Loyalty Programs : Do they really work?
Do loyalty programs really work? What can be done to make them work? An article by CRMIT’s Senior Director Naga Chokkanathan:
Loyalty management is a big CRM topic. Every company wants their customers to remain loyal and give continuous business and share of their wallet. They introduce schemes like loyalty cards, points, gifts etc., to attract them.
But in reality, most of these schemes don’t work. I would have registered for at least 20+ loyalty programs and got my fancy cards. But I can’t carry all of them wherever I go, most of the times I keep that card in some book shelf and forget all about that, It doesn’t make me return to the same establishment again, unless and until the benefits are very good and real.
When I say “Benefits”, I don’t really mean cash back, discounts etc., they are important motivators, but for a loyalty program to succeed, the company has to think of something unique and a real value add.
For example, we buy our monthly groceries and other goods from a super market. Last year, they gave me a loyalty card and told me that I will get 1 point for every 200 rupees spent on that shop, and later I can convert those points to gifts.
I did a mental math, my reward is, 1 rupee for every 200 rupees. Means 0.5%, Boy, this scheme is junk, I don’t want silly 0.5% discount for my purchases, forget it!
But guess what, those store people were smart. They recorded my mobile number, and tied it to my Loyalty card. Every time I bought anything from them, they asked for my loyalty card, when I said “I don’t have it with me now”, they asked my mobile number, and added loyalty points to me, even without the card.
Yesterday, I got a mail from them, which gave a nice pie chart with this snapshot:
Your Purchases last year:
- 38% Fruits and Vegetables
- 22% Pulses and cooking oil
- 16% Dairy Products
- 8% Snacks
- 16% Others
Wow, I never knew this. When I clicked on the pie chart, it gave me details on my purchases every month and how they changed over the 12 months period. Amazing insight on my spending habits, which I can’t get anywhere else!
Now, I am motivated to carry their loyalty card and produce it for any purchase, I know I am going to get some useful data out of this, in addition to that 0.5% discount, I will buy more and more from them because others don’t give me this value add.
Moral of the story? If Loyalty is a one way street (I want people to buy more from me), it is never going to work. Any Loyalty program will work only if there are visible benefits to the customers too.