While eating breakfast a few days ago, I happened to glance at the footer of a flyer from Stop & Shop talking about earning gas rewards. Then I said to myself, “Gee, since when does Stop & Shop sell gas?” and “Has everyone gone loyal?”
As the casino industry matured through its history … they were the pioneers in “comping” their customers literally for over half a century; the “Wizard of Oz” of loyalty program marketing. They knew that when you alter a consumer’s behavior to take some action they may not have originally intended, they won. You see the tabulations on a slot machine counting down to the next point. You run out of money. You are close to the next point. You put in another $20. Winner to the casino!
To 1981 … American Airlines and its CEO Robert Crandall (a RI native!) implemented AAdvantage, the first travel rewards program. They “cloned” what the gamming industry already knew for decades. Altering a consumer’s behavior to book a fare on your airline, as opposed to a competitor, is the business version of a “four-point play” in basketball. Marriott started their successful program in 1983 (and yes they alter my behavior!).
Now to the 1990s… credit card companies offering “cash back” and point accumulati0n .. and later on retailers. Giving freebies back to consumers. Now the premise of customer relationship marketing is born. Today, these loyalty programs take many forms:
- Level-based memberships: Simply, you earn as you buy. As the customer buys, more points and rewards are given.
- Credit card integration: Credit card issuers have a tremendous amount of power and data. They can reward (steer) purchasing to other corporate partners (merchants) and then reward based on total business “charged” to a merchant.
- Experience rewards: Businesses can offer incentives (meals, sports tickets, haircuts, etc.) which are different than the products/services they sell.
- Company partnerships: Points or rewards that you earn at one business can be transferred or redeemed at another. It offers businesses co-marketing arrangements between non-competitive, complimentary industries.
Ultimately, when the cards are dealt, businesses need to implement technology to track, maintain and “integrate” the rewards and “point crunching” data to not only service their stakeholders, but to their partners. In addition, they need to continually monitor the program to ensure that it reinforces customer loyalty through measureable metrics.
Does this hand get you 21? A recent global study by Nielsen found that 84 percent of respondents said that they “they were more likely to visit retailers with marketing programs that reward members with purchase incentives.” Furthermore, the respondents indicated that 75 percent believed that discounted or free products are the most valuable benefit of loyalty programs. Putting this into context … the respondents rated other business characteristics less; enhanced customer service (44%) and free shipping incentives (42%). It is clear that loyalty programs are the bedrock of a customer’s experience.
Technology is clearly the key to implementing these initiatives. So are loyal programs the winning hand?