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Study Sheds Light on Common Customer Loyalty Assumptions

Study sheds light on Customer loyalty As the customer loyalty landscape continues to grow, many brands are struggling to understand what loyalty and customer engagement strategies are working – and which are not.

To help brands better understand customer and brand loyalty to build customer experience, Points, a loyalty currency management company, has published Retail Loyalty Redefined: Challenging 5 Common Assumptions. Authored by Points’ Tim Moulton, the study aims at helping brands create loyalty programs that work – in both the short- and long-term – by dispelling the myths that are holding them back. 

Retail Loyalty: Common Assumptions and Challenges

Assumption 1: My customers want discounts, not loyalty points or rewards.  

Points: While everyone loves a good discount, offering customers discounts may get them in the door or visit your website for a short while, but it isn’t the best strategy to establish long term customer loyalty. “When you think long-term, constant discounting does a disservice to business, whereas awarding loyalty currency lets retailers keep more margin in their pockets,” the report said.

Assumption 2: How much is this going to cost me? Rewarding customers with loyalty currency carries a higher per-dollar value for a business.

Points: “Discounting attracts customers who are less loyal to a brand and more reactive to the lowest price – even when it’s offered by a competitor,” according to the report.  However, brands that offer loyalty currencies as a reward can attract high-value customers who are concerned about the price and willing to adjust their shopping habits in order to earn.

Assumption 3: Rewards programs only work for brands that sell big-ticket items. No one cares about earning small amounts of points.

Points: “Conventional wisdom would suggest that consumers lack the patience or tolerance for earning big rewards one small transaction at a time. However, this couldn’t be further from the truth,” the study said.

When it comes to travel, say, customers don’t mind earning smaller amounts of points if it gets them towards their goal. Earlier this year, Points surveyed more than 1,500 members of multiple loyalty programs and found that among retail program members, 48% actively set redemption goals. The research also revealed that 68% of members said it was worth it to earn small amounts of points and miles to help move them closer to these goals. Having more opportunities to earn, regardless of quantity, only serves to enhance consumer engagement with loyalty, and with the business doing the awarding.

Assumption 4: “Enough already!” Loyalty programs turn consumers off with too many marketing communications.

Actually, loyalty programs help streamline marketing communication. “Loyalty programs offer members non-intrusive reminders of the merchant relationship and of the earning they have experienced,” the study found. Its research showed that members covet their accounts, and check them regularly. In fact, consumers pay attention to loyalty-related messaging, enabling brands to send them promotions that translate to above-average conversion rates.

Assumption 5: “I can’t afford a loyalty program”

Points recommends partnering with proven loyalty programs such as frequent flier hotel or financial services programs that already have an established platform and members.

Multi-partner programs are able to mitigate common pain points that merchants typically experience with proprietary and even coalition loyalty programs. In partnership situations,” the study found, “merchants can focus on their core business, instead of on the challenge and expense involved in starting and managing their own program. And unlike coalition loyalty, each business retains exclusive control over its own data.”

The more the merrier. Partnering “opens up new marketing channels and segments not serviced by your current efforts, and may open up a relationship with modes of payment where double-dip earning opportunities are available.”

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