Frequent Flier miles were offered by airlines in the 1980’s, and grocers were rewarding their customers with green stamps back in the 1970’s, so Customer Loyalty Programs have been around for some time. It’s only over the last few years, however, that loyalty schemes have become so popular, that any business that sells a product or service seems to have one – and the consumer is taking full advantage of them.
Shoppers are becoming more and more sensitive to the price of goods and services they want to buy, and competition among retailers continues to increase. In an effort to overcome these challenges, Customer Loyalty Programs have become a key tool for merchants to attract new customers, and keep the ones they already have.
Most Customer Loyalty Programs work in one of two ways. The customer will get an immediate reward for being a member of a loyalty scheme; for example, they will get a preferential discount or complimentary upgrade when they make a purchase. Alternatively, the scheme may offer a deferred reward based on continuing customer loyalty and spending, at some point in the future; so customers have to collect points, tokens or stamps, which they can then cash in for discounts, free offers, or whatever else the scheme offers.
On the face of it, Customer Loyalty Programs seem like a good way for businesses to stand out and attract customers in increasingly competitive markets – getting customers to spend money in the first place, and rewarding them as they continue to spend.
. . . However, the real benefit to the retailer, is the amount of data Customer Loyalty Programs allow them to collect about their customers, and not just basic contact information either. Of course, this is useful for being able to market to customers and build even greater loyalty, but the sophisticated Customer Loyalty Programs use detailed analysis of customers’ buying habits to deliver much more targeted marketing messages on an almost individual level.
The majority of loyalty scheme members respond much better to this customer-specific marketing, and as well as creating even greater loyalty, it makes them more likely to tell others about how well they are being treated. Valued customers are therefore great for improving a business’s turnover directly, through their increased spending, and indirectly, through the new customers they refer.
There have been concerns over the amount of data that Customer Loyalty Programs collect, and how they plan to use this private information. But with consumers seemingly happy to let businesses keep track of what they spend, and how, as long as the rewards keep coming, it looks like loyalty schemes will continue to grow in popularity.