Building Loyalty With Rewards? April 07, 2008 New white paper asks where rewards programs fit into consumer engagement puzzle
By Alex Palmer
A new white paper from Allegiance, the South Jordan, Utah–based customer loyalty research and consulting company, encourages corporations to cultivate a relationship of open communication and positive interactions in addition to their points-based rewards programs. In the white paper, titled "Buying Loyalty: Do Rewards Programs Translate Into Customer Engagement?" market statistician and Allegiance loyalty expert Kyle LaMalfa discusses the high popularity and value of rewards programs, while exploring where they are most effectively used to strengthen bonds between customer and brand.
"Rewards programs have become a business in and of themselves," writes LaMalfa. "What was once seen as a unique marketing strategy…has become a common or 'must-have' part of an overall marketing strategy."
LaMalfa draws on the work of several loyalty experts, and particularly on Colloquy's Loyalty Census, released last May, that pegged U.S. rewards program membership at a whopping 1.3 billion—a point of "saturation," according to Colloquy magazine. Allegiance's white paper suggests that with the expansion of loyalty programs, companies must review where their rewards programs are most effective. He warns against using programs to aid customer service in ways for which they are not ideal, such as in responding to a customer complaint—by giving bonus points, rather than ensuring the mistake does not happen again.
The paper argues that greater value can be gained in areas like gathering customer data. Ongoing rewards programs allow companies to learn about their customers and their spending habits over time, in ways that sporadic sales or discount offers do not. LaMalfa says that for a program to be effective, this data should be used to predict customer preferences and spending behavior, decide which customers are the high-value loyal ones and which are only occasional shoppers, and to determine where marketing efforts can most effectively be aimed.
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