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Loyalty vs. Promotion: What’s the Difference?

At Merkle, our focus is on helping our clients create holistic customer experience strategies that include promotions and loyalty not as an after-thought or a disconnected initiative, but as a fully integrated solution. The customer experience and all of the cross-channel experiences that influence it, in totality, is more critical than ever.  

Why? Beyond CMO’s, the C-Suite has become much more engaged in the customer strategy, thinking beyond shareholder pressures and quarterly financial reporting. The C-Suite understands that a sustained competitive advantage is found in long-term customer loyalty, paving the way to outsized growth, profitability, and shareholder returns.  This has given rise to what Harvard Business Review refers to as “The New Loyalty Economy,” where a company is valued, in part, by its ability to engender loyalty with its customers.  

Loyalty leaders grow revenues roughly 2.5 times as fast as their industry peers – Harvard Business Review January 2020

Looking at promotions and insights as part of an integrated approach to customer strategy is critical, but it also important to understand the difference between promotions and loyalty, so we can ensure the right mix for our clients. So, let’s jump in and examine the unique properties and use cases, starting with loyalty.

What is Loyalty?

Loyalty is the sum of all experiences that a consumer has with a brand. Beyond the utility that the product or service itself provides, being loyal to a brand represents an emotional connection that is hard to simply manufacture or replace. When we speak to marketers about creating a loyal bond with a consumer or customer, it’s important to understand why the individual engages with the brand in the first place.  How do we meet the individual in a need state, beyond communication and marketing tactics, and add material value to what the individual is trying to achieve? 

A loyalty program is a multi-year, long-term strategy to build a sustained relationship with an individual. Taking a long-term approach, beyond the pressures of quarterly earnings and profit commitments, enables a brand to deepen insights on the consumer base.  By understanding purchasing and engagement habits, we can anticipate consumer needs and drive incrementality. The best way to think about loyalty is a friendship where you want to progressively deepen the relationship through a series of well-orchestrated communications and meaningful experiences. A brand needs to build loyalty by demonstrating it cares, its listening, engaging, and rewarding.

A good example of loyalty is our recent work with Samsung on the launch of Samsung Rewards in 2016. We continue to collaborate with the ongoing evolution of the platform, including expansion throughout the Samsung ecosystem and integration with strategic partners (such as the largest wireless service providers), which increases the overall value of the program to consumers. Overseeing promotional extensions for Samsung Pay, Bixby, Samsung Health, Internet, Samsung Kids, and the Galaxy Store is one way we encourage consumers to engage and earn with Samsung. Check out the full case study here.

Samsung b2c

What is the Best Example of How to What’s Not Loyalty?

While there are many things that loyalty does encompass, loyalty does not include normal business operations of CRM-driven discounting, inventory sell-through, or limited time offers to drive more transactions. While these marketing tactics may be important for some brands, this is not loyalty. 

What is a Promotion?

A promotion represents a way of engaging with consumers, at a specific moment in time, for a specific reason, and is often tied to a seasonal sales cycle. More importantly, promotions are the very best way to initiate permission-based marketing with an individual, initially driving identity acquisition.  Promotions are meant to be fun and engaging experiences that deliver spikes of excitement, allowing customers to escape the day-to-day norm by playing a game or having some fun with a brand they enjoy. Some examples of a promotion would be ”chances to win”, scratch off discounts, contests, etc. As an example, our team worked with Anheuser-Busch InBev to create a unique promotional opportunity with wholesalers to gain more shelf space and drive awareness. The result was a turnkey promotions house where account managers and wholesalers could offer consumers a simple text-to-win sweepstakes. Check out the full case study here.

Michelob Ultra

Do Promotion and Loyalty go together?

Yes! Promotions without a way to engage individuals in a sustained relationship, and loyalty programs without fun and exciting reasons to engage, are missed opportunities with consumers. The very best brand marketers have built enduring loyalty with consumers by designing programs that apply to both promotional and loyalty strategy.

Interested in more on Merkle’s Promotion & Loyalty Solutions? Learn more here.