Open your wallet.

How many cards do you see? Aside from your driver’s license and credit cards, there are likely several membership cards to loyalty programs for everything from gas stations to coffee shops to big box retailers.

Let’s face it. Some are used frequently, while others haven’t been touched since they were opened for the initial discount.

In this paper, we’ll explore what makes the most successful loyalty programs so popular with consumers.

Currently, Americans hold more than 3 billion loyalty program memberships. So simply offering a loyalty program will no longer help a company stand out from the competition.

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Currently, Americans hold more than 3 billion loyalty program memberships.

A successful loyalty program provides companies with increased revenue and valuable consumer data, but to instill true loyalty it must also provide real benefits that consumers will never forget.

Consumers want to experience personalized service that makes them feel valued and special. They want to feel truly rewarded for their loyalty with the gifts, perks and services they’re excited about. They want unique experiences they can’t find elsewhere, not just a discount on a future purchase. And, they want to feel like participating in these programs provides them with tangible benefits, not just an avenue for companies to make more money.

We will explore industries that have found great success through loyalty programs and learn from their examples. The professional sports industry lags in this area, and as a result traditional loyalty programs in this space are focused on the wrong areas, ultimately leaving money on the table and leaving fans wanting more.  The sports industry could benefit greatly from implementing or improving the kind of quality loyalty programs that have worked so well in travel, hospitality, specialty retail and many other sectors.

Fierce Competition

Today’s consumer has access to more options for entertainment than ever before.

With an unprecedented number of games, movies, streaming services, sports and social media available, it’s no surprise that gaining people’s attention and loyalty is also more difficult than ever.

This is especially true in the world of professional sports.

It’s more than just screens competing for sports fans’ time, attention and resources. Trendy leisure activities, such as upscale golf and bowling venues, may also be good alternatives for sports fans who want to participate in a game themselves.

Fans don’t have to attend a game to be part of the action. High definition TVs, live streams and social media make watching games at home not only economical, but enjoyable. Display technology has advanced to the point that television picture is so crisp and realistic it offers viewers a vantage point that’s equal—and in some cases better—than what they could see in person.

Of course, the experience of live sports simply can’t be replicated anywhere else. The energy of thousands of other fans cheering around you, the cheerleaders pumping up the crowd at halftime, and the thrill of being so close to your favorite athletes, just to name a few. There’s something magical about watching a game live and in person.

So how do sports venues and teams ensure that their fans are buying tickets instead of staying home or spending their dollars elsewhere?

The answer: loyalty programs paired with incredible fan experience.

So how do sports venues and teams ensure that their fans are buying tickets instead of staying home or spending their dollars elsewhere? The answer: loyalty programs paired with incredible fan experience.

Sports teams need fans just as much as the fans need their favorite teams. The best way to communicate this appreciation is by rewarding fans who consistently come out to support their teams. Loyalty programs are more important now for professional sports teams and venues than ever before.

However, while there are many platforms in this space for customer engagement, there is a void when it comes to programs that reward fans for their loyalty by giving them the kind of experiences, merchandise and upgrades they truly want.

Missed Opportunities

In the current market, customer engagement and loyalty programs are set up to provide more benefits to teams and venues than to consumers.

Ideally, these programs should be advantageous for both parties: increasing revenue and providing actionable consumer data for the teams, while making fans feel appreciated and giving them rewards they value.

Most of the existing loyalty programs operate on a really confusing point system. Customers accrue points when they purchase tickets, merchandise or concessions; arrive early or stay late at a game; interact with social media; swipe their loyalty cards at third-party retailers; or a host of other activities – the vast majority of which have little connection with the most loyal fan activity of all, renewal of season tickets and increased attendance. Depending upon the program, those points can later be redeemed for things like discounts and merchandise.

Most of the existing loyalty programs operate on a really confusing point system.

While this may sound like an effective system, the correlation between points earned and rewards delivered is often convoluted.

The huge problem with many existing platforms is that points can’t always be redeemed directly for a reward. Instead, fans can use their points for the chance to have a unique experience or interaction with the team, not a guarantee.

As an example, a team in the NFL offers weekly competitions fans can enter at a cost of 100 points. A winner is then selected to participate in a unique experience, such as attending a team practice.

The problem with this format is that the points fans earn may never translate into an actual reward if they aren’t lucky enough to be selected in the lottery. Over time, if fans see a lack of direct benefit, they will be less inclined to participate in the program. Less participation means less money spent at games and less valuable data about consumer behaviors provided to teams and venues.

Less participation means less money spent at games and less valuable data about consumer behaviors provided to teams and venues.

Other programs have extremely high thresholds for redeeming rewards.

A current NHL team’s loyalty platform features prizes that require an inordinately large number of points. For example, a hockey sweater (jersey) is offered to fans for 40,000 points—a number that likely seems unattainable to many.

