Curing 'Acquisition Addiction' and Other Loyalty Program Ills

Many commonly accepted loyalty program practices work well enough. The shopper is given a chance to take advantage of an instant percent-off offer at checkout for enrolling in the program. They provide an email address and other contact information, opting to receive exclusive promotions. But too often retailers fail to follow through with the implied promise of easing the shopper's experience and providing perks that make the shopper feel special and that inspire sincere affinity for the retail brand.

A case study by LoyaltyOne highlights a large two-banner apparel retailer whose problems were representative of many chains.

Using a 10 percent-off incentive to spur customer acquisition for their free loyalty program seemed to be doing the trick. Across both of the company's retail brands, cardholders were in fact responsible for over 90 percent of store sales.

And yet, the two programs provided few touch points for members after initial sign-up. There was only one reward being offered to program members and it required a high spend before eligibility was achieved. Consequently, only 11 percent of enrolled members shopped enough in the first six months to earn a reward vs. an industry redemption benchmark in the 30-50 percent range.

Shoppers were also clearly confusing program offers with the chain's regular promotions. During primary customer research, LoyaltyOne uncovered that 30 percent of members who claimed to have never redeemed for a reward actually had.

Fortunately, the investigation uncovered a number of opportunities to re-engage the retailer's most valuable customers and clarify the program’s value proposition. The strategic recommendations for the retailer included:

• A renewed focus on current high-value, high potential customers as opposed to acquisition.
• A consolidation of the banners' discount offers and promotions to solve the comprehension problem.
• A more balanced value proposition that would include soft benefits (i.e. experiential rewards, exclusive privileges/services).

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