This year, loyalty programmes celebrate their 30th birthday (American Airlines launched the industry’s first frequent flyer programme in May 1981). Today, it seems that many companies across all industry sectors have taken the loyalty plunge and introduced a loyalty programme. Sounds like an ideal solution? Yes, if done correctly, but also a potential pain to customers, losing the overview of dealing with too many plastic cards and managing the various account balances.
A recent study by Forrester has shown that an average customer in the US keeps between 6 – 8 loyalty cards in his wallet, while European customers participate on average, 5 card-based loyalty programmes. In both cases, the space available for plastic cards in the consumer’s wallet is limited. More and more, the loyalty market is a mere commodity, a necessary evil.
Originally, loyalty programmes were set-up to set brands apart from the competition and it was apparent that the companies that did not have a loyalty programme were losing market share. Today, operating a loyalty programme does not automatically guarantee success. As Colloquy recently stated: ‘Loyalty marketing programmes are ubiquitous in the developed world’.
Difficult to stop a programme once you’re in
From this perspective, there are an increasing number of marketers that now believe that it might have been a mistake to have introduced a loyalty programme. The arguments they put forward are no measurable results, lack of customer insight, proposition not compelling enough and cost management out of control, for example.
Many marketers wish they can remove their loyalty scheme, but they don’t know how as;
(1) All competitors have a programme in place (fear of losing ground)
(2) Customers, once they are in, don’t give up those perks easily.
However, there are others who believe that loyalty programmes are a powerful marketing tool. At the same time, they realize that the schemes must evolve and move to the next development stage. Hence, an overhaul (relaunch) of the programme structure is needed.
Looking forward is the right direction
Leading trend setters in today’s loyalty space, like Miles & More and Starwood Preferred Guest are currently in the process of asking themselves “what is next?”. After introducing points and rewards (stage 1: 1980/1990), traditional loyalty programmes introduced recognition and status elements (stage 2: 1990/2000) – what comes next?!
Basically, standing still is not an option. If loyalty programmes want to prevail they cannot watch new schemes and approaches pass by. In other words: programmes must undergo a revitalisation or redevelopment to remain front of the customer’s mind.
Next generation loyalty predictions
Focusing on differentiation and general enhancement, the picture shows some of our predictions on how loyalty programme structures will change within the next 2 years:
So, the key developments are:
- Programmes will move from being product centric to customer centric (stronger empowerment of the member)
- Plastic cards will give way to mobile cards
- Barcodes will replace stand-alone membership numbers
- Segmentation will be based on attitudes and no longer on socio-demographics or behaviour
- Speed of promotions will happen on POS level (not only for retail), individual and immediate rewarding
- Dialogue will move from traditional 1-2-1 communications to social media, driven by advocates.
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The State of Customer Devotion in Retail: Part One
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