Accruing this many points may only be possible for a super fan, while that five-digit number probably discourages more casual fans who may feel that they’ll never achieve enough points to earn cool prizes.

Take for example a man in his late 50s. He may be a 20-year season ticket holder with 50-yardline seats, but does not have any social media accounts. He shouldn’t be penalized or excluded from the program because he doesn’t have an online presence. Other fans may simply be more selective about what they post on their personal accounts. So many businesses push people to promote them on social media that those consumers may opt out of such promotions altogether to maintain the integrity of their individual brands.

Finally, many existing programs provide their fans with discounts on merchandise or food in exchange for points. But if customers still have to use their own money to make a purchase in order to benefit from the points they’ve accumulated, it won’t feel as though they are truly being rewarded.

Ultimately, all of these defeat the purpose of loyalty programs. They incentivize behavior like arriving early, which benefits concessions, or has little quantifiable return on investment, such as liking a social post. If you want to reward your most loyal fans, you really need to reward the behavior that matters most – buying season tickets.

If you want to reward your most loyal fans, you really need to reward the behavior that matters most – buying season tickets.

Loyal fans want to feel special and prioritized. And they don’t want to have to do all the work of posting on social media, swiping cards when they make purchases, entering contests, and keeping track of promotions and auctions. Fans find the most value when they are able to have unique experiences that they can’t access elsewhere.

What Makes a Successful Loyalty Program?

Professional sports teams lag behind many other industries when it comes to sustaining successful customer loyalty programs. These franchises are leaving money on the table by neglecting to court their fan base with more personalized service, unique experiences and rewards.

Loyalty programs are proven to increase spending and change behavior. And in the sports world, that could convert casual fans into season ticket holders and push current season ticket holders into renewing their ticket packages.

Numbers show that loyalty programs deepen consumers’ relationships with brands.

According to the 2016 Bond Loyalty Report, a whopping 81 percent reported that loyalty programs made them more likely to continue doing business with brands. What’s more, 75 percent said that loyalty programs are part of their relationship with brands, while 73 percent said they are more likely to recommend brands that offer good loyalty programs.

81

PERCENT

of consusmers say loyalty programs made them more likely to continue doing business with brands

75

PERCENT

of consumers say loyalty programs are part of their relationship with brands

73

PERCENT

of consumers say they are more likely to recommend brands that offer good loyalty programs

Loyalty programs clearly work—but it’s important to assess what makes the most successful programs rise above the competition.

The original—and still among the most popular— modern loyalty programs belong to commercial airlines.

Following the deregulation of the airline industry in 1978, American Airlines needed a way to compete with larger airlines and improve its lagging market share.

Through market research, executives found that customers valued travel more than almost any other prize or reward. And so the idea for a frequent flier program—in which customers would earn miles for future trips by flying with American Airlines—was born. In 1981, American introduced AAdvantage, the first airline loyalty program.

American Airlines managed customers’ miles through their booking records. So with no coupons, stickers or cards to keep track of, it was easy for customers to earn and redeem their miles.

Other airlines quickly followed suit, and today, nearly every major airline has a robust loyalty program.

There are many valuable lessons to learn from the airline industry model. By making it easy to participate, easy to understand, and offering the reward customers value most, they have an incentive to fly with the same airline each time they travel.

By making it easy to participate, easy to understand, and offering the reward customers value most, they have an incentive to fly with the same airline each time they travel.

More recently, airlines have also found great success keeping customers engaged in loyalty programs through a multi-tiered approach. The most frequent and lucrative customers are awarded with increasingly desirable perks, services and rewards.

Take Delta Airlines’ Skymiles, which offers Medallion status at four levels: Silver, Gold, Platinum and Diamond.

Each tier is achieved through a combination of miles flown and dollars spent with the airline. All four Medallion statuses provide the consumer with benefits such as priority boarding and free checked bags. But each successive tier provides the customer with more benefits.

For example, all Medallion members earn additional Skymiles for every dollar they spend on tickets.

But while Silver Medallion members—those who spend at least $3,000 annually— earn two additional miles per dollar spent, Diamond Medallion members—who spend $15,000 or more— earn six additional miles per dollar.

Diamond status also entitles customers to the most exclusive perks, such as complimentary access to Delta’s Sky Club, which provides food, cocktails and Wi-Fi. A single pass for the Sky Club would otherwise cost $59.

It’s clear from this example that there are incentives for customers to get to that next level: Those who spend the most are also rewarded the most with the free tickets and exclusive access they value most.

Consumers are motivated to change their behavior and fly exclusively with their preferred airline in order to reach the next level within the program and earn better perks and rewards. Some find these programs so beneficial they will even go so far as to make unnecessary flights—deemed “mileage runs”—in order to maintain their status with an airline.

There is now an entire cottage industry of bloggers, conferences and forums devoted to finding the best ways to collect miles and chase elite status within airline loyalty programs. People will go to great lengths to achieve the next status tier or maintain it because it creates a fun challenge when there are better perks at each level.

