Measuring the Value of a Coalition Loyalty Program — Part 1
Understanding key concepts behind the impact of loyalty on brand, program, and customer
Loyalty programs are heralded as the panacea to all ailing problems of revenue & growth to every board member in retail. However, in my opinion, they’re the most misunderstood and over-hyped approach to improving the top (and bottom) line of an organization. Too often, brands participate in a coalition loyalty program only to discover that there is no real value. Unfortunately, by the time they realize this as a problem, it’s too late.
The reason for this, in my opinion, is that the theory of loyalty and rewards is sound — incentivize your customers to spend more with you and they’ll see you as the only source of the product they’re interested in… you create a dependency (i.e. take up a knee-jerk reactionary space in the customers’ minds about their needs and associate it with your product). Over time, the cost of serving customers reduces, and eventually, they become advocates of your business.
In practice, however, businesses use loyalty rewards & promotions as a reactionary, short-term giveaway. This creates a negative loop in the minds of the customer — we’ll wait for the companies revenues to drop (especially towards the end of the month) and…