Recently I read an interesting article about Loyalty Programs, http://www.businessinsider.com/the-problem-with-loyalty-programs-2013-4, in which the author argues that customers really don’t care about loyalty programs as much as companies think they do. The author makes several compelling arguments for this and provides a few examples of customers who show brand loyalty without having a loyalty program. He argues that products and services should differentiate themselves from their competitors by offering a better product or better services. While I do agree with this statement, I think the author has generalized too much and left out some key areas where a well-run loyalty program can be successful.
I’m sure there are many examples, but I believe the most obvious are convenience stores (c-stores). Let’s face it, gasoline is all pretty much the same and it’s very difficult to offer a better product than your competitors. Modern cars will run well on most gas, even lower-octane gas, so trying to convince your customers that your fuel is superior to the fuel right across the street is a tough case to make. However, offering fuel discounts to the members of your loyalty program is an excellent way to distinguish your c-store from your competitors. Even a few cents off per gallon is a strong incentive for customers to join your loyalty program. I’ve witnessed long lines at c-stores that sell fuel for two cents cheaper than the neighboring c-stores, where the pump islands were nearly empty.
The fuel discount program will bring customers to the pumps, and a frequency or discount program will bring them into the store, which, of course, is the ultimate goal.
While I understand the author’s argument in his article, particularly his annoyance with having so many loyalty cards in his wallet (which is usually resolved by simply providing a phone number instead of the card), I think he has overlooked the many products and services industries where loyalty programs can and do provide customers with a compelling reason to choose one company over another.