Loyalty programs may sound expensive to operate, but they don’t have to come at a loss for companies. In fact, they can often be quite profitable.

When United Airlines filed for bankruptcy in 2002, the company reported that its loyalty program was the only part of its business that was making money. According to the Economist, charging partners for each mile earned on credit cards brings in an estimated annual revenue of more than $10 billion for the industry. Airlines get this revenue upfront, while customers don’t redeem the miles until a later date, and possibly not at all.

Loyalty programs are prolific. The COLLOQUY 2015 Loyalty Census reports that U.S. consumers hold 3.3 billion loyalty program memberships. With so many memberships, it’s likely that consumers are participating in multiple programs within the same industry. So how do you rise above the competition to ensure true loyalty from customers?

Offer personalized service and unique experiences they can’t find anywhere else.

Starwood Resorts, which owns 11 hotel chains including Sheraton, Westin and St. Regis, introduced the ambassador program to court the most elite business travelers: Those who spend 100 nights per calendar year in a Starwood hotel.

In 2012 Bloomberg reported that Starwood’s top 2 percent of travelers are responsible for 30 percent of profits. One elite traveler can yield as much revenue for the company as 50 ordinary guests.

Starwood’s top 2 percent of travelers are responsible for 30 percent of profits.

To win the loyalty of these lucrative customers, Starwood created a program to stand out from other hotel brands: an ambassador, available 24 hours a day, to personalize their stay. These ambassadors get to know the customers and provide special services such as having a glass of their favorite wine waiting for them when they check in or making dinner reservations for them while they are in town.

The ambassador program goes above and beyond other programs by offering ultra luxury and personalized service to woo elite travelers into choosing Starwood. This points back to what customers want: unique experiences and personalized service.

According to Bond, the percentage of members satisfied with a loyalty program is 2.7 times higher among members whose program representatives make them feel special and recognized.

This is also an illustration of the current state of loyalty programs: Simply offering a loyalty program for customers to accrue points over time will no longer cut it in today’s busy market.

COLLOQUY reports that the average American has 29 memberships, but is active in only 12.

29

OPEN MEMBERSHIPS 

12

ACTIVE MEMBERSHIPS

Clearly, keeping customers engaged is important. But you don’t have to offer exclusive wine tastings or an on-call assistant to win the same kind of loyalty. What matters isn’t the monetary value of the rewards, but the perception that the customer is gaining an exclusive reward for their participation in the loyalty program.

Statistics show that specialty stores are doing loyalty programs particularly well. According to COLLOQUY, there are 434 million specialty store loyalty memberships, second only to credit card reward programs and exceeding airline frequent flyer memberships for the first time.

Beauty retailer Sephora is a great example.

Sephora invites its top spenders to exclusive events where they receive makeup tutorials, discounts and free samples of the latest beauty products.

Samples are a reward that the company can provide at a very low cost. However, they give customers access to products they want that aren’t yet widely available, an exclusive arrangement that allows them to feel special.

Providing these samples to their most valuable customers has another benefit for Sephora. These frequent shoppers are often influencers who are more likely to tell their social media networks about the latest products, providing grassroots publicity for the retailer.

With this small investment of free samples and in-store events, Sephora is able to make customers feel special and give them rewards they value.

The monetary value of the rewards is not important. Each airline mile can cost less than a penny; the cost of product samples is negligible. What matters is that rewards make customers feel good about their brand investment and make them feel important.

Valuable Rewards For Valuable Fans

Professional sports teams and venues have so much potential to create successful loyalty programs.

Fans already have an emotional connection to their favorite teams and athletes. Fans will become even more loyal if they are rewarded with benefits when they take the most loyal step they can—buying season tickets.

An effective sports loyalty program will reward the behavior that matters most, structure the rewards in a simple manner, and deliver the perks that elevate the fans’ live game-watching experience. For example, upgraded seats would allow fans to see the game like never before. Attending a pregame warm up or behind-the-scenes tour would provide them with unprecedented access to the athletes they love.

An effective sports loyalty program will reward the behavior that matters most, structure the rewards in a simple manner, and deliver the perks that elevate the fans’ live game-watching experience.

Special experiences like these could be the tipping point that turns a casual fan into a season ticket holder or convinces an at-risk season ticket holder that it’s worth it to renew.

The important message to anyone considering implementing a fan loyalty program is that it must provide the maximum benefit to both the consumer and the business, while remaining simple for everyone.

Traditional loyalty programs are no longer enough. Today’s fans want to feel special and prioritized. They want unique rewards and experiences, not just an occasional discount. And they want be part of a program that makes it easy to earn and redeem their benefits.

At the end of the day, fans should know how important they are. After all, without them showing up, standing up, and cheering at the top of their lungs, the game wouldn’t be the same.