The Difference Between Repeat and Loyal Customers

Are your customers loyal to you (your company or brand), or are they loyal to your loyalty program?

Rewards programs work. In our customer service research (sponsored by Amazon Web Services), we asked more than 1,000 consumers, “How important are customer reward programs (points, rewards, coupons, etc.) when it comes to giving a company your repeat business?”

Sixty-seven percent of customers prefer to do business with a company that has a good loyalty or rewards program. Only 7% said it was not important.

So, it makes sense to create a program that will drive repeat business. However, it’s important to differentiate between a rewards program and a loyalty program. Often, companies and brands use the terms interchangeably, but they are not quite the same. And while there’s nothing wrong with either program, it’s important to understand the differences.

Repeat Customers vs. Loyal Customers

Rewards and points programs drive repeat business but don’t always create customer loyalty. What brand or company doesn’t want repeat business? Of course, we want our customers to come back again and again, but don’t confuse the behavior of a customer who keeps coming back with a truly loyal customer.

Most rewards and points programs are actually discount programs. The more the customer buys, the more points they accumulate, which turns into a discount.

For example, a restaurant may give you a free lunch on your fifth visit, which is the equivalent of a 20% discount across all five lunches. An airline gives you points every time you fly. Earn enough points, and you get a free ticket. Similar to the restaurant program, it may take nine flights to get a free ticket on the tenth flight. Hence, you’re really getting a 10% discount across the costs of all 10 flights.

These types of programs promote repeat business. Again, there’s nothing wrong with repeat business, and we should continue to work on building repeat business, but it’s important to understand that repeat business is not loyal business. The important question to ask is this:

If the points and perks were taken away, would the customer still come back?

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