Americans Have Love Affair with Loyalty Programs

Americans are have a love affair with loyalty programs. Colloquy's fourth quarter 2006 research estimated there are 1.3 billion loyalty club members participating in an average of 12 loyalty programs. Obviously, consumers like the idea of what loyalty programs can mean to them. They are intrigued with the promise of being recognized, rewarded and privileged. However, the challenge for most retailers is delivering on the promise. The average consumer actively participates in less than half the programs they are enrolled. But when they are avid members of retailer loyalty programs, they tend to spend more and shop across more channels. According to "The Loyalty Effect: Retail Loyalty/Reward Programs' Impact on the 2006 Holiday Season" published by Epsilon, loyalty program members accounted for forty-eight percent of holiday shoppers in the 2006. These programs have a significant impact on overall spending and share-of-wallet. Fifty-eight percent of enrollees said their memberships influenced where they shopped -- and that figure jumped to sixty-two percent among those who spent more than $1,000.

Executing a successful loyalty program requires focusing your discounts, and your resources, on building profitable customers relationships. These typically aren't price-oriented shoppers. By zeroing in on high-value, and growth segments, you will boost your bottom line instead of eroding your margin with widespread discounts.

Loyalty is built on both the rational and the emotional. The customer's rational side is drawn to good prices and the quality of the product. The emotional, on the other hand, is more about that sense of personal recognition, of being treated differently than anyone else. When the two sides meld together in the customer's mind, you've secured their loyalty.