Loyalty Lowdown

Published in CSP Daily News

Recent research questions the true impact of loyalty programs

By  Abbie Westra, Editor-in-Chief, Convenience Store Products

CHICAGO -- As more and more retailers launch loyalty programs, two research firms recently offered some critique over just what they offer, and whether consumers are really satisfied. According to them, companies must start striving for true loyalty, not just more transactions.

In its October 2009 shopper behavior study, Information Resources Inc. (IRI) found that 74% of today's loyalty programs are not delivering their promised business impact. "There must be a fundamental change from transactional loyalty to a continuing loyalty," said Thom Blischok, president of consulting [image-nocss] and innovation at the Chicago-based research firm.

Similarly, it its October 2009 report "The New Value Paradigm: Theatrics of Thrift," Bellevue, Wash.-based The Hartman Group surveyed 1,000 consumers on the importance of loyalty programs in their desired shopping experience. The survey showed strong dissatisfaction with what loyalty programs offer:
74% of consumers agreed somewhat or strongly that retailers need new and better ways of rewarding loyal customersthe top response on the survey. 57% agreed somewhat or strongly that most grocery loyalty programs make it seem like you are getting a better deal than you really are. 45% say they dislike having to carry so many different cards. The only two positive responses to fare above 50% stated that "I get good deals" (54%) and "I try to take advantage of my loyalty programs more than ever" (53%).

Loyalty programs have become "transparent means for data collection rather than true relationships and reciprocity," the report concluded.

"The real problem is that food retailers are not very innovative and duplicitous, as in, 'For the use of your data, we'll give you a few discounts on a few products that are paid for by the manufacturer'," Michelle Barry, senior vice president of The Hartman Group, told CSP Daily News companion publication Fare Weekly.

Barry pointed to the hotel and lodging industry as one that has gotten loyalty right.

"I've had several hotels which, after noticing that this was merely my second stay, left fresh flowers and a box of chocolates along with a hand-signed note thanking me for my loyalty," she said. "Now that's a good loyalty programsomething heartfelt, something that recognizes me and something that adds surprise and delight to my day. Could you imagine if once a month the manager of a grocery store came out and personally thanked me and comped my grocery cart that day?"

Barry also offered the example of a local pizzeria chain that, every so often, puts an order on the house. "You never know when, or why. It's simply a matter of saying, 'Hey, we appreciate your business'."

"At the end of the day, loyalty programs should actually be very, very easy. They are actually hard-wired into most of the world's cultures," said Barry. "Koreans have set up their entire economy this way. And then there is your neighborhood bar, where your bartender actually tosses you a free drink every so often as a means of recognizing your patronage."

By Abbie Westra, Editor-in-Chief, Convenience Store Products
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