Like millions of Americans, I love Chinese takeout. Mu Shu vegetables with tofu, wrapped in warm pancakes. Crab Rangoon and Egg Drop Soup on a cold night, I could drool over a takeout menu for hours. No matter what I order, my meal always comes with a fortune cookie. Wrapped in plastic, sweet and crackly, it's always exciting to open the cookie. You never know what the paper will say inside. If you’re really lucky you might even get two fortunes in one cookie!
Americans aren't the only ones who love fortune cookies. 3 billion fortune cookies are made each year. Why do we see fortune cookies around the world? They help maintain customer loyalty.
Why do loyalty programs work? Habits
Loyalty programs are marketing efforts that reward, and encourage loyal and repeat buying behavior. Great loyalty programs encourage customers to purchase more from the business.
Whether it's free will or nature, humans are creatures of habit. 54% of Americans, for instance, drink coffee every day (otherwise known as don’t-talk-to-me-until-I’ve-had-a-mug-of-black-coffee). 22% of teenagers log on to Facebook over 10 times a day. Habits are comforting, and also don't require intensive critical thinking. Creating a habit isn't just the routine action. Great loyalty marketing triggers two of the important aspects of habits: cues and rewards.
1) Cues: Triggering the habit
Cues are like the gunshot at the beginning of a race. They may not be as violent as a gunshot, but they cue the start of a habit. Longer than internet, phones, or even snail mail, humanity has lots of cues for habits. Hunger cues us it's time to eat. Dry eyes can cue us to rest (or drink another shot of espresso).
In marketing, triggers can be done in various ways. Virgin Atlantic Flying Club, for instance, uses consistent emails as triggers. They email you after flights are booked, and after the flight is over, Virgin will email to ask about your flight experience. Haven’t travelled in a while? Virgin Atlantic will reach out about the status of your frequent flyer miles. Suddenly you’re thinking about taking a trip, and how another 50 points will get you an upgrade or a free round trip ticket for the summer. Consistent email follow up keeps Virgin Atlantic's brand on your mind, and tempted to buy more from them.
These emails also hold cues for further purchasing opportunities such as more flights, or renting hotel rooms. These emails keep you aware of Virgin Atlantic, and increase your value with every purchase.
So how do people resist this amazing hand holding? Disengagement.
In the video below, they did a study on willpower with four year olds. They placed marshmallows in front of four year olds. If the kid resisted the marshmallow for ten minutes, then they got two marshmallows at the end. Seems logical to resist, right? The only kid who resisted the marshmallow in the video refused to look at it after five minutes. He disengaged to resist temptation (skip to 13:30 to hear all about it).
While Virgin Atlantic has a larger budget, Chinese restaurants engage customers with far less. With each purchase, many restaurants give takeaway and delivery menus.
Seems like a nice gesture, right? Let’s say you got Chinese two weeks ago, and kept the menu in your house. Today, you come home looking for food, too tired to cook. Then, you see the Chinese menu at home, it reminds you that you could have warm salty Chinese food delivered to your door. No cooking, no cleaning, just tasty food.
Now instead of peanut butter and jelly, you’re on the phone ordering General Tso’s chicken and an order of egg rolls. That cheap yet distinguishable menu just made you a repeat customer.
Ever taken care of a two year old? Then you know that punishment for behavior has to happen immediately. Miss that time frame, and the kid won’t know why he’s sitting in time out.
As adults our attention span is longer but we understand reward and punishment in the present. Great loyalty programs use this to their benefit. Fortune cookies come with your meal, instantly available with purchase (dessert before dinner anyone?) Some businesses, like Starbucks, have a point show up in your mobile app immediately after purchase. Watch your phone light up and enjoy the illusion of an instant reward.
Rewards associate pleasure with the habit. The purchase reward tricks the brain into a buying habit with something the brain already enjoys (Free stuff! Money! Cutting in Line!) Lots of people love coffee, but do you hate Starbucks prices? If you’re hesitant (for good reason, my tall soy lattes cost nearly $4), the reward program incentivizes you with freebies (free drinks every so often, free songs and suddenly $12 a week habit doesn’t sound so bad).
In the end, rewards encourage you to purchase more, and increase your benefit to the company.
Similarities in loyalty program rewards
The rewards aren't always the same, but great rewards surprise and delight. (xkcd)
Fortune cookies are a classic piece of loyalty rewards. Small prizes have been a part of loyalty rewards for over a century. W.D. & H.O. Wills began by incorporating trivia and pictures on cards in cigarette packs. Cracker Jack made this famous with prizes in every box since 1912. Companies may sell different things, but their prizes share some interesting similarities:
a) Reward comes with purchase
The consumer has to buy the main product to get the reward. While it feels like a freebie, rewards aren't product samples. The buyer knows the main product, and is already purchasing it. The reward is an add-on for another purchase.
