Loyalty Truth

Articles, interviews and videos that lead with the names like “Are loyalty cards worth carrying?” always get my attention, but not for the reason you would think.

I’m not defensive on the subject of loyalty programs. A lot of them are poorly designed, boring to consumers, and are set up to collect data that probably won’t be used in a productive way for either the brand sponsoring the program or their “most valuable customers”.

The articles challenging loyalty get my attention because I like to work in a fair playing ground. I am precise with my definitions of customer loyalty, rewards programs, and data-driven marketing. How we define these terms does make a difference as the definitions set expectations for clients as well as their customers. Therefore I like to fact-check those that sling critiques about customer loyalty around like the first pitch of spring baseball.

I’ll illustrate my point of view with a video that a web-savvy friend a/k/a “The Greatest Living American Dude”. alerted me to this week.

The video is a news report that I believe originates from Australia. The lead-in effectively sets the tone that we as consumers should be skeptical of these potentially nasty little programs embodied in a plastic card that fattens the size of our wallet while not necessarily bringing commensurate value to the person carrying that wallet.

An expert makes an appearance and proclaims that loyalty programs “should just be called data mining programs” implying all they do is suck information from customers without returning value from the retailer. Ouch!

A man on the street is quoted as saying “I don’t use the card enough to get value from the program”. Gasp!

Another expert presents the findings of a survey identifying the best of breed in Australian retail loyalty and offers Myer One as the top program as it rewards about $4 on spend of $200 and gives 2 points per dollar on every one spent. My loyalty math says the program delivers an effective 2% discount to members, fairly typical in retail loyalty, maybe even on the low side. Whether a program awards 1, 2, or 10 points per dollar is a matter of program design, not an feature that can be considered an asset without understanding the context of the value assigned to each point.

The expert goes on to suggest that grocery programs are the worst of all retail programs as a member would have to spend about $200 per week over the course of 2 years to earn rewards valued at $100. With this return of about 50 basis points, I would have to agree that the funding rate is low for most people to be able to reap meaningful benefit from the point currency without additional benefits layered on top. Sadly many programs offer this weak value proposition and fail to offer recognition benefits to round-out program value for members.

The final remark that caught my attention was an admonition from an expert that people should only sign up for cards at shops they already frequent on a regular basis. That’s right. Encourage consumers to put themselves in a self-imposed box, limiting their decision to join a rewards or loyalty program based only on self – selection as a regular customer.

I’ve seen many videos and read many articles over the years that track to a similar script as I’ve shared here. For the most part, critical comments are levied at what I would call a “rewards” program – a model that focuses solely on a “give and get” model that represents nothing more than a deferred discount to the customer, and is easily contradicted by other discounts and promotions offered by the same retailer.

Loyalty programs are intended to be so much more. Maybe we need to define the three terms; loyalty programs, rewards programs, data-driven marketing.

Coming up next on LoyaltyTruth.com, clarity on these definitions and help for you to set proper expectations for your next customer marketing strategy.