Consumers Feel Loyalty Programs Hold ‘Little’ Value

Getting new customers is expensive, which is why sensible marketers toil to keep the ones they’ve already got — and to get them buying as often as possible. As such, loyalty programs have become a conspicuous part of the marketing landscape. But how do consumers feel about such programs? A recently released survey by the Chief Marketing Officer (CMO) Council takes a close look.

The polling finds consumers exhibiting a kind of “yes, but” attitude toward loyalty and rewards programs. Sixty-nine percent of respondents said most of their own experience with such programs has been “pretty good,” and 10 percent said they’ve been “very satisfied.” Half said a program membership either “strongly motivates my repeat business or visits” (21 percent) or is “usually a big factor in my decision making” (30 percent). But, the report has less favorable news as well: “In fact, 32 percent of respondents felt that program participation held little to no value while 37 percent felt individual rewards had even less to offer by way of value.”

Do these negative sentiments reflect a lapse in communication on the part of loyalty marketers, or is the problem that many of the programs really aren’t valuable? “It’s both,” says Liz Miller, who was involved with the study in her role as vp of programs and operations for the CMO Council. “Listen, there are a lot of programs out there that only exist because of some brands viewing loyalty programs through what I call a ‘Field of Dreams’ lens — the ‘if you build it, they will come’ mentality. So, they build this program, investing millions in it, and then they pepper the consumer with junk. Or, they don’t pepper them with anything and just let consumers pile on points into a fantasy account that does nothing. What is worse is the lure of savings only to realize you can’t get to them because you can only do it on the second Tuesday of the sixth week of the month.” On this last point, 38 percent of respondents included “too many conditions or restrictions” among their top complaints about loyalty programs.

MEMBERSHIP HAS BEEN GROWING
Whatever misgivings consumers have about loyalty programs, though, this doesn’t seem to stop them from signing up. “Our research shows 67.7 percent of consumers belonged to loyalty programs in 2009, a 19 percent increase over 2007, when 57 percent of consumers belonged to one,” says Kelly Hlavinka, a partner in Colloquy, a firm that provides research and other services to the loyalty-marketing field. “Activity in some key demographic segments is up even more,” Hlavinka adds. “Just to name two, participation by young adults has soared 32 percent, and women age 25-49 are up 29 percent.”

Another statistic, from Colloquy’s “census” of loyalty-program participants, points to the ambivalence many consumers bring to these relationships. “Colloquy’s census does indicate a critical gap — that the average U.S. household  has enrolled in 14 programs, yet only participated in 6.2 of them,” says Hlavinka. “So clearly, most loyalty-program operators need to be thinking about how to enhance their value proposition for their most profitable customers. In addition, much more can and should be done to enhance the relevance of program communications and the recognition benefits for a company’s most profitable customers.”

It’s important, after all, to remember that consumers’ true loyalty is to themselves, and they tend to judge a loyalty program on the dollar-and-cents benefits it provides. That’s reflected in one of the CMO Council report’s observations about how consumers react to such programs: “Unfortunately, they’ve been programmed to expect the fundamental discounts and free products, and marketers will be hard-pressed to wean them off such a deep dependence on them and respond to more experiential rewards.”