Courtesy of Business Pundit, this article on customer loyalty programs and whether they actually increase profits.
To me, you can make a good case for them in commodity undifferentiated products like commercial airline service, but now it seems like every store, from Best Buy to Barnes and Noble have them. It strikes me that stores like these should have plenty to differentiate them without a loyalty program.
I'm no psychic, but I can probably guess what's in your wallet. Chances are it's stuffed with loyalty cards from this airline and that hotel, not to mention a handful of point-accruing credit cards. And your key chain probably has a few hanging versions of the same"”video store tag, gas station "quick pass," grocery store card. You probably belong to more loyalty groups than you can count.
Do you really think your customers are any different? It's hard to expect your affinity program to inspire loyalty when all of its members carry your competitors' cards as well.
Face it: Loyalty programs have reached the saturation stage. The first-mover advantage gained by the pioneers in this field is long past. Now as common as kudzu, affinity programs have lost their distinction and, as a result, much of their value.
I am actually sick of these programs. It increasingly irritates me to have to carry 354 pieces of plastic in my wallet to get the best prices every where I shop. I am old enough to remember when you had to have every stores proprietary charge card to shop there - so you had to have a bunch of department store cards and gas cards, etc etc. I am thrilled nowadays to shed all that crap in my wallet and just use my Visa card everywhere. Now, though, we are rolling back the clock to plastic proliferation. I find myself actually growling at the poor Borders Books checkout person when they ask me if I have (or want) a Borders loyalty card.
Coming soon, I hope, is the backlash, with stores competing with a saying like "you don't have to have a special card to get our best price".