First, and most important, thank you for being here. Frankly, I wasn't sure I should write this article. 214 folks clicked on my previous one but only 36 "Liked" it. Not a great ratio. Now I realize this is a highly-specialized area and folks who know, know, and most others couldn't be less interested. Which means there is only a handful out there who will benefit from these articles. If you are one of the rare few, folks who do indeed find them helpful, please let me know. Thanks.
Recognition usually happens when a company decides to treat some of its customers, often members of their loyalty program, as much-loved Children of a Greater God. Typically, these folks are in the upper-echelons of the loyalty program either by way of spends or by their ability to influence other customers' opinions. Or they are a real pain where you sit down and being extra-nice reduces the prospect of vicious diatribes in social media.
Recognition is typically delivered at one or both of two levels: stated "tier benefits" (e.g. platinum tier = shorter queues, extra services, upgrades, special discounts) or by intentionally designing your service delivery to recognize individual preferences (e.g. like the good hotelier who asks, "Would you like your usual room / table sir?").
The art of recognition is to create "Moments" that matter to customers. Basically moments are a point in time and place where the customer interacts with the company. The customer can either think, "I will only deal with this company going forward", or, "I will never deal with this company in future". The company should decide which they would prefer, many companies don't and thus allow their moments opportunities to fall unmanaged somewhere between those extremes.
Moments, to be successful, tend to work in one of two ways: either they surprise and delight the customer, or better, they are a reason for the customer to feel special, better served, to say to himself or herself, "Now that is why I always use this brand, they always get this right!" Often, that is human-speak for, "They treat me better, I feel important relative to others". A moment is also a way by which emotional bonds can be built. These bonds can be invaluable, and can hold firm against competitive price-offs and other offers.
A series of moments, artfully managed, build a relationship between the company and their customers. Typically a relationship, better yet a "learning relationship" where the customer invests money, time and energy to learn more about how to use the brand more effectively (and vice verse), makes it that much more difficult to split. The time and effort it takes to "train" both the brand and the customer are switching costs which can become prohibitive allowing companies higher prices, the occasional mistake or even short delivery. Relationships also make a customer "care" about the brand, or its loyalty program, and that is invaluable too.
Recognition and rewards are really flips sides of each other: imagine you are standing in the short gold queue for a flight.Someone offers you 200,000 miles to switch to the long-long regular economy queue. Would you take it? 15,000 miles? 1000? At some point the response becomes no, that is the value of that tier benefit in miles. (As a mental exercise, find more of these - hotels, retail, other airline examples. It's fun and will give you some sense of how much customers care about what.)
Another way of thinking about this is while a point build-up makes customers care in one way, recognition makes customers care in another. Together, these are invaluable. Both need cautious and responsible management though, they can be dangerous in the hands of the careless. A case in point, at one stage I was in the highest tier of an airline's loyalty program for years. Time came for a redemption, I took the good wife for a vacation to London -- and did it in style, we flew up-front. At the layover in Frankfurt, despite my high status, the airline refused us entry to their high-tier lounge, saying we were on redemption tickets. Really? Why would any responsible manager allow for that to happen? An interesting point to ponder.
The ultimate goal of loyalty is to make the brand a habit, something reflexive, where the customer no longer thinks, just automatically comes to the brand. Think of your toothpaste. Unless you have had a problem of some sort, a "moment of truth" (as first described by Jan Carlson in his eponymous book) chances are you still brush your teeth with the paste your mom gave you as a child. You don't think about toothpaste any more, don't measure the cost-effectiveness of your present tube, there are too many other things clamoring for your attention, this is a problem that is solved.
This then is the ultimate goal your company and hence program should strive for, become a reflexive habit to your most valuable customers. Have fun designing your program and brand experience accordingly, I am sure you will find it valuable to do so!