Who is rewarded with loyalty programs?
Posted by Becky Carroll on December 8, 2006
Loyalty programs started out as a great idea. Customers were rewarded for being frequent visitors and purchasers, and in turn customers did more shopping with those companies to whom they felt loyal. Now, if I look in my wallet, I have a plethora of loyalty membership cards, with the opportunity to get more nearly everywhere I go! The grocery store (of course – who would shop without one and pay full price?), the office supplies store, the shoe store, the hairdresser, the coffee house, the pet supplies store; really, too many to keep track of. Somewhere along the lines, as I am sure you will agree, the idea of loyalty programs got off track.
Retailers have recognized this and are starting to focus a little bit differently with more emphasis on their “most valuable” customers. For many retailers, these are their credit card customers. Often, the store-branded card customers see additional discounts above and beyond those offered to non-card customers. This article yesterday in the Washington Post highlighted the benefits for retailers: targeted marketing and advertising, as well as lower credit card rates. Most importantly, retailers can analyze the information to understand what customers are purchasing, and thus tailor their communications.
What is in it for the customers? Greater discounts – and something else. In the article, it was mentioned that Target reviewed shopping patterns of customers using its branded Visa card to see if they were shopping at competitors, then offering enticements to use Target instead. This, it seems to me, is pushing the envelope. Does a customer signing up for a card want to have their shopping life analyzed in this way? It is fine if a customer is aware of this and open to the idea, but how many customers are?
Finally, what happens to customer trust? A large element of customer loyalty to a brand is based on trust. When a customer feels a company has violated that trust, through privacy breaches, misuse of information, or simply too much junk email, the level of customer satisfaction goes down, followed by cracks in the loyalty wall. I don’t believe this is the intention of most loyalty programs!
Next week I will present tips to keep in mind before starting any kind of customer loyalty or retention program. In the meantime, good luck with the weekend holiday shopping, and keep track of those loyalty cards!
(Photo credit: T. Carroll)