Kerrie Bridson, Research Fellow of the Australian Centre for Retail Studies at Monash University discusses problems in current loyalty schemes, trends and what the future holds.
What the future holds for loyalty card marketing Technology
As mentioned many times through this report, technology improvements and innovations will shape the future of loyalty cards and their marketing strategies. Innovations like the smart card will be able to retain more information than ever about the customer in its relation to their stores. There is even recent talk of loyalty cards being replaced by customers using their fingerprints and having voice recognition instead of swiping their cards. One thing is pretty clear: consumers are going to be personally connected to a retailer, either by the card; or some voice recognition or thumb print or something. There will be some connection because it is advantageous to do so (Gilligan, 2001).
Credit Card Loyalty on the way out?
The future has some dangerous issues for customers with loyalty cards connected to their credit cards. Recent news has seen that credit cards may dump their loyalty schemes due to increasing costs via the Reserve bank of Australia. At issue are the fees that banks pay to each other for credit transactions and the relationship between the credit-issuing banks and the retailers who accept the cards for consumer purchases (Colloquy, 2002). Presently retailers are not permitted to charge extra to those people who pay with credit cards, despite the one to two percent fee the banks charge retailers for the transaction. However when money changes hands between the card-issuing bank to the bank of the retailer, the banks charge each other interchange fees of about 1% - that about $1 Billion a year in revenue for the banks. This interchange fee covers the costs of loyalty programs attached to the credit cards by which cardholders get point and mile (Colloquy, 2002).
Australian consumers tend to use their cards as often as possible to obtain loyalty points, and then pay off the cards every month to avoid interest charges. The Reserve bank noticed that these loyalty rewards are indirectly being paid for by those who pay cash or by debit card, or who keep revolving credit card balances. Conventional wisdom says that the four major Australian banks will increased card fees and cut loyalty programs once they realise there are no interchange fees to support them. Australia's wildly popular loyalty program culture will fall by the way side? (Colloquy, 2002).
Get as many as you can
With the saturation of loyalty cards already in the marketplace, it is foreseeable that organisations will endeavour to capture as many new customers as they can and attempt to retain them forever. Organisations will attempt to do anything to maintain their customer base, but will try to entice new customers over and get them to join their loyalty programs, in an attempt to build relationships with them also.
Some companies are going even further to get every single customer they possibly can, by trying to lure potential customers that may not be able to really purchase anything yet. In India, The Taj group of hotels has introduced a loyalty program called Taj Inner circle Junior league, designed to cater to children between the ages of five and 12. the program lavishes soft benefits on its child members (Colloquy, 2002). Each Junior league member is given a special check-in at the reception desk (Colloquy, 2002). Special in-room amenities include a special children's menu and free chocolates.
In the end, all retailers, with the amount of fierce competition out in the market, should be aiming to get 100% of their customers as loyal customers, either using loyalty programs and/or loyalty cards. It is best summarised by Australian promotions guru John Markham. If you don't have 80 per cent of your customers in Customer Club, you're not doing a good job (Bannister, 2001). Some retailer's get to 45% and this is enough, but it just means there is 55% of customers that should be in the Customer Club. Those 20% of customers that don't jump onto a rewards program simply don't like to be monitored or are the type of customer that just run in for a packet of cigarettes (Bannister, 2001).
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Complete article was reproduce with permission from www.cards-worldwide.com
