Looking at Loyalty Programs: Are They A Good Idea for Your Business?

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The average American belongs to 38 loyalty programs. Loyalty programs typically offer rewards – things like points that can be redeemed for merchandise, frequent flier miles, or discounts – in exchange for repeat business. Yet many retailers and business owners who offer loyalty programs find that customer interest appears lackluster, and there’s no demonstrable relationship between whether or not someone is a loyalty program member and their decision to make a purchase.

They may be right. Recent research done by Oracle Retail indicates that most people aren’t actively engaging with the loyalty programs they belong to, and can be very hesitant about joining additional loyalty programs.

What’s going on? One issue can be loyalty program fatigue. Loyalty programs demand a certain amount of work on the part of the consumer, even if it’s just the task of remembering that they’re a loyalty program member and mentioning that fact at the time of check out. There are a lot of people who are feeling overwhelmed and stressed out right now – last month Pew reported that 68% of Americans are exhausted by the news – and devoting energy to managing a loyalty program just isn’t a priority for them.

That being said, the average American is active in 12 of the 38 programs they belong to. People do enjoy being rewarded. A key issue identified in the study is relevancy. Customers indicate a strong preference for content they find personally relevant, and rewards must also be relevant – something they want and value. When a loyalty program repeatedly offers rewards that people don’t care about, they stop paying attention.

To recap, the key takeaway points are:

  • Loyalty programs are still important – but not all loyalty programs are created equal.
  • Loyalty programs that work make the process effortless for customers. This includes remembering a customer’s loyalty program status online as well as training in-store personnel to ask about loyalty club status. There’s been a strong tend toward cardless loyalty program logins: allowing customers to use an email or phone number reduces the number of things they need to remember in order to benefit from membership.
  • Check your relevancy. If the messages you’re sending loyalty club members are exclusively promotional, they’re likely to go unread. Check the data on your rewards – what items are members claiming most often? Adjusting a rewards program doesn’t always mean changing rewards: Starbucks recently increased member enthusiasm for its loyalty program by keeping the rewards system the same but changing the way points are awarded.
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Looking at Loyalty Programs: Are They A Good Idea for Your Business?
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Looking at Loyalty Programs: Are They A Good Idea for Your Business?
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Are loyalty programs a good thing for your business, or should you stay away from starting one up altogether? Let's take a look.
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