Drink Vouchers or Deep Conversations? The Loyalty Dilemma Explained
Studies suggest that acquiring a customer can cost between 5 and 25 times as much as retaining an existing one. So, it is no surprise that as companies work to optimize their businesses and find efficiencies, many turn to a “loyalty” program.
There are two approaches to loyalty: transactional and relational. Transactional loyalty is based on short-term benefits like discounts, rewards, and convenience. Relational loyalty is based on an emotional connection, trust, and long-term engagement. Ultimately, the goal for both is to create loyalty from customers, but only one will indeed start to build that type of relationship with a customer.
“The best marketing strategy ever: Care.” - Gary Vaynerchuk (Entrepreneur and CEO of VaynerMedia)
Let’s change the perspective; consider meeting two people at a party. The first one, Tommy Transactional, is friendly and approachable. Right away, he tells you about a fantastic opportunity—he’s giving out free drink vouchers! He hands you a voucher and says, “Here’s a drink on me! If you introduce me to five more people, I’ll give you another voucher. And for every time you buy me a drink tonight, I’ll give you a small gift.”
It's a bit weird at a party, but the approach makes you feel like you’re getting something of value immediately. It’s easy, it’s straightforward, and you know exactly what you’ll get out of the interaction. You’re happy to take the free drink and maybe even introduce him to a few friends to get more vouchers. But, you realize that the conversation with Tommy is focused on these quick exchanges—everything he offers is tied to a deal or a trade-off. While you enjoy the benefits, you'll likely switch your attention if another person provides a better deal. Tommy is great for instant gratification, but you sense there’s no real connection beyond the transactions.
On the other side of the room, you meet Rebecca Relational. Rebecca doesn’t have any vouchers or gifts to offer you immediately. Instead, she’s genuinely interested in getting to know you. She asks about your interests, listens attentively to your stories, and shares her own. She makes you laugh, and you both share a passion for hiking. Rebecca doesn’t ask for anything in return, but you enjoy the conversation so much that you exchange contact information to keep in touch.
As the night goes on, you notice Rebecca engaging with others similarly—building meaningful conversations, connecting on shared interests, and genuinely caring about the people she meets. You feel a connection with Rebecca that goes beyond any immediate benefit. It’s not about what you can get from her tonight; it’s about the potential for a lasting friendship. You know that if you see Rebecca at another party, you’ll be happy to spend time with her again because the relationship feels authentic and valued.
“We see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little better.” - Jeff Bezos (Founder of Amazon)
Both Tommy and Rebecca have strengths. Tommy’s transactional approach can be great for driving short-term engagement, just like promotional deals can boost sales. But Rebecca’s relational approach builds lasting loyalty, creating a bond that can withstand the ups and downs. For a brand, striking a balance between these two approaches can be key: offering value that attracts customers while also investing in building genuine relationships that keep them coming back.
First published in Eimer Creative Newsletter on 11/7