Retailers seem to be in a hurry to discontinue their customer loyalty programs. Here’s why they shouldn’t do so.
There is an interesting article over on the 1to1 Media Blog, about whether lower pricing is more effective than adopting, and sticking to, customer loyalty programs. The article comes in the wake of a number of retail chains opting for uniformly low pricing, rather than offering special discounts to subscribers of customer loyalty programs. It raises a number of interesting and relevant points:
1) Many retailers are probably dropping their loyalty programs because they are unable to mine data effectively and use it for personalized marketing: This could very well be the case. Customer information can come in floods that is difficult to wade through. Retailers which are not prepared for it then find it hard to pick out only the relevant bits of data. However, there are now solutions available which combine easy data analysis with loyalty programs; these would certainly be the future of customer relationship management.
2) In the absence of loyalty programs (and the customer data collection it involves), retailers will find it difficult to know how they can improve the customer experience: This is definitely true. If there is no mechanism in place to gather valuable customer information, then retailers will find it difficult to craft personalized marketing campaigns – something that more and more customers are appreciating.
3) Having uniformly low prices won’t address the problem of connecting with customers in the digital space: This is also true. The fact is that more and more customers are browsing and shopping in the digital space, which is already overcrowded with retailers and brands. Many of these brands and retailers are already offering slashed prices and it becomes increasingly unsustainable to keep using that tactic in the digital space. This is where adopting solutions like mobile customer loyalty helps brands and retailers stand apart.
4) This measure also doesn’t address the problem of attrition that will happen when customers move to another retail, despite lower prices, because the new option offers a better experience: This is true, and related to the point made above. If brands don’t care to differentiate themselves, apart from slashing prices, then customers have little to associate themselves with. Studies have repeatedly shown that consumers generally display loyalty towards brands that have a strong identity and a solid customer relationship management program.
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