Who is rewarded with loyalty programs?

The bells you hear ringing may not all be jingle bells; they may be the sound of points racking up on your loyalty cards! money-and-smiley.jpg

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)

6 Responses

  1. Jim Morgan

    A missed point regarding customer loyalty programs is the firms that give gift cards for referring a new customer to their business. That seems like a great gift but unless you use it immediately, you lose it. For example, I received a $50 gift card from SBC (now AT&T). I didn’t look closely at the card to notice that it only had an expiration date of six months. Also to see the terms and conditions of the card, I would have to go onto their web site. I bought one small item (about $15) and forgot about the card. Recently I tried to use the card to find out that it had no balance left. I called customer support to find out that they had been charging me $5 a month for not using the card before its expiration date. When I questioned why such a short time, I was told that I should consider myself lucky. All other gift cards that they give have only three month expiration dates.

    I’ve been an SBC customer for a long time but if I had a choice today, I’d drop them like a hot potato. I’m not sure if this is SBC’s fault or the adaption of AT&T’s policies. I’ve noticed that the service and responses have gotten worse since the two companies merged.

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