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Loyalty fatigue and the danger it poses to retailers

Chris Kronenthal, president and CTO at FreedomPay, explains how and why loyalty fatigue among customers is real and retailers need to work to address it to ensure they maintain and boost the relationship they have with existing customers.

Loyalty fatigue and the danger it poses to retailersPhoto by istock.com


| by Chris Kronenthal — President + CTO, FreedomPay

How many loyalty cards do you have in your wallet? If you are like most consumers then chances are there’s anything from a couple to five or more, each offering different benefits, from collecting points that can be redeemed in store, right the way through to free cups of coffee or newspapers.

Loyalty programs have become a vital part of customer engagement for retailers who are trying to reward their patrons for spending their money with them, and encourage them to spend more by visiting the store more often. But with the plethora of loyalty programs on offer, there is a very real sense that customers are becoming fatigued with the process of collecting and spending points and that many of these programs are now being ignored because they are seen to offer nothing special.

Loyalty fatigue is a dangerous trait for retailers, as it creates a reluctance to ‘buy in’ to a program designed to help your best customers return to your store time and again. What was seen as a benefit some years ago has become so commonplace that the incentive has lost its power, and the potential impact of that is the loss of a customer and lower engagement over time.

Part of the problem is the disparate nature of the various loyalty schemes available. There comes a point when customers are no longer sure exactly what each retailer is offering to them as a loyalty benefit, and having to produce a card, for example, each time they buy a coffee has become old-fashioned. As technology continues to move on, so do the ways we shop and pay for the items we want. In fact, many shoppers will no longer take a wallet with them, preferring instead to pay using the myriad of alternative payment options now on offer. With smartphones and wearable tech like watches offering Apple Pay or Google Pay, technology has made loyalty cards all but redundant.

So, how can retailers combat this loyalty fatigue most effectively? One of the easiest and effective ways is to partner with a number of retailers to provide a loyalty program that works across a number of stores and retail chains and is not specific to your outlet alone. This encourages shoppers to build up points – if that is how you choose to offer your loyalty scheme — that can be used across a broad range of businesses. The scheme has a number of benefits, such as:

•    Shoppers build points more quickly — if you are buying goods and services from a number of companies and getting loyalty points that are cross-populated, creating better value in the eyes of the consumer.
•    Retailers can tap into a wider customer base — consumers that may never have thought to come to your outlet may now be enticed by the fact they can get additional savings in other stores they use more often. It also expands your reach way beyond the customers who have come to you at least once before, creating a wider pool of customers and potentially increasing your sales.
•    Additional marketing and promotion that would not have existed otherwise — as the loyalty scheme spreads further, your store has much greater marketing opportunities that would otherwise not exist, helping to boost your brand awareness across a wider range of people.

It would also be sensible to use a technology-based system that sends the loyalty rewards straight to a customer’s phone. This allows a much more targeted approach that can be personalized toward the individual, and presents offers that they are more likely to take up.

For some retailers there may be a reluctance initially to sign up to a scheme that promotes other stores to their existing customers, but this is a short-sighted and isolationist approach that does little to help the people you want to encourage to buy more from you. In reality, it does little to help you as a retailer either, because if customers can benefit from a wider loyalty scheme that you are not signed up to, you could actually end up missing out on business.

Some reasonable fears might include the cross-population of information — where other stores are able to see or benefit from your specific data as well as their own — but due to data protection legislation and best data management practices, this is not something any payment services provider would allow. Your data remains yours and no-one else’s.

However, the additional footfall you may see as a result of participating in a wider loyalty scheme gives your business an excellent chance of moving forwards and boosting sales. The key benefit is that you don’t have to approach other retailers directly to work together; instead a good payment services provider will have the contacts and the capability to put all of this in place for you. Your business simply reaps the benefits.

Loyalty fatigue among customers is real and retailers need to work to address it to ensure they maintain and boost the relationship they have with their existing customers. Addressing it the right way increases the opportunities any retailer has to sell to customers, which is good for them, and definitely good for business.

Chris Kronenthal is president and CTO at FreedomPay.



Chris Kronenthal

Chris Kronenthal, President and CTO at FreedomPay is the payment industry's preeminent security expert, bringing world-class experience to the software development processes and compliance solutions of FreedomPay.

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