A Powerful Reminder about Customer Loyalty Programs

This week, Target Corporation announced the launch of its new, nationwide customer loyalty program (after a year-and-a-half beta test in multiple markets).

As you may recall, Target has a near-mythological track record when it comes to understanding their consumers and delivering what they want. So as I read the details about this new program, I’m inclined to put a lot of stock in their planning, rationale, and program design.

Here’s what leaps out at me: Target has opted for a straightforward, easy-to-follow program structure that is based on a high degree of consumer personalization and, consumer participation, personalized rewards (like a member birthday gift), and earned discounts. Nowhere do I see any mention of “points.”

Whew! I’ve become leery of many points (but certainly not all) programs. All too often, they end up functioning like bait-and-switch: luring consumers with the promise of a future reward that is often unattainable due to expiration dates or other restrictions.

In his recent piece for Forbes, Dan Gingiss, goes into greater depth in explaining how loyalty programs can function as actual loyalty programs when they don’t frustrate customers with disappointing restrictions.

Check it out here:

 

When Loyalty Rewards Expire, So Does A Customer’s Loyalty

Dan Gingiss

Rewards programs can be lucrative for loyal customers, but when companies add lots of rules and restrictions to a loyalty program, it can actually have the opposite effect.

Customers are very perceptive, and they understand when something is a value and something is not. One example of this is when rewards expire. From a customer’s point of view, this doesn’t make any sense. They earned the rewards, and now the company taking them away? That is not the basis for a positive customer experience.

The background on this is that it’s actually the Finance department making those rules. When a customer earns rewards, that shows up as a liability on the company’s balance sheet. It may or may not have to pay out those rewards, so the money has to be set aside for if and when the customer decides to redeem them.

When rewards expire, it evens out the balance sheet and removes the liability. But it’s not a good experience for the customer.

Sometimes a customer simply takes a break from a brand for one reason or another. Perhaps they begin flying a route that their favorite airline doesn’t fly. Does that mean they should lose the rewards earned on their favorite airline? Does it mean they’re no longer loyal to that company? And yet most airline programs have an expiration clause that says that if you don’t earn or redeem miles within a certain period of time, you lose them.

Thankfully, the tide is turning in the airline industry. Last month, United Airlines announced that its frequent flier miles will no longer expire, joining Delta and JetBlue. (American, Southwest and Alaska Airlines miles still expire with 18-24 months of inactivity.) This is a much more customer-friendly policy.

Similarly, cash back programs on credit cards often have an expiration clause that says card members will lose the cash back or points or miles if they don’t use the card for a certain amount of time.

Read the entire article >

 

Bobby Matthews
Senior Vice President, Sales and Marketing
Skybridge Americas
bmatthews@skybridgeamericas.com

 


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