Here’s why we’ll never release a loyalty card – and you shouldn’t either.
- Loyalty programs are expensive to set up and maintain and they give away value.
- Yet research studies consistently show that loyalty programs produce only small loyalty effects, and do almost nothing to drive growth (the consequent effect on profits is presumably negative).
- The reason why loyalty programs produce disappointing results is that they are very poor at reaching new buyers and light buyers of the brand.
- Loyalty programs skew to heavier buyers because it is easier for loyal buyers to notice the program and to join; particularly so when joining up is in store.
- Loyalty programs skew to heavier buyers because they have a stronger economic incentive to join, in being rewarded for what they do already.
- An over-hyped benefit of loyalty programs is that they provide data that might give insight into customer behaviour and greater efficiency in targeted marketing. In practice much of this data isn’t needed, or can be obtained in other ways.
- Unlike proper representative panels loyalty programs tend to not collect data on the portfolio of brands bought. Nor do they have much to say about the total market and competitor marketing activity as non-customers are ignored.
- B2B loyalty programs, like the one in our April Fool joke, are particularly unlikely to change corporate buying behaviour. This is why airline frequent flyer schemes try to give the points to individuals (even if they are flying at company expense).
For more on our research into loyalty programs see How Brands Grow Chapter 11: Why Loyalty Programs Don’t Work.
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