Fair weather friends? Consumers tie loyalty programs to getting discounts and freebies.

As more consumers than ever before have gravitated online to do their shopping, loyalty programs continue to grow in importance.

But what do consumers really want out of these loyalty programs?

The short answer to that question is “freebies and discounts,” the Loyalty Barometer Report from HelloWorld, an arm of Merkle, makes clear.

Of the ~1,500 U.S. consumers polled, ~77% of the respondents said they expected benefits for their loyalty to be in the way of free products, and an almost-equal percentage (~75%) expect to be offered special offers or discounts.

As for the most important reasons people participate in loyalty programs, the Merkle survey reveals that most people take a purely “transactional” approach to them.  Discounts and free products far outweigh other considerations:

  • Participation to receive discounts or offers: ~43% of respondents cited as the most important reason
  • To earn free products: ~27%
  • To gain access to exclusive rewards: ~10%
  • To receive members-only benefits: ~9%
  • To stay connected to a “brand I love”: ~6%
  • Other factors: ~5%

Notice how far down the list “brand love” falls.

As for negative aspects of reward programs, it turns out that there are a number of those.  The following five factors were cited most often by the survey respondents:

  • It takes too long to earn a reward: ~54% cited
  • It’s too difficult to earn a reward: ~39%
  • Receiving too many communications: ~36%
  • The rewards aren’t very valuable: ~32%
  • Worries about personal information security: ~29%

[For more details from the Merkle report, you can access a summary of findings here.]

The results of the Merkle survey suggest that rewards programs may be more “transactional” in nature than many brand managers would like them to be.  But perhaps that’s happened because of the very way the loyalty programs have been structured. When loyalty marketing is focused on discounts, it’s likely to drive transactions without necessarily engendering much if any actual customer loyalty.

On the other hand, if we define customer loyalty as when people are willing to pay a premium, or go out of their way to purchase a particular brand’s product or service, that represents a significantly smaller group companies than the plethora of companies offering loyalty programs to their customers.

Which brands do you consider to be true loyalty leaders?  A few that come to my mind are Amazon, American Express and Nike — but what others might you posit?  Please share your thoughts with other readers here.

Getting Our “Just Rewards” in Airline and Hotel Loyalty Programs

If you think your airline or hotel rewards program is “merely mediocre” … you’re likely not alone.

Rewards ProgramsU.S. News & World Report’s just-published annual listing of the best and worst rewards programs in the airline and hotel industries is confirming what many people already suspect: some of America’s biggest loyalty programs are also some of the least liked.

Let’s start with the airlines. USN&WR ranked the ten largest programs on a variety of attributes including the ease of redeeming points for free flights and hotel stays.

Best Airline RewardsThe three best performing airline rewards programs do include two with high participation rates — American and Southwest:

  • #1: Alaska Airlines Mileage Plan
  • #2: American Airlines AAdvantage
  • #3: Southwest Rapids Rewards

But three other programs, including two of the biggest ones — United and Delta — bring up the rear:

  • #8: United MileagePlus
  • #9: Delta SkyMiles
  • #10: FREE SPIRIT

Ranked in between are four other airline rewards programs, generally ones with fewer participants because of the smaller size and narrower geographic reach of the airlines involved:

  • #4: JetBlue TrueBlue
  • #5: HawaiianMiles
  • #6: Virgin America Elevate
  • #7: Frontier EarlyReturns

As for which airline rewards programs experienced significant changes in their rankings between this report and last year’s, the biggest shift was JetBlue, which fell from the top-ranked position in 2014 to fourth place in the latest ranking.

Hotel Rewards Programs

Best Hotels RewardsUSN&WR took the same approach with hotel rewards programs, but evaluated a larger group of 18 programs. The five best-ranked hotel programs are the following ones:

  • #1: Marriott Rewards
  • #2: Wyndham Rewards
  • #3 (tie): Best Western Rewards and Club Carlson
  • #5: IHG Rewards Club

Marriott’s top ranking is a repeat from the 2014 USN&WR rankings, and it’s due to maintaining high strength in the three-legged stool of critical factors: having an extensive hotel network; a relatively lower requirement for earning and redeeming free hotel stays; and generous “extras” as part of its membership perks.

Also noteworthy was Wyndham Rewards ascent to the #2 position from #7 a year earlier.  Its dramatic improvement was attributable to changing its program policies to allow members to redeem a night’s hotel stay for a flat rate of 15,000 points across the board.

At the other end of the scale were these low-ranked rewards programs:

  • #14:  Kimpton Karma Rewards
  • #15: Le Club Accorhotels
  • #16: Fairmont President’s Club
  • #17: iPrefer
  • #18: Loews YouFirst

The worst programs score that way because in comparative terms, they lack easy ways to earn points.  Also, in many cases their geographic coverage and/or property diversity is lacking.

[Perhaps the bottom-ranked program will need to change its name to Loews YouLast …]

For the record, the hotel rewards programs that came in the middle of the pack are these:

  • #6: Leaders Club
  • #7: La Quinta Returns
  • #8: Starwood Preferred Guest
  • #9: Hilton HHonors
  • #10: Hyatt Gold Passport
  • #11: Choice Privileges
  • #12: Stash Hotel Rewards
  • #13: Omni Select Guest

More information about the USN&WR rewards program rankings for both industries can be found here.

