Launching a Successful Loyalty Program

By: Tim Fasano

Loyalty programs are good for you and good for the customer. Though airlines and retailers typically run sophisticated rewards programs, targeting customers who have exhibited particular buying behavior in the past, any business with a customer base can offer their frequent customers something extra.

The value of loyalty programs would seem to be conventional wisdom, but a recent Maritz Loyalty Marketing study showed that loyalty programs genuinely do just that: create brand loyalty. Yet, the current state of loyalty programs isn’t entirely rosy. Many of the customers surveyed expressed their concern with the level of information the loyalty programs required them to divulge. Customers welcome value and rewards from a company they do business with, but they are not readily willing to sacrifice privacy for it.

On average, the consumers polled for the study participated in about seven loyalty programs last year. Programs for shopping/retail businesses saw the highest participation, with the average consumer involved in around two retail loyalty programs. A whopping 70% of the consumers involved in this study said that loyalty programs influenced their forming a relationship with a brand. 57% said that loyalty programs influenced where and how they made their purchases – they were indeed more loyal to companies offering loyalty programs!

But loyalty programs haven’t achieved their full potential. 53% of respondents said that they have ceased their involvement with the loyalty programs, i.e. stopped making purchases from the brand offering the benefits. The obvious question is why? Why would a consumer actively refuse benefits offered by a brand? The answer is the “creep” factor. Many brands seek to tailor offerings to their consumer’s behavior and demographic profile. But in doing so, they end up asking for too much information, being invasive, and ultimately alienating the consumer. Almost 30% of respondents said that loyalty programs required too much personal information, and 24% said that privacy concerns kept them from continuing enrollment in a loyalty program.

What is the lesson for a small business seeking to get a loyalty program off the ground? Make the barrier to opting in as low as possible. You may need some basic information like an email address to enroll someone in your rewards program and notify them of special offers, but are home address, phone number, etc really necessary? In this era in which our information is collected in so many different ways, often without our full knowledge, it’s easy for consumers to get cagey around a form. Sometimes it’s better to give (value) than to receive (information) – embrace every opportunity to reward your customers, without asking too much information of them, and they’ll stay loyal.
 
To read the complete study, visit Maritz Loyalty Marketing.