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Loyalty programs aim to gather customer spending data and cultivate customer loyalty. They offer discounts, points, and rewards, and are popular in the US, with supermarkets using them to access customer data. Airlines were among the first to offer loyalty programs, and companies now offer benefits to capitalize on an entitlement culture. The success of loyalty programs depends on how well companies use the data they gather.
Loyalty programs are started by companies with two main objectives: to obtain information related to customers’ spending habits and to actively cultivate loyalty among customers to ensure that they continue to patronize the business. While some companies reverse these priorities, the above hierarchy holds true for most.
Many loyalty programs offer a sustained discount (like 10%) for a period of time – maybe a year, maybe for the lifetime of the business. Others offer a discount once certain criteria are met. For example, this might give a customer a 20% discount on a single purchase after spending $200 USD ($) on the business. Still others offer points that can be redeemed for products that may or may not be directly related to the business.
Loyalty cards are the most common form of such programs found around the world today. In the United States, nearly 75% of consumers have at least one card, with over a third of all shoppers having two or more. Major supermarket chains almost all have loyalty cards, also known as reward or benefit cards. These supermarket programs often operate by offering discounts on certain products, usually marked throughout the store, to anyone who has a card. In exchange for this discount, customers are giving the store access to detailed receipts of their in-store shopping habits, allowing the business to better meet their needs and build product purchasing and discounting to help retain its most profitable customers.
Some of the first loyalty programs were instituted by airlines in the 1970s in the form of frequent flyer miles. In these programs, a customer accumulates points flying with the airline and can then redeem the points in exchange for tickets, upgrades or even third-party benefits. In the past, many non-airline companies combined their own loyalty programs with those of the airlines, offering frequent flyer miles in exchange for everything from phone use to gasoline purchases.
These programs have gained immensely in popularity over the past 15 years, largely due to the development of an entitlement culture where consumers feel they deserve special treatment. Companies have capitalized on this when designing their programs, often offering benefits that cost little but carry an assumed prestige, such as access to faster moving lines or special parking spaces.
Ultimately, the success of loyalty programs depends on how well the company uses the data it gathers to further refine its policies. Many companies find little profit from their use, while others attribute much of their financial success to the well-executed use of such programs.
Asset Smart.
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