Members only

When it comes to customer loyalty, most brands have a very transactional mindset: whether it’s through cashback loyalty programs or discounts, the default approach is to buy your way out of the problem. That shouldn’t come as a surprise in an industry where paid social was—for a very, very long time—the one and only channel for customer acquisition.

Unfortunately, short-term incentives are only good at driving short-term behavior (who would have thought?): loyalty acquired this way is ephemeral and—in most cases—unsustainable. When you give away free money in exchange for “loyalty”, you erode not just your margins, but your ability to navigate the brand-consumer relationship. Do it enough times, and you’ll wake up one day with no leverage left over your brand positioning—the same leverage which likely led you, among other things, to go direct-to-consumer in the first place.*

So, if money’s not the answer, what is?

The answer lies in membership. And when we say “membership,” we mean belonging to a group and participating in said group’s network behaviors for reasons that go beyond mere financial utility. It can be about identity, or it can be about convenience: for the former, look at Patagonia; for the latter, look at Amazon. Apple is one of those rare unicorns doing both.

Patagonia, Amazon, and Apple are extreme examples, but that doesn’t mean true loyalty is inaccessible to smaller brands—just look at the brands mentioned in today’s outsights if you don’t believe that. More and more, founders are building their brands around communities rather than products, doing their best to capture every last drop of genuine enthusiasm and customer necessity, and getting impressive results.

So, the next time you’re thinking about loyalty, resist the urge to reach for a quick solution and think about what your customers really need from you: is it free money, or is it connection? And if it is connection, do you think that 10% coupon will make a difference?

If you look deep enough, the answer might surprise you.

(*) This isn’t to say that all discounting is bad. Please don’t quote us saying that all discounting is bad.