Frequent Flier miles were offered by airlines in the 1980′s, and grocers were rewarding their customers with green stamps back in the 1970′s, so Customer Loyalty Programs have been around for some time. It’s only over the last few years, however, that loyalty schemes have become so popular, that any business that sells a product or service seems to have one and the consumer is taking full advantage of them.
Every year, businesses spend billions on providing Customer Loyalty Programs for their customers. With increased competition in most markets, and consumers becoming more and more price-sensitive, many retailers have found loyalty schemes are essential for attracting new business, and stopping the customers they already have going elsewhere.
When someone signs up to a Customer Loyalty Program, they are either rewarded with an immediate benefit every time they spend money with the merchant, or each purchase counts towards a reward at some point in the future. An immediate reward could be a discount off their purchase, or an upgrade free of charge; and the customer would qualify for whatever future rewards the program was offering once they had saved up the number of points or vouchers they needed.
In their simplest form, Customer Loyalty Programs are used by retailers to help attract new customers, and reward them so they want to keep spending money, instead of going elsewhere. However, the more sophisticated loyalty schemes are able to make use of the most valuable product of just about any Customer Loyalty Program, and that’s the data that can be collected about the consumption habits of members in the program. As well as being able to use their contact details to market to these customers directly, it’s possible to build even stronger relationships with them by tailoring these messages based on accurate and detailed information about their spending habits.
The majority of loyalty scheme members respond much better to this customer-specific marketing, and as well as creating even greater loyalty, it makes them more likely to tell others about how well they are being treated. Valued customers are therefore great for improving a business’s turnover directly, through their increased spending, and indirectly, through the new customers they refer.
Some critics might argue that the amount of private data these advanced Customer Loyalty Programs collect is intrusive. However, as long as the benefits to the consumer outweigh any potential downsides, and businesses use whatever information they collect in a responsible way, the popularity of Customer Loyalty Programs, for retailers and shoppers, is likely to continue.
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