Today I read an interesting article having the title: Time To Rethink Loyalty http://tinyurl.com/bk4mrx. The article’s author Robert Howard is like me in one regard. Our last names are common first names for many men. Despite the name similarity, I don’t agree with everything he says, but I believe his article is thought provoking!
It is time to rethink loyalty, especially in light of the current economic climate! With every retailer challenged to make their sales plan, what better time to recognize and reward the loyal shopper? This is exactly when a smart retailer needs to know their best customers and market to them. Converting shoppers into buyers is tough anytime, but it is doubly difficult these days with layoffs and bankruptcy making the news every day. Doesn’t it stand to reason now is the time to know who the best customers are, understand what they are buying, and target marketing messages giving them reasons to continue shopping and buying?
Contrary to his pronouncement that the traditional loyalty model has grown tired and provides little differentiation in the market today, I believe the retail marketplace is still wide open for conventional loyalty programs operated by standalone businesses and coalitions having multiple partners participating in a loyalty network. Even the most basic loyalty programs continue to differentiate because every retailer I can think of has one or more competitors, some with and some without loyalty programs.
I live in the northeast and many of the everyday retail businesses where I shop have frequent shopper programs of one kind or another. CVS has ExtraCare, a loyalty and rewards program unmatched by competitor Walgreens. The Brooks/Eckerds chain of drug stores, while not offering a loyalty program of its own, is at least connected to Upromise, the way to save for college. Big grocery chains like StopandShop and Shaws groceries have discount card programs, and they are connected to Upromise too. Staples has their Staples Rewards, Best Buy has Rewards Zone, Hallmark has Crown Rewards and the list goes on and on.
For every retailer I can think of with a loyalty program, there is a similar competitor who doesn’t have a defensible loyalty strategy and they lose market share because competitors have loyalty programs that help them recognize and reward their best customers.
Mr. Howard makes a good point when he says loyalty programs can create disdain when reward redemption is too difficult. His comment reminds me of the saying “guns don’t kill people, people do! I can paraphrase by saying “loyalty programs aren’t bad for people, but people can create bad loyalty programs!”
I was surprised however when Mr. Howard criticized the HiltonHonors program. Oh my goodness, it’s one of my favorite programs. I’m a road warrior and the HiltonHonors program gives me great rewards every year and Hilton has earned my loyalty as a result. I’m always looking for a Hilton property whenever I’m traveling and need overnight lodging.
I think Mr. Howard himself is missing the point. HiltonHonors isn’t targeting people who travel so infrequently they might not stay in a Hilton property at least once every twelve months. The special circumstances he mentions are easy to avoid for even those people who are occasional travelers, and if the customer is at risk of losing their points, just make a redemption and you will remain active.
For all my disagreement with some of the points in his article, I agree with his wrap up and conclusion. Loyalty programs that only offer discounts don’t really create customer loyalty. Eliminate the discounts and the customers’ loyalty evaporates, or introduce a competitor with lower prices and watch the previously loyal customers leave in droves. Well designed and executed loyalty programs are much more than just giving discounts. In the best of examples, you will find loyal customers are insensitive to discount pricing by competitors!
It is time to rethink loyalty!
Posted by loyaltycio 
