The Current State of Loyalty and Rewards

Customer loyalty and rewards programs are far from a new concept. Airlines and the hospitality industry have been using them for decades to attract new customers and retain existing ones. Soon after, credit card companies caught on, offering both integrated programs and stand-alone ones, like American Express’ Membership Rewards. From retail outlets like Dick’s Sporting Goods and Subway to small local businesses, loyalty and reward programs are more prevalent than ever in the U.S.

It’s estimated that the perceived value of points and miles issued in 2010 in the U.S. exceeded $48 billion. What’s even more astounding is that one-third of that total, or $16 million, remains unused. In addition, research from Colloquy notes that the average American household has 18 reward program memberships, but only maintains active involvement in 8.4 of them. Colloquy also reports that only 36 percent of Americans received a reward or promotion that drove them back to the issuing store.

While some still question the value of these programs, it’s obvious that today’s consumer expects a deal, whether that be a promotional offer from a daily deal sites like Groupon or LivingSocial, a physical coupon, a loyalty punch card, or a mobile offer, Americans don’t want to pay full price. Customers want special offers and their expectations are that these rewards, coupons or deals be more and more relevant or personalized.

Gartner predicts that, “By 2015, context-aware promotions will comprise 10 percent of convenience item promotional activity among consumer goods manufacturers in developed markets. One such scenario is real-time offers in which retailers and manufacturers will use technology to proactively make offers to consumers/shoppers while they are in the shopping process at the store level, likely through a mobile device.”*

There is an onslaught of new mobile loyalty options for both merchants and developers including Cartera, Swipely, Edo Interactive, LevelUp and CardSpring, just to name a few. The challenge lies with the decision of determining which solutions will provide the greatest return on their investment, both in terms of new and incremental sales.   

* Gartner, Inc., Summary for Top Industry Predicts 2012: Industries Face Intensified Consumerization and Technology Disruption, November 29, 2011