I agree totally with Bodie Le Monz’s post where he writes, “loyalty does not create satisfaction (but can create repeat purchases) but satisfaction creates loyalty.”
All loyalty programs, no matter the mechanics, are designed to increase switching costs. (Switching costs are the costs that a customer would incur if they choose to switch their business from one company to another.) For Bodie, his switching costs of changing his trans-Atlantic airline of choice are steep because he has racked up too many frequent flyer miles to even consider switching airlines. For that half-caf, double tall, one pump vanilla, two pumps hazelnut, extra hot, non-fat latte drinker, their switching costs are also steep because if they switch espresso shops then they will have to train a different barista to make their convoluted drink to perfection and that will take some time.
I’ve always viewed loyalty programs as either transaction based or relationship based.
Frequent flyer programs are an example of a transaction-based loyalty program. It’s designed to get you to buy a round-trip ticket in order to receive xx # of frequent flyer miles. If you choose not to make that transaction then you do not get the miles.
Having the barista at your neighborhood espresso shop know exactly how to make your drink is a loyalty program that is relationship based. It’s the high-touch, low-tech way to developing customer loyalty because it requires a personal connection between the customer and the employee.
I believe the path to creating real customer loyalty needs to have some element of a relationship-based program to generate endearing and enduring customer loyalty.
Now, to answer Bodie’s question of – “do companies tend to equate loyalty driven by these programs to customer satisfaction or are these two separate issues as the company views them?” For the airlines, I sense they measure, to some extent, customer satisfaction by how their customers vote with their wallets. And for Bodie, since he votes with his wallet by continuing to give one airline his money, I reckon that airline would view him as a satisfied customer… thanks to their loyaty program.