What about your personal experience with various airline and hotel programs? Do you have one or two particular favorites? Or ones you’ve decided to stay away from at all costs? Please share your perspectives with other readers.

Less is less? What’s happening with customer loyalty programs.

CustomersWhen it comes to customer loyalty programs, here’s a sobering statistic: Only about 15% of consumers redeem loyalty rewards.

This finding comes from a report by Forrester Research, based on results from an in-depth survey it conducted last fall of 50 member companies of Loyalty360, a major loyalty marketing association.

What Forrester found is that fewer than half of the surveyed companies’ customers are enrolled in their loyalty programs. And of those customers, only about 35% of them are actually redeeming their loyalty awards.

Hence the 15% “effective” participation rate.

At first blush, the paltry participation makes one wonder what all the fuss is about when it comes to loyalty marketing.  But more than half of the companies surveyed by Forrester reported that they view their loyalty program as a strategic priority, not merely a marketing afterthought..

Clearly, there seems to be a bit of a “disconnect” between those lofty aims and the not-so-airborne reality. The question is how companies can encourage greater participation in their loyalty programs, thereby using them to improve consumer brand loyalty in addition to retaining customers over time.

Forrester offered several recommendations in its report:

1. Use advances in analytics to act on customer insights, rather than just relying on the purchase transactional history of loyalty program members. 

2. Balance the “reward mix” with personalized offers that present rewards program customers with unique experiences that are different from simply offering “more of the same.” (In many cases, offering discounts on more of the same merchandise a customer has already purchased won’t qualify as anything particularly special.) 

3. Break out from the traditional e-mail/web portal/call center communication vehicles to embrace more social media channels featuring two-way interaction. (Surprisingly, only about half of Forrester’s survey respondents reported that social media is an important part of their loyalty programs’ methods of communication.)

Speaking personally, I’m not particularly surprised at the relatively low engagement levels reported in this study. Many companies and brands have reached out to me over the years with offers to join loyalty programs, using various incentives – often purchase discounts or sign-on points as an incentive for joining.

apathyFor me, it’s a matter of “time” and “mindshare” as to which of these programs qualify for my participation. If a brand isn’t that important to me in terms of how I live my daily life, it – and its loyalty program – isn’t ever going to be big on my radar screen.

I suspect there are quite a few other consumers like me. But if you have different take, leave a comment and share your perspective with other readers.


Loyalty? … What Loyalty?

Godiva's newly announced customer loyalty program is a yawner.
Godiva is a late entry in the customer loyalty program sweepstakes.
Godiva Chocolatier has just announced its first-ever loyalty program for customers. It promises to ply chocoholics with all sorts of goodies — from free in-store confectionery gifts to free shipping on online orders. Anyone over age 18 is eligible to sign up with no obligation to purchase … and for those who activate their loyalty membership before June 13th, there’s even a chance to win a complimentary “chocolate party” for up to 25 friends at their nearest company-owned Godiva boutique store.

How wonderful. Now, pardon me while I stifle a big yawn.

For a program that seems pretty decent actually, how come it all sounds so predictable … so mundane? That’s because everybody’s doing it. (And Godiva is really, really late to the party.)

A recent report issued by consulting firm Colloquy contains some interesting statistics about loyalty programs. With more than 1.8 billion loyalty memberships on the books, the numbers have never been higher. (This translates to a whopping 14 loyalty program memberships per U.S. household.)

These stats underscore the fact that loyalty programs have migrated well beyond the original airline frequent flyer and hotel frequent stayer programs to encompass seemingly every corner of consumer activity today.

But according to Colloquy, fewer than 45% of all loyalty programs are actually active, in that they’ve had at least one instance of activity in the preceding 12 months. “The relative ratio of active to inactive loyalty program members suggests that more than half of all program memberships are merely names in a database,” the report states. “The implication for marketers is clear — the era of growing membership rolls just for the sake of growth is over.”

What this suggests is that companies have done a better job of signing people up for loyalty programs to begin with … but not nearly enough to keep them engaged as regular customers over time.

Could it be that the single most popular tactic — offering a one-time 15% or 20% discount on purchases as a “sign on” incentive — has attracted customers who cheerfully take advantage of the special activation offers, but have no compelling reason (or even any intention) to participate over the long haul?

If that’s the case, the loyalty is only skin deep … and the current economic conditions will likely spark even more instances of lax participation.

But what if companies tailored loyalty programs to individual customers based on their unique profile and actual purchase history? Would better customer conversion result — along wth improved ROI?

It’s more challenging to run a tailored loyalty program … and it requires more focus and attention than many marketing department personnel are willing to devote to it. Moreover, there’s no guarantee that consumers won’t simply “take advantage,” without spending any more on merchandise than they would have done without the loyalty program being offered in the first place.

But with the sorry participation rates currently being experienced with loyalty programs … it’s certainly worth a shot.