The Business Case for Loyalty

There are two basic points of view to be considered when discussing the business case for introducing -or keeping - a customer loyalty programme: Some industry observers have argued that a loyalty programme is often unnecessary because it's just a way of spending money rewarding customers who would probably have been loyal anyway.

Others, however, have recognised that the real benefit of a loyalty programme is not necessarily felt first by the customer, and that it is the merchant that gains the necessary insight (from detailed analysis of its loyalty programme and transactional data, for example) to be able to improve the way it communicates with and deals with its customers. The

customer is actually the secondary (but still the most important) recipient of the benefits of a true loyalty programme.

To say that a loyalty programme is not useful, or is a waste of marketing budget, is to have misunderstood the real purpose of the programme. Rather than offering a simplistic discount or rebate programme, a real loyalty programme offers the customer any number of incentives to allow the programme operator to collect accurate and useful data about their lifestyle, purchase choices, motivations, interests, circumstances, and in many cases even about their household and immediate family.

The reason for gathering this data is not - as a very small minority of consumers seem to fear - to create some kind of 'Big Brother' database of peoples' personal habits, but to gain practical insights into ways in which the merchant could serve each customer more effectively, more easily, and more satisfyingly.