Tuesday, February 16, 2010

The Customer Perspective on Loyalty

As I have written in previous blogs, great companies do not need loyalty programs. Their customers are loyal because they are a great company. They leave the loyalty programs and the expense of implementation to the not-so-great companies. That being said, the Chief Marketing Officer (CMO) Council surveyed customers to find out how they feel about loyalty programs. The results are interesting but not surprising. Here are some of the findings from the survey.
1. 69% of the respondents said most of their own experience with such programs has been "pretty good."
2. 10% were very satisfied.
3. 21% were strongly motivated to come back for repeat visits.
4. 30% said it was a major factor in their decision making.

On the negative side they found:
1. 32% felt that the loyalty programs had little or no value.
2. 37% believed that the individual rewards had little value.

There are some generic concerns that are positive indicators that loyalty programs are still of interest according to the research firm Colloquy. For example,
1. 67% of consumers are involved in loyalty programs in 2009 compared with 57 percent in 2007.
2. Participation by young adults has increased 32 percent between 2007 and 2009.
3. Participation by women age 25-49 has increased 29 percent for the same period.

Another observation by Colloquy was that the average US household is enrolled in 14 loyalty programs but the typical household only uses (is involved in) 6.2 loyalty programs.

Customers were asked for the top three benefits they received from a loyalty program. The results are:
Greatest benefit - discounts and savings (66% of the respondents)
2nd greatest benefit - better deals and offers (43% of the respondents)
The rest of the top five are:
3rd free products or premiums (38%)
4th perks and privileges (36%)
5th cash back (33%)

Far down the list were the issues that most loyalty programs seem to focus; namely, "recognition and appreciation" was only mentioned 18% of the time and "more individualized attention was mentioned 12% of the time.

The most often mentioned concern by customers was that they received too much spam email and junk mail. When things go bad, customers will opt out of a loyalty program. In fact 54 percent of the respondents said they had left a loyalty program after poor product or service experiences.

The bottom line is that customers perceive the benefits of loyalty program in terms of cash or rewards. While customers do like to be recognized and not considered a stranger, they sign up for a loyalty program for the financial benefits.

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