Loyalty: tough to earn, tough to keep

When loyalty programs bore or frustrate consumers, they quietly tune out. Here's how to make yours engaging.

Being on the key ring is no guarantee a grocer will develop a meaningful relationship with loyalty club cardholders.

New data show how badly supermarkets and other businesses fail to offer the experiences and discounts different shopper segments want from their loyalty programs. Nearly half of card-carrying members (47%) have stopped participating in one or more programs this past year—they simply disengage rather than formally request to leave, notes the first annual Maritz Loyalty Report. “Given the high percentage of passive defection, it is paramount that loyalty marketers proactively identify the early warning signs of disengaged members,” urges Scott Robinson, senior director of loyalty consulting for Maritz Loyalty Marketing.

According to Forrester Research, customer experience accounts for 46.5% of the loyalty they feel toward a store. When figured in with price-value, this figure barely nudges up to 47%.

To F3, these findings should compel retailers to make shopping all of these things—easier, more convenient, information-rich (how to eat healthier, how to save) and competitively priced—in order to keep cardholders coming back regularly. Indeed, our own observations show shortcomings in store execution and loyalty programs. Among the latter:  people either give false identification when signing up, or at checkout they ask cashiers to enter a number qualifying them for discounts. Both behaviors undermine a store’s ability to target audience segments and customize offers, and measure the effectiveness of specific promotions. Many programs are boring too, or place too many conditions on customers trying to acquire deals (such as gasoline points that expire monthly).

Where else should loyalty programs shore up? Anna Koren, director, Ipsos Loyalty, provides a retailer checklist with these 10 common pitfalls she developed for The Wise Marketer:

• Does the program fail to deliver on ROI?
• Is it poorly aligned with the brand promise?
• Doesn’t it deepen relationships with customers?
• Does it treat all customers the same?
• Does it lack differentiation?
• Isn’t it digital?
• Does it fail to evolve over time?
• Does it offer bland perks?
• Is it too hard to use?
• Doesn’t the program listen to the customer?

It takes many elements to make a loyalty program appealing—and many retailers don’t engage members as fully as they should. Nevertheless, U.S. loyalty club memberships in the grocery channel are up 27% from the pre-recession year of 2006. The 2013 Colloquy Loyalty Census reports the 172.4 million memberships of 2012 are also down 1% from 2010.

Consumers in the Maritz Loyalty poll expressed an 83% satisfaction level with Kroger Rewards, and ranked it the nation’s top supermarket loyalty program. Kroger, known for its work with dunnhumbyUSA, has launched an app version of its loyalty card which, says USA Today, allows customers to download digital coupons, renew prescriptions, track gasoline rewards, build shopping lists and see weekly circulars.