Do Customer Loyalty Programs Really Work?
Customer loyalty programs and memberships have been around for decades. Consumers love the idea of saving money, receiving exclusive offers, and getting priority service from their favorite retailers, banks and service providers. But are these programs causing businesses to actually miss out on key opportunities that truly build customer loyalty?
There is a misalignment between what businesses expect from loyalty programs vs. what consumers want. Below are two studies from eMarketer that look at customer loyalty programs from the perspectives of retailers1 (on the left) and consumers2 (on the right):
Loyalty Programs Generate Price Loyalty, not Brand Loyalty
While retailers’ primary loyalty-program goals are to drive engagement, increase transactions, and increase the amount customers spend, consumers are mainly interested in product discounts and getting cash back on their purchases.
The problem is that consumers achieve their money-saving goals, but retailers aren’t earning the brand loyalty they crave.
“For far too long, ‘loyalty programs’ have really just been a mechanism for distributing price discounts, which really has virtually nothing to do with loyalty. It frankly can create precisely the opposite behavior of loyalty. It can create loyalty to the lowest price, wherever that lowest price can be found.” – Katie Casavant, CEO, Kantar Shopcom3
Customer Loyalty Program Engagement is Declining
Of consumers who do participate in loyalty programs, only 45 percent remain loyal to a given retailer. The other 55 percent either reduce their brand loyalty or purchase from a competitor. This is what happens when customer loyalty programs are price-driven. They simply don’t create brand loyalty at all.
Furthermore, consumers, on average, belong to 13 different loyalty programs, which means your business is not the only one offering a discount-driven program. What’s even worse is consumers only actively engage in half of those programs they’re currently enrolled in.
On the left are figures about “loyal” customer retention4. On the right are statistics from eMarketer about actual customer participation in loyalty programs to which they belong5:
Customer Loyalty Programs Offer the Façade of Personalization—Not the Real Thing
Just because you’re sending an email addressing your customers by their first name and offering a price break on a few related products or services doesn’t mean you’re offering personalized service. We live in a consumer-driven economy where access to products and services is virtually limitless, leaving the power in buyers’ hands, not yours. Consumers want service that’s tailored to their needs and delivered on their schedule.
“Loyalty is an emotional state. The way to drive real loyalty is to create engagement through experiences.” – Mark Taylor, SVP , digital customer experience, Capgemini6
When customers engage with your loyalty program and visit your locations, your only attributable capture point is when they use their membership number on checkout—and that’s only if they decide to make a purchase!
Your loyalty customers could be walking in and out of your stores without you even knowing they were ever there. That’s money walking right out your front door.
Scheduling in-store appointments using online appointment scheduler or checking walk-in customers into a queue management tool gives your associates the ability to learn who is coming in, see what they’re interested in, and view their transaction history. It also prepares your team to deliver a highly personalized customer experience, including pulling desired and related products for your customers ahead of time.
Leading retailers, including Best Buy, Sprint, Nordstrom, Sephora, and many more have already implemented customer engagement solutions that deliver the personalization consumers are looking for and the attribution retailers need.
To learn more about increasing customer engagement solutions and delivering unrivaled personalization:
All images and quotes are from eMarketer.
- Customer Loyalty Program Goals (211265), May 24, 2016
- Most Valuable Loyalty Program Benefits (214668), July 29, 2016
- Kate Casavant: “Loyalty Program Memberships Climb, but Participation Wanes,” Feb. 10, 2016
- Loyalty Program Retention (197989), Sept. 30, 2015
- Loyalty Program Participation (212688), June 7, 2016
- Mark Taylor: “Loyalty Is an Emotion, Not a Transaction,” Feb. 3, 2016