Brian Woolf, a global leader in loyalty marketing and author of
Customer Specific Marketing
(Teal Books, 1996) and
Loyalty Marketing: The Second Act
(Teal Books, 2002), gives a definitive answer: “A loyalty card is not a replacement for any of the basic loyalty drivers but is a supplement to them. Just as a hammer doesn’t build a house, a loyalty card doesn’t build customer loyalty. Both the
Jim Barnes, author of
Secrets of Customer Relationship Management
(McGraw-Hill Trade, 2000), says, “Loyalty schemes must be seen for what they are—not ‘loyalty’ programs at all but rather programs to drive repeat business. As the latter they are
Michael Lowenstein, coauthor of Customer WinBack: How to Recapture Lost Customers—and Keep Them Loyal (Jossey-Bass, 2001), adds “Loyalty schemes, also known as frequency marketing programs, only have value when they create—and the sponsor uses— information and insight which enables a company to improve value in all areas a customer considers important. The primary role of a retailer loyalty card is to gather data about customers.” 
 Brian Woolf, Loyalty Marketing—The Second Act (Greenville, South Carolina: Teal Books, 2002), p. 5.
 Carol Parenzan Smalley, “Butterflies and Barnacles: Re-writing the Rules of Loyalty,” crmguru.com, September 13, 2002, p. 8.
 Ibid., p. 10.
The customer’s use of a loyalty card gives us the data required to identify our biggest spenders. Yet some
How important is this? There is more to it than Pareto’s Law (20 percent of the
Biggest spenders and most frequent shoppers are
Garth Hallberg gives us another example of this with a packaged goods firm he disguises with the
In many businesses the real value is in the customer information that loyalty card customers provide voluntarily. Voluntarily is the critical word. When customers volunteer personal information in return for expected benefits, the question of privacy goes away.
Some years ago Richard Barlow, founder and CEO of the loyalty marketing advertising services company, Frequency Marketing, Inc. (FMI), and publisher of Colloquy.com, established this definition of
to be used by the
He says that as consumer privacy concerns enlarge, and formal and informal mechanisms are put in place to secure privacy, relationships in which customers volunteer to be known will be essential, since without such volunteered information, customers will become increasingly invisible and difficult to reach. He says,
demonstratedaily that customers gladly trade information for value. Aside from actively assuring that all their purchase activity is tracked, loyalty program members respond to surveys enthusiastically. Response rates are routinely above 20 percent, and sometimes exceed 50 percent. That’s because members have learned over the years that program sponsors turninformation into value for members—more points or miles, which convert into more free rewards and special treatment. 
Point-based loyalty programs offer other advantages for the retailer. Brian Woolf lists more than a
Creating simplicity: Points are a very simple way to skew rewards in favor of best customers.
Points permit easy targeting of groups for short-
Targeting departments or categories: Extra point offers can spur sales of specific items or from selected departments.
Strengthening price image: Bonus points can replace price reductions as incentives.
Avoiding price wars: Points can become the tie-breaker when you do no more than meet a competitor’s price.
Encouraging multiple purchases:
Points can be used to
Building incremental sales: Points can be used to build incremental sales by offering bonus points for cumulative sales in a given time period.
Enhancing school-funds programs:
A points reward scheme is more flexible than the typical tapes-for-schools program, which assures a percentage of each customer’s total spending for the
Offering special rewards:
Points can be used as rewards for customers who
Promoting quality control:
Some stores award points to customers who discover quality control problems. Woolf gives the example of an Irish
Generating employee rewards:
Besides being very well received, these point awards benefit the company because the
Building partnerships: Building partnerships with other companies allows cardholders to accumulate points at a faster rate.
As customers build up points
Differentiating: Given price parity, points can be a very powerful differentiator for a retailer.
Encouraging card carrying: An incentive for the customer to show the card with every purchase.
There is no question that point-based loyalty programs do have value. The question is have they become so commoditized that they have lost some of their earlier punch? Barlow, a recognized expert on loyalty programs, has developed data that show more than 60 million Americans belong to frequent flyer programs. In one major market, three out of four households belong to at least one grocery frequent-shopper program, with half of those households
McKinsey research found that about half of the ten largest U.S. retailers in each of seven sectors have loyalty card programs, with a similar rate in the U.K. The research also found that 53 percent of U.S. grocery customers and 21 percent of the customers of casual apparel retailers are enrolled in card programs. 
Credit cards with reward
With all these opportunities to earn benefits, card reward programs create greater value for customers, but do they really build loyalty?
[4 ] Garth Hallberg, All Consumers Are Not Created Equal (New York: John Wiley & Sons, 1995), p. 40.
 Ibid., p. 118.
 Richard G. Barlow, “Loyalty Marketing: What Is Its Role in a CRM World?,” crmcommunity.com, January 9, 2002, p. 3.
 James Cigliano, Margaret Georgiadis, Darren Pleasance, and Susan Whalley, “The Price of Loyalty,” McKinsey Quarterly, 2000, Number 4, p. 1., _www.mckinsey quarterly.com (January 15, 2003).
 Richard Barlow, “Loyalty Marketing: Six Trends to Watch in 2002,” The DMA Interactive, January 9, 2002, p. 2.error 'ASP 0113'
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