What Amtrak Can Teach Retailers About Loyalty

Consumer loyalty: Every retailer wants it; not all of them know how to get it. Regardless of what category of products a merchant sells, there exists a startling similarity among loyalty rewards programs, many of which boil down to some combination of these elements (or similar ones):

Spend this much, get this much back.

Buy this many things, get this other thing free or at a discount.

It’s your birthday; here’s a coupon.

When it comes to turning first-time or few-time consumers into long-term ones, outside of product quality or general shopping experience, competing retailers by and large face a ceiling in terms of how far they can differentiate themselves from one another (provided they have an interest in maintaining a functional profit margin).

On the flip side, there’s an almost certain way that a retailer can, through its loyalty program, alienate the customer: Make it confusing.

Today’s value-aware consumers — the very ones who are likely to be open to a loyalty rewards program in the first place — have a sixth sense for sniffing out when a business is attempting to give them the runaround. Nothing turns a customer off faster than the mere impression of fine print or the first sign of a hoop they’ll have to jump through to get something in return for their repeat business. Even if a retailer had the best of intentions in the design of what turned out to be a convoluted loyalty program, the customer is under no obligation to give it a second chance to win them over; it’s that simple.

Simplicity, in fact, is at the heart of any successful loyalty rewards program — and that’s a truth that extends even beyond the retail space. Recently, a company in the travel industry reworked its own customer loyalty structure following a few basic guidelines that could stand as an example for retailers who are trying to build longstanding relationships with customers…or perhaps even win back some that they’ve lost.

Late last month, Amtrak announced a retooling of its Guest Rewards program, scheduled to be implemented at the start of next year. The overhaul came from a desire for simplification, as Vicky Radke, Senior Director of Amtrak Guest Rewards, explained to Loyalty360: “We recognized that over the years the [Guest Rewards] program had become overly complicated and we really wanted to emphasize an easy-to-participate structure to attract new customers and new members to the program.”

Hand-in-hand with the five major changes in Amtrak’s revamped loyalty rewards program are five lessons than any retailer could follow in building (or improving) its own.

The change: No blackout dates or time-of-day restrictions on rewards redemption.

The lesson: Empower the consumer.

There’s no loyalty without trust, and there’s no trust that comes with strings attached. For a retailer to build restrictive caveats into its loyalty rewards program is to make the customer feel that he or she doesn’t have complete control over his or her purchasing decisions.

A consumer who is granted that control by a loyalty program, on the other hand, is far more motivated to engage in a longstanding relationship with the retailer in question.

The change: Bonus points for Acela First class (50 percent increase) and Business class (25 percent increase) travel.

The lesson: Treat customers as individuals.

Central to any loyalty rewards program is the notion that the retailer is telling the consumer, “We know you; we recognize you as an individual.” That appeal is sharply undermined if loyal customers are rewarded equally across the board based entirely on the dollar value that they spend over a certain time period. In that case, the retailer is essentially telling the customer: “You are a line item with a face, maybe — or maybe no face; makes no difference to us.”

What a customer is spending his or her money on should matter to a retailer as much — if not more than — how much money he or she is spending in total. If a customer tends to purchase the top-shelf items in a retailer’s offerings, the retailer would be well-served to take notice and reward that customer on an equivalent level, rather than taking a one-size-fits-all approach.

The change: Redemption structure based on price instead of zones or routes.

The lesson: Incentivize, don’t obfuscate.

In the travel industry, the shell game of airlines making it as difficult as possible for customers to redeem their points or miles is arguably the poster child for What’s Wrong With Rewards Programs. Clearly, Amtrak — albeit a ground-based commercial transportation business — took notice of this unfavorable association and sought to distance itself from it.

A baseline measurement that a retailer ought to take when putting together its loyalty rewards program (or assessing its existing one) is of “goals” vs. “obstacles.” In other words, does the program lead the customer on a clear path to incentives through his or her relationship with the business, or does it push the customer around one corner after another in order for him or her to earn rewards? The former scenario is good business; the latter is a waste of everybody’s time — and is likely to compel consumers to jump ship.

The change: Points never expire as long as the customer earns or redeems them within 36 months.

The lesson: Give the customer his or her space.

“If you love something, set it free. If it comes back, it is yours. If it doesn’t, it never was.”

Though commonly associated with romantic entanglements, that adage can be just as easily applied to the retailer-consumer relationship.

The more narrow the timeframe that a retailer places on a consumer’s opportunity to redeem his or her loyalty rewards, the more disingenuous the entire operation may appear to the consumer. Pressure is a real turnoff. If a retailer’s loyalty program is designed to give the customer breathing room, it can lead to a more fulfilling relationship for both parties.

The change: Cash-plus-points option.

The lesson: Loyalty equals money.

The fifth and final major change that Amtrak implemented in its Guest Rewards program provides a very straightforward example for retailers: At the end of the day, a consumer’s loyalty is built on money spent. If he or she wishes to redeem whatever a retailer’s points currency may be, but doesn’t quite have enough accrued to receive the desired reward, there’s little sense in the retailer being nitpicky about it.

For a retailer to allow a customer to cast aside the superficial elements of a loyalty rewards program and make up whatever difference exists with cold, hard cash (or any type of capital-backed transaction) is to show him or her respect — and that’s something that can go the distance toward building, and maintaining, loyalty for the long haul.