February 2025 | VOL. 31

“The purpose of a business is to create a customer

who creates customers.”



– Shiv Singh, Marketing Strategist & Author

Welcome to the February Verde Edition newsletter. This month, we are focusing our content on the subject of customer loyalty. After all, every business would love their customers to be loyal. Referring others to their brand, shifting market share, and perhaps most importantly, being patient when friction occurs in the customer experience. 

In The Seven Habits of Highly Effective People, author Stephen R. Covey introduced the concept of the "emotional bank account," where people and brands build authentic and loyal connections by consistently making deposits into the emotional bank accounts of others. This idea highlights the importance of trust and goodwill, emphasizing that meaningful relationships—whether personal or professional—are nurtured through consistent acts of integrity, empathy, and reliability.

Two primary ways in which businesses build equity in customer relationships are investments to improve the customer experience and loyalty programs. But their effectiveness depends on how well they work together. A customer experience that is seamless, enjoyable, and exceeds expectations creates a natural foundation for loyalty. When paired with a well-structured loyalty program, businesses can further reinforce their customers’ commitment by rewarding repeat purchases and engagement. However, if there is significant friction in the customer journey, a loyalty program can feel like an empty incentive rather than a meaningful relationship-building tool. For example, if a business has an attractive rewards program but consistently delivers poor customer service, misses delivery dates, has confusing or misleading promotions, etc., customers may lose trust and disengage. 

Here are three key points to consider when integrating customer experience and loyalty programs to build lasting customer loyalty:

This month, we also delve into the topic of customer loyalty with Rick Ferguson, partner at Loyalty Wired, a leading authority on customer loyalty. In our monthly Fast Five, we share our thoughts on which brands are getting loyalty right. 



As always, we thank you for your support and welcome your input.

Cheers!

The Verde Group

From Friction to Customer Experiences That Drive Revenue & Retention

• How to identify which customer interactions truly impact business outcomes, moving beyond surface-level satisfaction metrics.
• The critical role of negative experiences in predicting customer behavior, triggering either flight or fight responses.
• Why traditional metrics like NPS and CSAT alone fail to capture the full picture of customer relationships.
• The challenge of maintaining brand consistency across proliferating digital and in-person channels.
• Why synthetic research tools, while valuable, can't fully replace direct customer engagement through surveys and focus groups.
• The increasing pressure to link customer experience initiatives with tangible financial outcomes.
• How successful organizations balance automated processes with the human touch that customers still crave.

February 2025 Poll

If you could only make one investment, what improvement would you make to your customer loyalty strategy in the next year?

February’s Fast Five:

Customer Loyalty

This month, we’re taking on customer loyalty. And we've featured 5 B2C companies we believe are getting "Big L" loyalty right.

Here are February's FAST FIVE! Are any of them your favorites?

Trust: CVS has built trust over time with its focus on delivering reliable pharmaceutical products and health services. Their pharmacies offer clear, understandable information and work closely with patients to ensure adherence to prescriptions and overall health.

Reciprocity: CVS provides numerous loyalty programs like ExtraCare, where customers can receive discounts, rewards, and personalized offers based on their health habits and shopping history.

Commitment: CVS is dedicated to improving access to healthcare through their MinuteClinics and by expanding healthcare access in underserved communities. They’re also focused on sustainability and health outcomes, showcasing their long-term commitment to both their customers' health and the environment.

Trust: Nationwide has built its reputation on a foundation of trust by offering reliable insurance products and delivering excellent customer service. They are transparent with their policies and provide clear information regarding coverage options, pricing, and claims processes.

Reciprocity: Nationwide provides reciprocal benefits through their "Vanishing Deductible" program, which rewards loyal customers by reducing deductibles over time for safe driving. Additionally, they offer a wide range of discounts (bundling, good student, safe driver, etc.) to create a mutually beneficial relationship.

Commitment: Nationwide shows its commitment through its customer-centric approach and support during difficult times. Whether it’s helping customers recover from a natural disaster or offering financial guidance, Nationwide is dedicated to standing by their clients in times of need. Their commitment to social responsibility and community support also underscores their long-term dedication to customers' well-being.

Trust: Starbucks fosters trust by delivering a consistent product and customer experience across locations, which ensures customers know what to expect every time.

Reciprocity: The Starbucks Rewards program offers customers free drinks, birthday rewards, and other perks that encourage loyalty and show appreciation for repeat business.

Commitment: Starbucks listens to customers’ preferences, offering customizable drinks, and is responsive to customer concerns, whether in-store or through their app.

Trust: Costco has earned customer trust through its membership-based model that promises high-quality products at unbeatable prices. Their return policy is also one of the most generous in retail.

Reciprocity: Costco's membership provides customers with exclusive discounts, perks like free samples, and a sense of value for money, making customers feel that they are getting more than they pay for.

Commitment:  Costco responds to customer feedback by stocking high-demand items and consistently offering products that align with customer expectations.

Trust: Amazon has built trust through its reliable delivery system, easy returns process, and extensive product selection. Their customer service is highly rated for resolving issues quickly.

Reciprocity: Programs like Amazon Prime offer customers exclusive benefits (faster delivery, streaming, etc.), creating a strong sense of reciprocity and mutual value.

Commitment: Amazon has a reputation for responding quickly to customer needs, whether through their 24/7 customer service or by constantly optimizing their platform based on user behavior.

February 2025's Question:

Question:  Dear Verde Group, our customer loyalty program is not delivering the ROI we expect. Do you have any recommendations for how we can improve our financial performance?

Answer: Thank you for your question! ROI analysis for loyalty programs can be tricky. My experience has been that is it difficult to persuade CFOs that your program is having a financial impact based on retained revenue. Clearly, organizations are looking for incremental sales and rightly so. Our advice would be the following:

Focus on Understanding the Experiential Drivers of Loyalty

Specifically, identify the discrete CX friction points that erode loyalty and the corresponding behaviors exhibited by those customers. This will help you set the baseline for what impact the broader experience is having on your overall business.

Analyze the Cross-Section of Key CX Friction Points and Loyalty Benefit Usage Amongst Members

This analysis conducted by The Verde Group and featured in Harvard Business Review demonstrates that some loyalty benefits, when used, have an inoculating effect on CX friction. This will build the case for how the program is driving financial benefit for your overall business. The Watch Out: Some program features, when used, will increase the negative financial impact of CX friction - we call this the boomerang effect of loyalty programs. This is largely driven by the operations of a company's business not applying customer loyalty value criteria to service priority and recovery efforts.

Use Program Features to Mitigate the Impact of Priority CX Friction Points

A simple example, when your flight is delayed, many times an airline will provide club access or mileage to help triage the impact of this inconvenience - using program benefits to mitigate CX friction. Apply this thinking to your customer experience and monitoring member's downstream spending behavior can also add to your ROI analysis. 

READY TO TALK? Book an intro session with Dennis Armbruster, Verde Group Executive VP, to discover how you can enhance the impact of your CX program. We want to help you find methods to anchor your customer insights firmly within your business framework, driving stronger ROI and increasing executive buy-in. We want to learn more about your current challenges.

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