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Loyalty programs promote business growth by rewarding repeat customers with varying incentives. Loyalty programs, or also called frequency marketing is defined as, programs that encourage repeat purchasing through a formal program enrollment process and the distribution of benefits (Winer & Dhar, 2011). In today’s modern society data technology is built into reward cards- that data provides key customer intelligence that organizations utilize for strategic planning. This data also helps shape future customer decision points and provides competitive advantages.
I love coffee! If I could figure out a way to have SB (Starbucks coffee) readily available at all times I would, as it gives me “superpowers” at work. I believe SB has developed one of the best Loyalty programs. The Loyalty card rewards you with free drinks, special promotions, and member benefits. In order for any company to have a successful program it has to consider three key aspects; value proposition, value-add, and customer value. Here’s how SB accomplishes that.
SB supports its value proposition with their “Live Coffee” mantra. People come to drink and “Live Coffee”, whether it’s a drip coffee, espresso, or cold beverage. Their loyalty program adds value to their coffee products by rewarding its customers with new drinks, that you may not otherwise tried before. What that looks like is, once you have earned enough points through your purchases you are allowed pick any drink on the menu no matter the cost value. Customer value materializes in reward offerings such as; free drinks on your birthday, free in store refills, or better – order ahead to pick up for later. If an organization follows these key aspects of developing a Loyalty program, coupled with emulating existing successful organizations like SB, the chances for success will be highly probable.
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Loyalty programs are sometimes called frequencies marketing and are formal enrollment programs that offer rewards/discounts to repeat customers (Winer & Dhar, 2011, p. 428). Loaylty program are offered in various industries icluding airlines, casinos, restuaraunts, grocery stores, and pharmacies just to name a few. Whiner and Dhar suggest that there are three conditions that that loyalty programs works best when:
1. The program supports and is consistent with the brand’s value proposition.
2. The program adds value to the product or service.
3. Lifetime customer value is high (Winer & Dhar, 2011, p. 429).
It is very important that if you do have a loyalty program that it is not costing you money in the long run. You aslo must use the data you collect to add value to the customer. “According to the 2015 Colloquy Customer Loyalty Census, American households hold memberships in an average of 29 loyalty programs, but are active (meaning earn or redeem at least one per year) in only 12 of them. Companies lose money on time and effort, and customers get no more value from the businesses to which they are “loyal” (Kolowich, 2015).”
Needless to say, I am one of the household that have many loyalty cards, but the one I use most often is my MVP rewards card from Food Lion. Currently they offer four basic rewards: Every week you can enjoy new MVP pricing on the items “ you and your family love most (Food Lion Staff)”. Another reward that they offer is that they have a coupon kiosk at the front of the store. This kiosk will give you coupons based on your shopping habits. Most often I do not use the kiosk because I forget or the coupons are not for something I am buying at the time. You can also download coupons right to your MVP card. In addition you can sign up to receive e-mails and texts. The e-mails will offer savings personalzed to you and the texts will send you exclusive digital offers, flash deals, coupons, and more. Food Lion plans to initiate an additional benefit to their costumners. The program will allow you to “browse the offers available each month, load them on to your MVP card, shop throughout the month, and when you meet the reward requirements, get reward dollars loaded to your MVP Card to redeem on your next shopping visit. (Food Lion Staff).” In the past they would offer this type of service, but only around the holidays. The problem with the previous service was you had to save the paper copies of your coupons and receipts for at least a month. The new program will will automatically save them to your MVP card. I did not benefit t from the past program because I did not save my receipts so the new program appeals to me much more. Therefore, in addition to your regular MVP savings you will earn additional rewards. The problem I see with this type of program is that shoppers may only shop for the items that are discounted so the store is really not gaining any value. In an area like Hampton Roads many of us can also shop at militray commissaries, which are much cheaper, they do not charge taxes, and they also have a loyalty card. The bulk of my grocery shopping is done at the commisary and I pick up only sale items from Food Lion. In order to be truly effective, Food Lion needs to initiate a loyalty program that can actually compete with the commissaries in the areas. Costumers also need to know the value of the membership and all the benefits the card will offer. At present I only use my MVP card for the weekly savings deals because that is the only one that is easy to use and adds value to the products and service they provide.
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