Consumer loyalty programs are experiencing a resurgence as the economy forces consumers to look at value. The history of customer loyalty programs is interesting and varied, with one constant: companies try to win the hearts, minds, and wallets of customers. One of the first customer loyalty programs was S&H Green Stamps. They began their program in 1896, but reached their zenith in the 1960s and 1970s. S&H represents a period in our history when consumers did not “buy” the price, but instead were rewarded for their loyalty to merchants with green stamps redeemable for a large number of consumer goods. This form of non-monetary reward or “alternative currency” reached a certain value and this alternative currency has become the customer loyalty programs of today.
According to Jupiter Research, more than 75% of today’s consumers have at least one loyalty card, and the number of people with two or more is estimated to be one-third of the shopping population. According to Gartner, US companies spent more than $1.2 billion on customer loyalty programs in 2003.
To distinguish a good program from a bad one, marketers must understand how people are motivated. Surprisingly, when given a choice between cash or a promotional incentive like airline miles, consumers often choose miles thinking that if they have money they’ll pay a bill and not do anything “fun” with the benefit.
Just as trading stamps were an alternative form of currency in the past, digital currencies, including music downloads and ringtones, are the currency of the moment.
Rewards4Promos was recently launched by Coca-Cola. When a consumer purchases a specially marked 20 oz Coke, they text the code (under the cap) to 36569 (ENJOY), confirm their birthday, and receive a text message telling them if they won a card $20 cash. If you don’t win the money, you can enter your redemption code to receive bonus offers that are good for music downloads, instant discounts, exclusive Coca-Cola offers, and cash back offers for charities. Both sellers and consumers gain from this promotion as the sellers gain valuable information and the consumer receives a reward.
Return on investment makes customer loyalty programs more important than ever. Studies have shown that it is 7 to 10 times more expensive to attract a new customer than to retain an old one. Through customer loyalty programs, marketers can:
1. Preserve customer contact information – An up-to-date and working customer database can double the value of your business.
2. Give repeat customers motivation: Regular customers spend 33% more than new customers.
3. Develop long-term connections with customers: Customers expect to be rewarded and will be more loyal to companies that give them something back.
There is value in cultivating a loyal customer. According to Parago, eighty-two percent of Americans who participate in customer loyalty programs have recommended their favorite loyalty programs to friends and family. Implementing customer loyalty programs will provide the consumer with a reason to stay loyal in today’s highly competitive marketplace. Repeat customers and long-term relationships will set your company apart from the competition. In today’s economy, as many companies are proving, loyalty marketing programs can make or break.