For a long time, fortune cookies were only available to most people at restaurants. You had to purchase a meal to get the cookie. Today, you can buy mass boxes of fortune cookies online. Still, most people continue to go to Chinese restaurants and having them there, rather than buy them directly. The fortune cookie is an ingrained reward that most people don't seek it out. It’s part of the Chinese takeout experience.
b) The reward is a surprise
The consumer may choose the items they buy, but often they have no control on the reward that comes with it. The fortune is hidden inside the cookie. The lithograph can't be seen before purchase. Happy Meals at McDonalds provide one of a variety of toys. Every reward has a mystery component. While the consumer buys something familiar, that mystery adds a level of excitement.
In 2014, companies with point systems may be explicit in the reward. Nevertheless, they add surprise in other ways. While Starbucks has a point system, they surprise their consumers each week with a free song or free app download. On top of their reward program, customers are encouraged to make Starbucks at least a weekly habit to discover what new surprises await.
c) The reward is a low cost add on
Rewards are about growing the bottom line, not diminishing it. Fortune cookies today cost about $ 0.08 per cookie. For two people, dinner at a Chinese restaurant can cost around $20-$25. Two fortune cookies would cost the restaurant $0.16, not even 1% of the meal price. Happy meal toys, for instance, cost about $0.43 per meal. Rewarding and delighting customers doesn't have to be expensive to a business bottom line.
Not all loyalty programs have each of these factors. But creating rewards that delight your customers is crucial to making any program work.
3 great loyalty program examples beyond fortune cookies
Chinese restaurants aren’t the only ones in the loyalty business. Below are 3 great examples of successful loyalty programs:
1. Walgreens balance rewards
Walgreens reward system goes beyond just incentivizing shopping at their locations. As a brand focused on healthy living, customers can also earn points for immunizations, filling prescriptions, and healthy activities like walking or running. When enough points are earned, customers earn in-store gift cards.
In their loyalty program Walgreens is placing their brand as customer centric, focusing on health and wellbeing of their consumers.
2. American Express partners for success
Strategic partnerships allow companies to share the cost of a reward and delight customers in new ways. American Express does this with companies across the United States. BP, Crate and Barrel, Hampton Hotels are just some of their various partners. American Express found a way to partner with great companies and delight a wide range of customers.
How? By using an ongoing Twitter sync campaign. Customers sync their American Express card to their twitter handle.
Different partner companies offer deals with hashtags, such as $5 off a Petco purchase. American Express card holders tweet the specific hashtag deals they want. Then American Express confirms within 15 minutes.
American Express's program raises the company's profile on twitter, delight's customers, and benefits partners. The deals are always changing, keeping customers surprised and excited about the program. American Express wins on a variety of fronts. People will use their American Express cards more frequently, associate the brand as fun and exciting. As of 2012, American Express customers have redeemed over $2 million dollars in rewards alone. All of these great rewards came from their partners, not American Express. The partners see an increase in purchase sales, and ability to grow a more loyal and larger customer base. When customers, partners and your business wins that’s great loyalty marketing.
3. Small business grabs attention with creative rewards
FoBoGro is a DC area convenience store. Instead of a 10% discount, they went totally creative. Their rewards include:
- Fist bump
- 30 seconds to grab as many items in the store (one man grabbed 24 packs of beer)
- A date with one of the store's founders
- Inventing a sandwich to be on the menu for one week
The crazy rewards are FoBoGro’s but they had Belly create a more unique loyalty program. Customers check in on a tablet at the store. Once they've checked in, the customer sees how many points and what reward they get. Multiple platforms like Belly allow small businesses to be more creative in their loyalty programs.
Small businesses like FoBoGro don't have the resources to compete with large loyalty programs that Walgreens or American Express might have. Fortune cookies and FoBoGro’s system show, though, that rewards don't have to be expensive luxuries. They simply have to surprise and delight customers. They appeal to our feelings and that’s a compelling pull.
Businesses always have to think about finding new customers and expanding their base. But the secret of rewards is that they encourage customers to return again and again. Delighting and thanking them for their loyalty can keep them coming back, increasing their lifetime value. At 3 billion fortune cookies this year alone, there's definitely a benefit in rewarding your loyal customers.