Businesses find competitive advantage by creating differentiators in their industry. Products or services that look, feel or behave unlike their competitors make people notice and get curious. Something is new, distinct.
Differentiation offers a genuine alternative for the customer who was not fully served by what already existed in a market. It creates options, options drive choice, and repeated choice becomes preference.
Uniqueness is the most defensible form of differentiation because it offers the only choice. Businesses that find their uniqueness no longer compete. They define the category.
Ways Businesses Compete
Some companies are born unique. They invent, innovate or move first, creating categories before anyone else knew they existed. Clear examples are the iPhone bringing smartphones to the mass market, Airbnb defining a new way for travelling, and Levi’s who created blue jeans. All trailblazers.
Others find their uniqueness along the way, through experience, customer feedback or by digging into their DNA and discovering what makes them irreplaceable. Patagonia’s commitment to quality and the environment became their identity. Harley-Davidson found its uniqueness through the riders who loved their bikes, formed clubs and built a culture the brand eventually made its own.
Some construct their difference deliberately, designing differentiators and using branding and marketing to make those differentiators known, understood, and preferred. The differentiator can be real, like a product feature, a service model or a price point. Or it can be entirely perceptual, a feeling, an association or a story. Liquid Death’s identity was designed for a consumer that Evian’s alpine purity was never positioned for.
Others make no claim to difference. Most businesses actually live here. The traditional 4Ps of marketing are their competing field. They rely on availability, familiarity and communication strategies.
There is no single right approach. Businesses have their own imperatives, intrinsic characteristics, life stage, budgets and leadership style. While they all compete for consumer preference, they all start from a different place. But living without differentiation comes with its own challenges. And for many brands, loyalty programs are where that challenge becomes most visible.
Loyalty as a Differentiation Strategy
Many brands design loyalty programs to differentiate themselves and gain competitive advantage. They aim to turn transactional interactions into relationships of preference, adding a layer of value to the purchase experience.
That value takes many forms: monetary rewards like cashback or discounts, benefits like early access, exclusives and third-party partnerships, or gamified mechanics like points accumulation, tiers, badges and leaderboards. The premise is simple. The company rewards those who are there.
We can find loyalty programs in every industry. The business outcomes they drive are well documented, so the business case for having one is established. But when companies skip thoughtful design and simply follow what the category leader is doing, their competitive advantage disappears.
The floor rises, the program is no longer a differentiator and it becomes the cost of entry. That leaves companies with two options. Cover that cost of entry with a program indistinguishable from everyone else’s, and give members no reason to choose them. Or design a loyalty program that has found its uniqueness.
What Happens When the Category Follows
American Airlines created the first modern frequent flyer program in 1981. Every airline followed and the model spread beyond aviation and other industries. Rewarding flyers for miles flown became the standard. Then in 2015 Delta changed it. They decided to reward based on spend, instead of distance. The model shifted and others started to follow.
What this shows is that no program design is fixed. The category standard is only standard until someone decides to question it.
Companies do not need to follow the same program design. They need to think about their business model, member base and behaviors, life stage, capabilities and commercials to define what works for them.
More often than not, companies looking at their own characteristics will find a different approach rather than a copy of what already exists.
Programs That Found Their Own
Grill’d is a good example of this. A burger franchise in Australia where earning points and redeeming them for food is the norm and the expectation for any QSR. Grill’d chose to give badges per visit instead.
Members earn a burger after eight visits and can choose to take it or donate it to charity. Grill’d has always donated a portion of proceeds from every burger sold to local charities, with customers choosing where the money goes. The loyalty program extends that purpose. It expresses who they are, their uniqueness.
So loyalty programs, like businesses, can be born unique. Or they can look inward, at their members, their brand and their commercial reality, and build something that belongs specifically to them.
Differentiation in loyalty is not limited to the mechanic. It can live in the experience, the recognition, the partnerships or the value the program delivers.
Nike illustrates how value can be delivered differently. In apparel retail, points programs with tier progression and incremental benefits like exclusive access or free shipping are the norm. Adidas runs adiClub on spend-based earning with status tiers. Most competitors follow the same architecture.
Instead, Nike starts by meeting what members expect as non-negotiable from the industry: free shipping, a 60-day wear test, and no-receipt returns for every member.
Members get early access to limited product drops, member-only collections and exclusive event invitations. All of it accessible across four connected apps: the Nike App, Nike Run Club, Nike Training Club and SNKRS.
The program is built around identity and community. A key feature of the program is the highly personalised training content it delivers and allows members to connect with other members. They access training content together, run with communities, and engage with the brand beyond the transaction.
Nike’s own data shows members spend approximately three times more than non-members. This result was produced by making membership mean something a points balance cannot replicate.
And it is defensible. Adidas cannot easily adopt a community-driven model without contradicting the program architecture it has built and the expectations it has set with its own members over the years.
Loyalty programs that look like everyone else’s give members no reason to choose them. The programs that endure are the ones that are intentional. Not looking at what everyone else is doing, but designing around the value that belongs specifically to them.
Sources
iPhone bringing smartphones to the mass market
Airbnb defining a new way of traveling
Patagonia’s commitment to quality and the environment
Harley-Davidson riders forming clubs and the brand making the culture its own
Liquid Death designed for a different consumer
American Airlines creating the first modern frequent flyer program in 1981
Every airline following and the model spreading beyond aviation
Delta shifting to revenue-based earning in 2015
Other airlines following Delta’s revenue-based model
Grill’d donating a portion of proceeds from every burger sold to local charities
Adidas adiClub running on spend-based earning with status tiers
Nike members spend approximately three times more than non-members
