You need to diagnose the problem before implementing a loyalty program

A loyalty and incentive company has to behave like a doctor – it has to diagnose the problem before implementing the cure.

One common mistake that companies make is, instead of making a personal diagnosis, they just copy what their competitors are doing.

“Often that company will have spent five or six months planning what the programme will do for their business and your objectives are going to be completely different,” says Dr. David Cox, chief executive of Motivforce Marketing and Incentives, and one of the few professors of loyalty and relationship marketing in the world.

Motivforce identifies the four or five behaviours a company would like to affect and what the “picture of success” is in 12 months’ time, “then we work back from that”, he says.

Loyalty programmes have been around since American Airlines pioneered them in the early-1980s for the consumer and they have been around for even longer in the business-to-business sector. “But they need to keep up with the times. Methods have changed and you can’t be doing the same things,” says Dr. Cox.

Analytics is key to this development. “In good programmes, you should be able to track pretty much everything people do. We have a great reservoir of past behaviours and we use this to pull together models, either conjoint models or structural equation models, to predict future behaviours. It’s all about moulding types of behaviour. We should have a good view of what we think will occur when we change certain things in the programme,” he says.

Social loyalty has allowed companies such as Motivforce to build programmes that are not replicable. “Social media helps form bonds,” Dr. Cox says, “so it becomes more than who offers the most points. These didactic ties are crucial for creating higher switching costs. People start to rate the online learning experience, they get online badges and they become experts in the community.

“It’s like Trip Advisor, once they start blogging they can’t stop. And they do it more because it becomes an inner motivation. The more you can bring people on that journey, the more holistic the experience is.”

“In good programmes, you should be able to track pretty much everything people do”

Motivforce runs the global loyalty programme for IBM and Lenovo, which has a very strong social media element, and a presence in 131 countries and 17 languages. “It’s one of the gold-leaf programmes,” says Dr. Cox, “because it shows that a properly structured programme is beyond regional and cultural variances, and can still achieve the same objectives. Of course, you do need to have people on the ground in certain places and there are cultural differences, but the consistency of the central programme is key.”

Use of behavioural data is useful when investigating the so-called “dark side” of loyalty too. Dr. Cox and his team have been working on Project Pinocchio, which looks at what happens when people get overly loyalty engaged. He says: “There’s a tipping point where they start to cheat because the rewards are larger. They sandbag and cheat on invoices and they start to manipulate.”

Project Pinocchio has analysed written communication and identified a telling vocabulary. “We have realised from social psychology that if people are lying they actually use a certain series of words. We have found, with a 96 per cent degree of accuracy, that we can tell if people are lying,” he says.

This approach works across cultures too as: “Typically people will go into more detail and use more personal words if they are lying, and take a much more clinical approach if they aren’t,” says Dr. Cox.

The tools for drawing people back from the “dark side” are very much the same as those employed elsewhere in customer relationship management. “It’s a theatre,” he says. “You need to walk in their shoes. All you are is an actor on the stage with that customer. Anything like a standard response is absolutely detrimental. Always remember there are people on the sidelines looking in.”

Originally published on www.raconteur.com