It’s Time to Kill the Loyalty Card
Retail thought-leader, entrepreneur, and an innovator behind DAVIDsTEA, David Segal has deep knowledge of brand journeys, scaling, and digital and retail marketplaces. He also knows a few things about customer trust, and in a new article for Financial Post, he says companies can do a good job of building it without going through the hassles of a loyalty card.
From Financial Post:
How many loyalty cards do you have in your wallet? Between coffee-shop stamps and gas station points and consumer rewards, it’s likely there’s quite a few (in fact, the average American is a member of 29 loyalty programs — even though they’ll only use half of them this year).
Just one look at the recent Air Miles fiasco and it’s clear that these programs are a hassle for companies, too.
Study after study has shown why they just don’t work. You essentially discount your brand in exchange for customer data, which feels cheap and tawdry. In the long run, it doesn’t yield economic returns — studies have shown that companies with a higher spend on loyalty programs earn, on average, 10 per cent less than competitors. The reality is, do any of the cards you have really compel you to head back to the store?
For companies, I think a dose of brutal honesty is in order. In the end, loyalty programs are about gathering information from your customers. If you want that precious data, be up front about it and give them a compelling reason to share it.
Real loyalty, in my mind, starts with showing buyers you have integrity, heart and soul — a purpose, personality and sense of values that transcend your logo. Eighty-nine percent of consumers in the U.S. say it’s shared values that drive their brand loyalty, not discounts.
And this is where corporate social responsibility — i.e. charitable and giving programs — and loyalty unexpectedly converge. These are usually thought of as two separate initiatives, but they don’t have to be. With a loyalty program that’s tied into a giving program, you enable customers to actually give back instead of getting punches on a card or piling up miles they’ll never use.
I’ve thought about his a lot lately. I was never exactly happy with DavidsTea’s Frequent Steeper program — not only was it complicated to manage, it cost us millions of dollars in product each year and did nothing to drive our already-loyal customers to the store. When I launched my newest venture, I wanted to get this right. We recently rolled out a very different kind of loyalty program at Mad Radish: for every order a customer places on our app or online, a serving of fresh vegetables is donated to a local food charity on the customer’s behalf.
After trying it for two months — and giving away more than 1,000 servings of produce — I don’t think we’ll ever go back to a “Buy 9 Get the 10th Free” model.
To read Segal’s three principles of loyalty building read the full story here.