Tuesday, April 14, 2009

Loyal To A Fault

I was discussing customer loyalty programs with a retail technology products manager for a large outlet on the West Coast the other day, and he made a surprising comment. I was noting how successful loyalty card programs can be, but he didn’t find that to be the case, at least not in his part of the country.

“Loyalty programs here in the Pacific Northwest, and on the West Coast in general, haven’t been as big as elsewhere in the U.S. A lot of our retailers have decided not to go that route,” he said. “I don’t know why that is. If anything, our retailers have been almost anti-card program. Customers get deals in our stores whether they carry our card or not, and that’s worked well for us.”

Are loyalty programs only popular in certain regions of the country, or are some retailers just failing to realize the full potential of such programs? A survey released today by the Aberdeen Group indicates the latter — that loyalty programs suffer not because of regional variances, but because retailers don’t effectively implement their programs (“Cutting Edge Customer Loyalty: Retail Best Practices for Acquiring, Retaining, and Re-engaging Customers,” April 2009).

The report notes that “customer loyalty programs and similar relationship marketing initiatives are some of the most critical factors that are impacting the retailer’s sales and customer retention performance in current difficult market conditions. However, significant loyalty-related improvements are required in retail as almost half (47%) of Laggard retailers and more than a third (35%) of Industry Average retailers indicate ‘no change in performance’ from their loyalty program.” Reasons cited for retailer failure in loyalty programs include inadequate CRM data capture, a lack of customer analytics-based offers, and poor loyalty process execution, particularly at the POS.

What’s your opinion? Does geography or implementation have a more significant impact on the success of a loyalty card program? Post your comments, and I’ll follow up with more on the topic in the future.

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