I have to go grocery shopping today and I have a choice of two store with loyalty programs. One is going to give me .20 a gallon off gas at my preferred gas station. I need gas. Guess which store is getting my business today.
There’s nothing subtle about loyalty programs. According to a new report from Forrester 71% of consumers belong to at least 1 program but the average consumer belongs to eight. It’s the next number that hits home:
48% of adults cite customer loyalty programs as a top motivator for interacting with brands that they like.
Not only does a loyalty program influence their buying decisions, it influences so much that a lower price becomes secondary. 50% of people who use their loyalty cards regularly said they would be willing to pay more for products and services that saved them time and hassles and 37% were willing to spend more if they liked the brand’s image.
The willingness to spend more money is ironic seeing as the main reason people join a loyalty program is to save money. But Forrester found that customer also appreciate other kinds of perks. Experience rewards such as concert tickets, private lessons and event access are also highly valued.
The report notes that The North Face saw an increase in customer visits and average order value when they started offering ski lift tickets, advanced skiing clinics and other experiences in return for reward points.
I doubt any of this is new information and yet I’m surprised by the lack of loyalty programs among retailers, especially online retailers. The benefit of rewarding your best customers with small perk far outweighs the cost of the perk and yet most retailers don’t do it.
My guess is it’s not about the cost of the perk, it’s about the time and effort it might take to administrate a loyalty program. I know there are third-party tools and apps that will handle all of the accounting for you but for a small business owner, it’s a lot to take on.
Here’s another thing I don’t understand, loyalty programs that you have to pay for up-front. For example, Barnes and Noble. They charge $25 a year to belong to the club. If you buy a lot of books, you make that money back and then some, but considering how bookstore sales have declined, you’d think offering free membership would be worth it just to increase customer loyalty. When you’re in direct competition with Amazon. . . well, I don’t see how they do it.
I also have an intense dislike for customer loyalty programs that price their perks way out of the reach of the average shopper. If I have to spend $1000 a year to get a 25% off coupon or a $50 product, it’s not worth it.
Finally, (since this has turned into my personal crusade against poor customer loyalty programs) I really dislike programs that pretend to be a membership clubs but are really nothing more than a glorified mailing list. I was in a fast food restaurant recently that was all about their loyalty card. They had counter displays and a fancy gizmo for signing up. The cashier asked if I was a member and prompted me to sign up when I said I wasn’t.
If I sign up, do I get points toward free or discounted food? No.
Do I get monthly perks or special coupons? No.
What do I get? You get an email when we run a promotion.
So. . . the same thing I’d get if I just put my name on your email list. Right.
If I don’t get special rewards in return for my continued and frequent support that’s not a loyalty club, that’s just email marketing.
Want to learn more? Check out “The Loyalty Program Participant Profile” from Forrester Research.