Loyal Customers Can Get Scary

So how serious is it when you accidentally offend one of your loyal customers? So serious that it takes 12 positive customer experiences to negate the poor impression left behind from one unresolved, bad experience. Studies show that a satisfied customer will tell 2-3 people about their experience with your company, while a dissatisfied consumer will share their pain with 8-10 people, and some sources even push that number to twenty.

With that said, we’ve already talked about the benefits of happy loyal customers (a.k.a. Dr. Jekylls). The other part of that equation is learning what the consequences are of a loyal customer scorned (a.k.a. Mr. Hyde). Here are two of the biggest problems scorned customers can cause:

• Lost Business - 32% of consumers stop doing business with a brand they love after only one bad experience, and 47% of consumers will abandon a brand if it repeatedly provides “poor, impersonal or frustrating” customer experiences.
• Bad Reviews - 62% of people report trying a brand based on recommendations from an influencer, 88% read an online review that influenced their buying decision, and 76% regularly use online reviews to determine which business to use.

The Good News - Any Monster Can Be Slayed

Our upset customers and their complaints can often benefit us by helping us discover different points of view, valuable feedback, reassess our current practices and beliefs, and help us make our products and services better.

So, don’t worry. All is not lost. Every angry customer represents an opportunity to win them back – 80% of switchers feel the company could have done something to retain them.

It really boils down to the way customers perceive they are being treated, how quickly a complaint is handled, and the way in which it is taken care of. 70% of buying experiences are based on the way the customer feels they are being treated, and 80% of unhappy customers will come back if you've treated them fairly (this stat rises to more than 90% if you respond immediately to their complaint).

It’s also a good idea to make sure you’re continually providing value added benefits to committed customers throughout their relationship with your brand. What’s not cool is only offering something of real value after they’ve made a complaint to put out the fire. Make sure your customer service and experience strategies are preventative instead of just reactive.

In short, don’t ignore unhappy customers. The best discount programs acknowledge customer feedback, make them feel heard, and if possible, do something to rectify it. For more details, read our article: How to Turn Online Haters into Loyal Customers.