Can you buy loyalty – what is wrong with most loyalty schemes?Posted: October 8, 2013
How many loyalty programs are you a member of and how many loyalty cards to do you have in your wallet and? Do you really think any of these programs has really increased your brand loyalty or significantly changed your buying habits?
The only scheme I think has really changed my purchasing behaviour has been the Qantas Frequent Flyers program; even then my Westpac Amex/Visa cards have mostly funded my points. I don’t think the program has made me any more loyal to Qantas but merely keeps me flying with them more often than they deserve.
The problem I have with most loyalty programs is that they are not really trying to increase our loyalty to a brand but are crudely attempting for me buy more from them and ideally buy from them today.
I would go as far to say with the exception of a few brands, and even then only a small percentage customers using these brands, gaining long-term sustainable brand loyalty is near impossible.
Remember when people queued for the latest release of Microsoft’s operating system; remember when people queued to get the latest iPhone? I wonder how many of these people are now using a Mac computer with an Android phone?
In our modern era, and particularly in the technology space, brand loyalty is short lived. I know that Google dominate the search space today but will they have the same dominance in 10 years time?
Loyalty is a mindset, an attitude towards a brand at a specific point in time. We know that customer research into customers’ predisposition to make future purchases is at best poor, and a waste of time when dealing with new products.
Let’s remove the term loyalty from these schemes and call them what they are, club cards or purchase schemes, but not loyalty programs.
Singapore retailers like their Australia counterparts are keen for you to add yet another card to your wallet, with most shops offering some form of “loyalty” scheme.
Unlike Australian retailers membership does come at a cost, usually for an annual membership fees of around $30-$50 you can secure a 10% discount and hundreds of emails in your inbox.
I think that most of these Singaporean retailer schemes have the business model completely wrong. They shouldn’t be charging to join their programs and they shouldn’t be giving a constant discount.
The most valuable retail asset
The thing that retailers lack more than anything else is customer contact details, followed closely by the ability to link purchase behaviour with these customers.
The “loyalty” card until a few years ago was about the only technology available to link customers with purchases. The mobile phone provides a great medium to remove the cards from the wallet; the problem still remains how to connect your mobile to the store. While NFC looks to hold a lot of promise, provides the best bridge between the mobile and retail worlds.
The problem with the traditional card and discount schemes is that they only attract a limited segment of your customer base and I don’t think it attracts your most valuable customers.
Any schemes that can easily capture a wide cross-section of your customer base without the customer having to complete large forms gets a big tick from me. Taggohas developed the best solution I have seen to date; they build loyalty programs linked to Facebook.
I have a real problem with schemes that offer a constant discount; it just erodes value from the industry. For those that get the discount, it becomes the normal and loses its value over time, and for those who don’t get the discount, you feel that prices are inflated so the retailer can provide a discount to the others.
As humans we have an innate ability to find patterns and routines. In the Australian retailers heavy discounting wars of a few years ago customers came to expect a short gap between large discounts, so delayed purchases until items went on sale. We see this at its extreme with Boxing Day sales where people delay purchases, though gift card companies do very well out of this learned behaviour.
It is so important as retailers that we move beyond just price as the sole differentiating factor and start to look for promotions and offers value to groups of customers.
Where to next?
Lets start moving beyond the one size approach to promotions and start to invest in great CRM systems that can identify and target specific segments of your customer base. This will truly be the first step to moving beyond the current array of ‘loyalty’ schemes.
Author: +Richard Brock