January 25th, 2010

Love them or hate them, loyalty programs/clubs have become an important marketing tool in many industries. According to Wikipedia, in marketing generally and in retailing more specifically, a loyalty card, rewards card, points card, advantage card, or club card is a plastic or paper card, visually similar to a credit card or debit card, that identifies the card holder as a member in a loyalty program. Of course, some of the biggest examples of loyalty programs come from the travel industry (frequent flyer, hotel points), retail (grocery, gas, and sundries), and credit cards (AMEX). A retail establishment or a retail group may issue a loyalty card to a consumer who can then use it as a form of identification when dealing with that retailer. By presenting the card, the purchaser is typically entitled to either a discount on the current purchase, or an allotment of points that can be used for future purchases. Of course, managing your points so that you can use them (before they expire) has become one of the biggest drawbacks of these programs.

In addition, loyalty programs have expanded globally and in the types of industries one might find them. For example, Hewlett-Packard induces small and medium business to spend more money on branded supplies through their Purchase Edge Program.  And they are pervasive too. According to Jupiter Research, more than 75 percent of U.S. consumers now have at least one loyalty card. Most people belong to multiple loyalty programs.

Marketers intend to maintain loyalty program spend in 2010, with 34 percent increasing investments. In fact, a key area of spend will be investments into online communities and social networks that will allow members to share and connect.  Unfortunately, according to consumers, online communities, social networks and connecting with other members are among the least valued inducements to participate and remain active in loyalty programs.  

The CMO Council’s latest report, The Leaders in Loyalty: Feeling the Love From the Loyalty Clubs, reveals that marketers are failing to fully connect with consumers and are missing a big opportunity to leverage member insights to deliver on rewards, value and engagements customers say they really want. The full report contains detailed findings from both the marketing and the consumer research, along with over two dozen qualitative interviews from brand leaders from American Express, Etihad Airways, Giant Eagle, Jet Airways, Marriott, Office Depot, RIM, Shell, Travelzoo, Virgin Atlantic, and more.  It also contains key findings,  loyalty rankings and contributed insights from industry leaders. Get a complimentary summary of the study at the CMO Council’s web site.

Love them or hate them, loyalty programs and clubs are an important part of the marketing mix and spend for many industries. Yes … they can help in building and maintaining brand loyalty. In addition, they also act as a gigantic CRM database that identifies and tracks high usage customers. Finally, they link consumer buying and shopping habits with demographics at the individual or family level. This data is then used to formulate offers and programs to drive more purchases and demand for a company’s product. Powerful marketing tools for sure (in the right hands).

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Posted By Vince Ferraro