I have always wondered as to how loyal are the members of any loyalty program. Especially when I read in one article that on an average one household is a member of about 22 Loyalty Programs. Complicated further by the fact that one can earn points, loyalty awards or miles or any other fancy term you might want to go along with for anything, anywhere. If you are smart perhaps you can earn multiple points.
Many people are members of loyalty programs of competing brands. So how loyal are they? Are organizations losing the raison d’etre for having these programs, is this just some marketing gimmick and the fundamental question – should you as an Organisation have a loyalty program?
I guess one of the main reason is to have loyalty and reward loyal followers. There do possibly exist a lot more reasons, but I will not really dwell in them. I don’t have the money, time or tools to go and do a full time research. Maybe at a later stage I blog about some of them… But at the very basic a loyalty program should and is meant to create loyalty.
For the purist the definition as per the dictionary is:
loy·al·ty
I would say, “The price or the sacrifice which a member is willing to make in order to stay loyal is the true value of your loyalty program. The number of members is secondary.”
Lets take some examples
Say if you are a low-cost budget airlines. Your USP is the low fares. People fly with you for the bargains and for the economical deals and the lowest price plans. Thats where their loyalty lies. They are not flying with you for the reward points – thats just an added benefit. And the “air miles” will certainly not prevent them from jumping ship to a carrier which is offering either lower fares or similar fares but better time schedule. So should you really have a loyalty program or should you save the marketing dollars in expenses and always ensure the benefits of price?
This could be for an industry or market where prices are most of the time similar to that of the competitor. What comes to my mind is large department stores, perhaps not the best example but two equal competing department stores selling the same goods will generally price similarly. Here one can argue that having a loyalty program will give an upper hand. Maybe it might, but generally if somebody is a member of X store, they are also members of Y store. And the questions to ask is, are people shopping only for the rewards. What happened to all the talk that people come for the environment and experience? And most of the time the points given per $ spent is really low and you do have to make really big purchases to get anything of value.
I think the bottom line is how much extra is your loyal member willing to pay and not switch to the competition. Or rephrasing the question is how much extra can your Loyalty Program get you over your competition selling the same product. Not that you should charge extra, thats not my point.
I just think that in our drive to see large numbers – we have concentrated too much on increasing membership.
We have not really concentrated on improving the value of the loyalty membership – case in point sometimes you have to go through hell to redeem your rewards, the guy at the cashier sees you more like some obnoxious problem rather than a valued customer.
And perhaps loyalty membership is not for all you consumer groups. It’s certainly not for people signing up in campaigns – “like signup get XYZ free”. Yeah, people sign up, get the free stuff and go back to their usual vendor – your competition.
I think some groups value the rewards that come with the loyalty programs and some groups of consumer would be happier with instant benefits and some for various other elements that spur them to do business with you.
Just my thoughts… As I said earlier, no research or time or money has gone into coming up with this rant..
Related articles
- Survey Shows That Half Of Travelers Don’t Belive In Using Loyalty Programs (forbes.com)
- Grocery Stores that Offer Loyalty Cards (coupons.answers.com)
- Two Kinds of Loyalty Programs (business2community.com)
Gaijin @ Japan 