Do loyalty programs attract the least desirable consumers?

I found the following Byron Sharp Perspective on Loyalty Programs thought-provoking.  Note particularly:

“Marketers have tended to use the loyalty program concept as an all-purpose marketing initiative, when in fact loyalty programs attract the least desirable consumer for a supermarket wanting to increase its business – the ones who already are loyal and do most of their shopping in your store,” he said.

“These shoppers actually have the most to gain – something for nothing. …

“Infrequent shoppers – the customers a supermarket would like to have change their behaviour and shop at an outlet more often – are actually less likely to get around to joining up.”

Prof Sharp says this is what researchers call a ‘selection effect’ and it trips up unwitting marketers.

“If you take a store like Myer for example – they boast that loyalty program members spend an average of $822 a year in-store compared to $795 for their other customers – but this does not reflect any change in buying behaviour, it is just that heavier customers tend to join loyalty programs,” he said.

“Giving away money to already loyal customers destroys the rationale behind most loyalty programs.

“To get a real advantage, supermarkets or stores need to attract consumers who buy from their category a lot, but don’t yet regularly shop at their stores.”

About Arie Goldshlager

Customer Insight, Customer Strategy, and Innovation Consultant
This entry was posted in Customer Loyalty, Customer Retention. Bookmark the permalink.

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