I often say customers are people first, and people are driven by the same core human needs. Psychology has proven that our decisions are influenced by innate desires to maximize positive emotions, express our identities and achieve our goals. So if your loyalty program can meet these needs, it will get better results.
On a business level, brands that help customers fulfill their needs get customers’ attention, gaining wallet share and sustaining customer loyalty.
In this four-part series, I’ll go through the three types of psychological benefits successful loyalty programs provide: functional, emotional and identity.
Because these benefits foster strong emotional connections between customers and your brand, it’s important to get them right. I’ll provide specific guidance and critical, concrete recommendations on what to do (and what not to so) when launching or relaunching a loyalty program that maximizes psychological impact.
The connection between psychology and brand perception among loyalty program members
Psychology drives how customers perceive value and ease, the two factors which lead to overall loyalty program satisfaction. In our recent study, ITA Group found loyalty programs with high perceived value create more brand advocates. These brand advocates are 6x more likely to visit and spend with a brand than other customers.
In a separate study conducted by CMB, customers were as much as 30x more likely to try a brand if they expected it to deliver strong functional, emotional and identity benefits. That’s a huge number when you’re trying to build up your customer base!
Getting the right mix of psychological benefits in your loyalty program encourages customers to build emotional connections, guaranteeing they become brand advocates. But the right mix will be different depending on your industry. In fact, the right mix will likely vary within your brand’s customer groups.
Finding a partner to help you manage your different audiences and provide the right psychological experiences is critical.
Related: Discover how industry-leading loyalty program software creates positive, personalized experiences.
What are the psychological benefits of loyalty programs?
Since value is so important to overall loyalty program perception, that leads to one key question: How do you create value?
The answer is to put together a compelling set of functional, emotional and identity benefits within your program.
At their core, the three primary psychological benefits can be described as follows.
- Functional benefits: How does the program enrich my life?
- Emotional benefits: How does the program make me feel about the brand?
- Identity benefits: How does the program make me feel about myself?
Related: Learn how value and ease define the best customer loyalty programs.
Functional benefits
Your loyalty program’s functional benefits help customers achieve their goals. For example, a customer might enroll in a retail loyalty program to keep up with the latest trends, so an invite to an exclusive product launch will make them feel supported in their objectives.
Functional benefits include:
- Accomplishing goals
- Delivering on the brand’s promise
- Saving time or providing convenience
- Saving money or offering good overall value
When brands get this right, it’s the fastest way to create positive perceptions of value and ease.
Emotional benefits
A good loyalty program’s emotional benefits maximize the good feelings (and minimize any bad ones) your customers have about the brand. And, because those benefits happen every time they use the program, the good feelings keep adding up.
Opportunities to reinforce emotional benefits include:
- Redeeming awards
- Receiving relevant personalized messages
- Getting custom, relevant offers
- Recovering from any customer relationship stumbles
- Delivering on the front-line experience
By curating positive experiences through the loyalty program, brands create lasting emotional ties between them and their customers. After all, who doesn’t want to do more business with a brand that makes them feel special?
Identity benefits
Identity benefits tap into the human need to be seen and understood. Brands scoring high on identity benefits treat their clients like unique individuals while connecting them to a broader community of like-minded customers.
These benefits work on two levels: personal and social.
- Personal identity: How much does the brand fuel my personal pride through the loyalty program? This might look like a program focuses on delivering experiences that make customers feel smarter, cooler or better about themselves whenever they use the program.
- Social identity: Do I personally identify with the kind of person who likes/uses this brand and the loyalty program? This is reflective of how a program builds a community around it. It makes customers feel there are lots of people like them who frequent the brand.
Identity benefits are compelling because brands that excel at them scored high in our loyalty survey. While customers often downplay the importance of these benefits, they had a clear impact on the top programs in our study.
Harness the power of psychological benefits to create successful loyalty programs
Great programs have the right balance of functional, emotional and identity benefits. When all three benefits are correctly woven into the program strategy, they deliver the high perceived value that loyalty members crave, increasing the likelihood they’ll visit more, spend more and give your brand more market share.
I’d like to give a shout-out to the following people at CMB for their immense contributions to our customer loyalty research: Mark Doherty, Senior Vice President; Amanda McMahan, Insights Director; Hannah Davidsen, Insight Consultant; and Laura Blazej, Senior Director of Data Management.
Ready to elevate your loyalty program experience? Use our research-backed insights to find out what customers really want out of a program.
Note: This article is part one of a four-part series on the psychological benefits of customer loyalty programs. Now that you’ve learned what the three key benefits are, discover more details about each of them.
- Functional benefits (coming soon)
- Emotional benefits (coming soon)
- Identity benefits (coming soon)