Despite the growing popularity of loyalty programs, a study shows they yield little benefit to the companies that offer them. As noted in Business Insider, a recent McKinsey study suggests that in general, loyalty programs do not add marked value — and may in fact destroy value for program owners. The study, involving 55 publicly traded North American and European companies, showed that those that spend more on loyalty, or have more visible loyalty programs, grow at about the same rate — or slightly slower — than those that do not, which begs the question: why do many loyalty programs fail to deliver long-term value?
Business Insider points out, companies that have successful loyalty programs integrate technology — like Starbucks—connecting mobile devices with the overall shopping experience; use data — like Target — to reach the highest-value consumers; and build partnerships — like Sainsbury — which allow consumers to collect rewards across a large number of non-competing retailers.
Another success story is Amazon, which has built its loyalty program around solving one of its customers’ biggest pain points — delivery. The “Prime” program gives free two-day shipping, plus free digital content for $79 a year. Prime not only integrates tightly with Amazon’s customer and convenience-focused brand, it also creates a loyalty program for suppliers, who rely on Fulfillment By Amazon for access to Prime customers.
HubSpot also provides examples of successful programs. Boloco uses a simple points system, and the HubSpot article points out, “They speak the language of their audience by measuring points in dollars, and rewards in food items.” After every $50 spent, the customer earns the choice of any item from the menu for free. The article also mentions Virgin Airlines’ Flying Club, for its tiered system that encourages customers to do more business with the airline.
With an approach that takes a broader view of customers’ needs, Patagonia, an eco-friendly outdoor apparel company, launched its Common Threads Initiative last year. The retailer partners with eBay to help customers to resell their Patagonia clothing online through the company website.
Successful loyalty programs also are tightly integrated with the brand and the shopping experience. To assist their clients reap the full benefit of loyalty and rewards programs, IT solutions providers should work with their customers to offer the customer a seamless experience across point of sale, the Internet, phone, and mobile channels.