What's next for loyalty programs?

The Lempert Report
October 18, 2013

There are two big ideas at play in the supermarket industry on the utility of loyalty programs.

There are two big ideas at play in the supermarket industry on the utility of loyalty programs. On one end, Kroger, helped by dunnhumby, continues to fast track its ability to customize offers to shoppers based on purchase history. On the other end of idea spectrum; Albertsons and its sister chains ended cardholder programs, preferring instead to level the pricing field for all shoppers. Which idea proves to be right, or the most successful, may actually depend on the quality of execution. So then, what’s the next big loyalty innovation that could pay off for retailers, CPG and consumers? Many consumers seem tired of the time and effort it takes to capitalize on loyalty cards, cents-off coupons, point rewards and flash sales. It seems likely a new approach that is quick, easy to use, and volume-building would appeal to today’s time-poor, value-driven shoppers. For example, The Wise Marketer’s account of a recent LoyLogic survey explains that retailers need to find new ways to encourage a first reward redemption “as soon as possible in the customer lifecycle”. Loyalty needs to be turned into something tangible, quickly. According to Peter Clark of The Wise Marketer, once customers see reward, they are on average 8x as valuable as those who have not and they raise their loyalty point accrual rate on average by 30%. Best customers are typically more affluent, and may prefer rewards that add convenience, save time, or give preferred access to experiences such as concerts and sports events. According to research by LoyaltyOne’s Colloquy, the average household belongs to 18 loyalty programs and participates in eight, so competition is strong. If retailers are to compete with their loyalty programs, the reward needs to be efficient, valuable and tangible.