Pi Attitude Zone: Affiliation & Cohesion

Cards That Fail the Loyalty Test

You would assume that the main point of customer loyalty cards would be to engender, well… loyalty, right?  As evidenced by, erm… encouraging loyal behavior or something?

Pi is just asking, because, sad to say, most don’t.

The wise consultants at McKinsey published a study of customer loyalty cards in the USA, and the ways they get used.  The big insight is that many of them never get used at all. 

Over sixty percent of US consumers have signed up for at least one loyalty card scheme.  Typical households are enrolled in over eighteen different schemes.  Yet they seem to actively use less than half of them, walking away from the opportunity of gaining vast numbers of customer reward points.  It’s as if they don’t care.

Even the schemes that people do actively participate in fail to appeal to them at any meaningful level.  They don’t seem to feel that ‘loyalty programs’ address any of their real needs, or make them feel loyal in any way to anyone.  Less than 20% of those enrolled say the schemes influence their choice of purchases or purchase locations.

This seems bizarre, since retailer loyalty schemes have been the fastest-growing in the rewards sector, outstripping even credit-card reward points and airline frequent-flyer miles. 

What’s the point, if shoppers care so little about these points schemes that they have no discernible effect on their shopping patterns? 

The situation is not quite as silly as it sounds.  The original reason for launching shopper loyalty schemes was to build up detailed and intimate databases on individual and household shopping patterns.  The core aim was to get mineable data that would help with stock choices, maintenance and rotation, negotiations with suppliers, pricing issues and promotions planning, not to mention the occasional real insight into consumer thinking.  The idea of rewarding customers for shopping in your store was incidental to those aims.

But it only works if the data so gathered is reasonably comprehensive and representative of your customers’ preferences and behavior. If they care so little for the offered “rewards" that they can’t even be bothered to dig out their card and swipe it at the checkout, then neither participant in the deal is getting rewarded for anything worth a damn.

Pi says: shopper loyalty schemes need a radical re-think.  Starting, dare we suggest, with a new definition of loyalty.

Zone: Affiliation & Cohesion Country: USA / North America Product – Retail