Customer loyalty programs today are transforming, offering an unmatchable experience for consumers across the point of sale with the use of smartphones, Internet and mobile channels. Gone are the days when the conventional marketing techniques, like seasonal discount offers, were predominantly used to lure prospective and existing customers to purchase.
This has been replaced by loyalty and rewards-based programs, a trend that brands are embracing in long-term marketing strategies so as to keep their customers engaged. And why wouldn’t they? Even smaller local companies are well aware that their product or service can become a well-known brand only if they are able to retain their customers for a longer period. And the figures back up the fact that loyalty programs are hot amongst consumer; in the US, an average household owns more than 18 loyalty memberships. So which industries have benefitted the most from innovative loyalty program initiatives?
Here are the 3 sectors who have struck gold in loyalty programs:
The airline sector was amongst the first one to embrace the loyalty program initiative 30 years ago. The unique concept, called the Frequent Flyer Program, was started by American Airlines to use as a mechanism to retain customers and dissuade them from using other airlines. The idea fundamentally involved rewarding customers for their flight ticket purchases, and the accrued points or miles earned could be used towards new flight purchases.
This triggered a domino effect and many other established and emerging airlines began implementing this idea. The result was that despite soaring operating costs, the airlines managed to increase their revenue by 20% year over year.
Retail is another sector which felt the demand to build a connection with consumers. Retailers of all kinds, from grocery to electronics, in-store to online, are feeling the need to ramp up their loyalty efforts.
The customer would typically purchase a loyalty card and receive a percentage of discount on all future purchases for a stipulated period of time (mostly one year). In some cases, the customer would receive a one-time percentage discount upon reaching a specified purchase level. Walmart introduced a loyalty card where the customers could get a 3 cent discount per gallon of gas at the fuel stations located on Walmart premises.
A study in 2015 conducted by E&Y found that loyalty programs increased the annual revenues of large chains by 18% (on an average) from 1990 to 2016. This also increased their profit margins as the expenditures for advertisements were drastically reduced as retailers did not feel the need to advertise more to reach out to wider prospective audience.
- CONSUMER PACKAGED GOODS (CPG):
As the name itself suggests, the CPG sector is regarded as one of the most ‘consumed’ sectors, holding the maximum mindshare of consumers, as brands from the industry are purchased almost daily. From an economic point of view, the CPG industry is one of the largest industries in North America, valued at staggering $2 trillion.
The CPG industry in the United States grew by leaps and bounds during its golden days when they had fewer competitors and huge spending budgets on TV advertisement. The biggest challenge for these established brands was to tackle the emergence of private labels in the retail stores.
For this, loyalty programs were introduced by the brands to engage the customers. For instance, Coca-Cola introduced a partnership with Rutter Farm stores – a 56-store chain to give customers My Coke Reward points for fuel discounts.
Kellogg’s, for instance, now runs most national brand promotions through Kellogg’s Family Rewards (KFR). Kellogg’s eliminated the need for printed codes and replaced them by receipt processing solution where customers need to take photos of receipts and submit them on KFR website or via text. From there, consumers can earn rewards and enter to win daily prizes. By introducing receipt processing solutions, Kellogg could reduce its operating costs by roughly 12% annually.
It is clear that these sectors have been successful in generating huge revenues by innovating and customizing their loyalty programs to suit the needs and demands of their consumers. By adopting loyalty programs, they have not only gained revenue growth but more importantly, a satisfied customer base.
Sairaj Kalekar, Marketing Coordinator, Snipp Interactive