In October, we had a fantastic hour-long call with Shep Hyken, leading thinker in the worlds of customer service & experience, to talk all things loyalty. Shep’s articles on loyalty are world-renowned, and he’s fostered a conscientious community around his words of wisdom, across his highly-successful career.

We were curious & excited, to say the least.

Hi Shep, thank you for taking the time to speak to us! First things first, right off the bat, how did you get into your line of business? What was your inspiration?

It all started when I was 12 years old, and I did magic shows at birthday parties. I came home from the first party that I’d performed at, and my mom asked, “what are you going to do after dinner?”

Of course, the correct answer was homework! Actually, the answer was to write a thank you note – my first lesson in customer service: show appreciation to your customers.

My Dad agreed that it was a great idea and suggested that about a week from now after they’d received my note, I should call the parents up and thank them again, and then ask them for their thoughts on the show. Another lesson!

So, at the age of 12, I didn’t know it was called customer service, I was learning. From then on, there were many other little nuggets of knowledge that taught me to do the right thing. As simple as showing up early, so the parents aren’t worried, dressing appropriately for first impressions. Little things like that.

I had regular jobs through high school and college as well. I graduated college, and within a year I was trying to figure out what I was going to do. I saw a couple of amazing motivational speakers and knew that I could entertain people in an informative way. But I also went to college and had regular jobs, so there was some business background that mixed in.

In a very short time, I was talking exclusively about the concept of customer service. Ultimately, since I started back in 1983, I’ve been in customer service, which has led to customer experience as it ties into that.

You obviously have a lot of knowledge of the customer service and experience worlds, but you also write about loyalty. How do you feel these worlds connect?

To do this effectively, you need to understand how we define loyalty.

Usually, it’s “how do we get the customer to come back to us?” First up, you can’t have a loyal customer without a good customer experience, that’s a given. If I give you terrible, terrible service, the likelihood of you coming back is very, very small.

But does loyalty mean that brands can get 100% of the market share? As in, when I want a soft drink, I only have Coca-Cola and nothing else? Or a restaurant – it might be my favorite, but does that mean that every time I’m hungry that I go to that restaurant? No. I think a restauranteur would define loyalty as someone who comes back on a regular basis – maybe once a month or in some cases once a week.

So, we need to think about how, in the industry, there are different levels of loyalty. So many of my brands hone in on ‘long-term loyalty,’ but I think that’s a mistake. I get them to focus on short-term loyalty. How short-term? The next time. That’s it.

Customer loyalty isn’t about a lifetime; it’s about the next time. Every time.

How has loyalty changed over the course of your career?

It’s like a loyalty war. The original concept of a loyalty program was about giving some perks to people that come back again and again. Then brands started to jump on the bandwagon. The problem is that competitors then started to think about their own programs that would be better, and so on.

Let’s say you stay at a hotel, regardless of the perks program that they have. One day, a smart person thought about going the extra step – a chocolate on the nightstand or pillow before bed. A great idea! It wasn’t long before other hotels thought about doing it. And then newspapers then started to be dropped off at doorsteps, rather than in the front lobby! Again, other hotels then started doing it shortly after.

I call it the amenity war, which you can also say about loyalty. Which perks can we offer to get that next purchase?

We hear a lot about ‘true customer loyalty,’ these days, with the likes of Apple, etc. – Is true loyalty harder to attain now?

I don’t think so.

Apple created a renegade product; they earned loyalty from people who want to be different. They’ve stuck with that very well even if it is changing now. If you’re a company that recognizes that they have a path, you’re not going to be all things for all people; this just needs to be accepted.

Perfume companies that won’t do animal testing are similar. They’re going to get a community and know that if they stick to what they’re doing, while offering great service, it’s going to help build a community.

Amazon, on the other hand, is so focused on the customer – but they take massive money & put it back in for the customer. It’s better, and it shows! Their membership program intrigues me a lot, as once you get someone to pay for a membership, even if you’re not the lowest price, they’re going to go with you.

Amazon validates that the customer made the right choice to go with them because their service is so good.

How do you feel that Amazon Key could affect loyalty?

I wrote about this when they first announced it! Once again, Amazon sees an issue and looks to fix it. Although, Walmart may have been first to this dance!

Once you pay $250, are you going to go and not use that lock? No. And it’s extra smart because the lock is multi-functional – consumers can use it with couriers, relatives, housekeepers!

What’s even better is that we’ve seen that if you try to make things too proprietary, it scares people off. Instead, make your product more available & you still win them over. If Amazon continues to do a great job – which I’m sure they will as they’re going to have bonded parties who are totally insured – they’ll keep this trust.

Just out of interest, what do you consider to be the difference between a rewards program and a loyalty program?

A rewards program is pure marketing, and a loyalty program is more emotional. Loyalty is the question of “am I still going to do business with you?” In today’s world, I believe loyalty has to be combined with the perks that I give.

It’s easy to get someone in a program, but it’s hard to keep them engaged. Why?

How many loyalty rewards cards do people carry around now? I feel like a loyalty program is a tax that a company has to pay – it’s a part of business.

It’s a shame because if for example, you don’t have a punch card and you’re a small restaurant in a food court, you’re going to miss out on that initial interest because you’re not in the game. That’s important and really is a problem in modern competitive business. It means that you absolutely have to differentiate yourself.

Keeping the customer engaged is a question of providing a great experience.

Are there any programs to you that stand out as particularly good?

Nordstrom has a really great program – they give you points based on the purchases you have, and it’s redeemable for merchandise etc., which makes you feel like you’re getting a bit back.

I also have a credit card that if I go to a company and I buy something, I get 2% cash back. I have that for me, no matter what. When you deliver a service experience that’s good enough to make me want to come back, the tactics do work.

But when you deliver a service experience that doesn’t rely on the cards, I think you’re nailing it.

A key point: when you do a great loyalty program, you collect data.

If you use that data the right way, you can personalize the service, the most important piece of the puzzle, and make your experience even better. That’s not to say that you can create personalization based on each individual, you can create personas that match particular sections of your customer base – even if it’s just 4 or 5 types.

What are the bad habits?

I think the biggest mistake is the interchangeable terminology between rewards programs and loyalty programs.

A big issue for me is when the brand is asking for too much information – that’s not a good sign to me.

Lastly, programs that require me to keep on changing my passwords! There are unifying tools out there that can really help.

We’ve been seeing lots of millennial commentary recently – what do you think of the generational gap in loyalty?

Honestly, I think it’s overplayed but still important. We know that millennials have a certain personality – and I don’t want to make it sound like I’m stereotyping! We can start to look at generational differences and patterns, there will be differences, but you do still have to target your tactics to your market. So, there’s value, especially with deeper segmentation.

Where are programs going next?

We’re in a commodity war and to differentiate yourself from one company to the next; you need to display value. If you decide to compete on commoditization, it’s dangerous, because anyone can copy your program.

So, in my opinion, programs should be incorporating knowledge and data to improve your overall brand and total customer experience, and that’s a fact based on all of the statistics that I’ve taken in. Customers will come back for that.

To sum up?

The best rewards program will fail if the rest of the customer experience is not in line with the customer’s expectations.