THE CLARUS Blog

Transactional vs. Experiential Benefits Is the Wrong Question

The customer loyalty formula should always contain this goal: Create an emotional tie to your brand.

We want to increase CLV (Customer Lifetime Value), improve brand awareness, and grow revenue for the brand. But these metrics track what happened versus why they happened. You can influence these metrics without creating an emotional connection, but that’s the short game. True loyalty is in the long game.

Every interaction your brand has with a customer is an opportunity to create a memorable loyalty moment. A moment that matters–at the time and that leaves the customer with a positive memory of the encounter.

Theoretically, loyalty programs are supposed to help with this, but too many of them feel the same. Same currency. Same structure. Same funding rate. Same benefits. Plus, the majority seem more focused on collecting information instead of providing meaningful value to customers.

Brands offer transactional and experiential benefits. Should you focus on one type of loyalty benefit over the other?

 

When People Think of Loyalty Programs, One Word Comes to Mind: Points

Points are the easy solution, but many times they use complex systems that take too long to show value and fail to create differentiation from other brands. On top of that, they often earn the reputation of margin killers in many companies.

As a result, you’re seeing some more negativity in the industry toward transactional benefits.

That’s the wrong way to look at things though. Transactional benefits don’t need to be about just points.

Points are a proven way of measuring progress or status, but consumers now want instant benefits. The world is getting faster and loyalty programs need to respond to this mega trend.

Instant discounts, free shipping, free upgrades, and member-only deals are the types of benefits that let your customers experience value every single time they shop.

Points still hold value, but the more you can do to create experiences where your customers receive tangible benefits quicker, the better. Memorable experiences hold the key to unlocking sustainable emotional connections.

Transactional benefits are usually the first loyalty moment that your customers will experience and serve as a vital hook in retaining them as members. The goal isn’t just enrolling people. It’s getting them to become engaged and active members.

Don’t discount the value of transactional benefits. Consumers love to feel that they got a deal.

 

Adding Depth to Your Loyalty Program

While transactional benefits are the ones consumers usually engage with the most, it’s the experiential benefits that build deeper emotional connections and create long-term impact.

These are also the benefits that create differentiation.

This is where your brand can get ahead of the competition.

It’s harder to create truly unique transactional benefits, but that’s not the case with experiential benefits. What your customers value from you is different than what other brands can provide. Unique brand experiences spark heightened customer engagement and build advocacy that permeates throughout a customer’s network.

Experiential benefits need to revolve around your specific customers and offer a better experience for them. These benefits also need to reinforce your brand promise and create deeper emotional connections.

Essentially, experiential marketing aligns tactics, touch points, and engagements. Where material rewards incent and reinforce desired behaviors, experiential benefits engage channel partners, customers, and end users.

Experiential benefits should be thoroughly researched, keenly executed, and constantly evolved. When this happens, you will achieve great success.

 

Successful Loyalty Programs Combine the Two and Create Differentiation

Prime is the most successful loyalty program of all time and a source of great pride for Amazon. Prime started with free shipping, but now offers benefits that transcend shopping. Amazon is, of course, an outlier, but its Prime exclusive items and free two-day shipping are transactional benefits that its customers can experience every time they shop.

The My Starbucks Rewards loyalty program changed its focus in 2016 when Starbucks officials shifted the model from visit-based to spend-based. Program members can place orders via mobile and they are ready when they arrive.

Restoration Hardware gives program members 25 percent off every purchase, and then adds experiential benefits that make sense to its customers, like complimentary interior design and concierge services.

The increasing popularity of emotional and experiential rewards doesn’t mean that consumers don’t also feel emotional about earning and redeeming transactional benefits. Brands need to find a happy medium to provide both relevant transactional and emotional benefits.

 

Find A Balance Between Transactional and Emotional Benefits

Transactional benefits let your customers feel smart, where experiential benefits let them feel special. Both have an emotional impact.

In the 1950s, marketers used to tell people how they should feel about a brand. Today, that brand promise is the experience. Often, the experience precedes the messaging. A loyalty program that combines experiential and transactional elements gives consumers a greater stake in the brand.

The balance between transactional and emotional benefits helps a brand attract and retain more customers.

Material benefits are certainly important to customers, but they also want to receive special treatment. Since the power has shifted from marketers to consumers, listening to and understanding your customers is the most important thing a brand can do to develop true and lasting loyalty.

In today’s loyalty landscape, if you don’t show your customers that you value them, they will look elsewhere. It’s that simple. Combining transactional benefits and experiential benefits is the best way to engage the most consumers with your brand.

There isn’t a choice anymore. You must do both.

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