Many of us have heard of business loyalty programs. But, do they really benefit the business running the program in terms of increasing customer loyalty? That is, do they encourage customers to do more business more frequently with an organisation. And, do they increase referrals? In other words, do they generate more sales and profit than the investment required?
A recent study by Directivity and Citrus found that consumers buy more from businesses with loyalty programs and choose businesses that have a program compared to those without. The study, "For Love or Money 2013 Consumer Study into Australian Loyalty Programs", surveyed over 1000 Australian consumers and found 88% of those aged over 16 belong to a loyalty progam.
The study found that 80% of consumers buy more from businesses with loyalty programs. Consumers also prefer to buy from businesses with a loyalty program versus one without a loyalty program. When faced with choosing between two similar products or businesses – one with a loyalty program and one without – 55% of those surveyed tend buy from the one that has a loyalty program.
But the study also found that although loyalty programs influence buying behaviour, they don't necessarily encourage customer loyalty. Less than half of those surveyed tend to feel more loyal to a brand (e.g. to refer others) whose program they are a member of. "It's our view that loyalty programs on their own do not engender loyalty, as there are many factors that influence loyalty, not just a program," the report found.
Financial rewards rated as the most popular benefit, with 80% of respondents rating discounts when making purchases as very important. Points-based programs (where members can redeem points for vouchers, products or other rewards) were the second most popular benefit.
Supermarket Coles topped the list of local businesses who were doing a "particularly good job", with its FlyBuys program, followed by Woolworths, Qantas, Myer and then Priceline.
What is your experience? Which loyalty program does best in terms of increasing your spend with a business?