Nowadays, it seems that nearly every organization offers a type of loyalty program. While these programs are typically used to measure customer activity and purchase behavior, they also have a significant amount of potential for customer retention as well as developing closer loyalty bonds and the reduction of churn drivers. A comparison of several well-known loyalty programs can provide additional evidence as to the use and benefits of such programs for a variety of service providers.
One example of a well-known loyalty program is frequent flier miles that are offered by nearly all of the major airlines. One example of such a loyalty program is Delta Airline’s program, SkyMiles program which is offered in conjunction with the credit card company, American Express. This program allows member to earn “miles” to be used toward the purchase of future airplane tickets for Delta flights. Miles are earned one of two ways. The first way that miles can be earned is through using the Delta SkyMiles Credit Card and for every dollar spent, miles are earned depending on the tier at which the member is associated (“SkyMiles” n.d.). The other way that members are able to earn miles, is through the number of miles they actually fly. The program offers several perks beyond the opportunity to earn miles. For one, the program boasts that the miles earned by the customer never expire. Additionally, the customer is able to use their miles towards future flights, in place of or in addition to cash.
The Delta Airline’s SkyMiles program illustrates just one example of loyalty programs that drive customer loyalty, satisfaction, repeat business, and a reduction of churn drivers. For one, miles can only be earned when flying with Delta. As such, customers enrolled in the program may feel more compelled to fly with Delta versus other airlines in order to add to their miles. Also, as part of the SkyMiles program, customers may feel that they belong to an elite group of fliers, developing a closer bond with the Delta brand and will be less likely to move on to other brands.
Another example of loyalty programs commonly used, are those within grocery stores such as Kroger. Grocery store loyalty programs may not be as effective in reducing churn as frequent flier miles due to the frequency of which customers visit the grocery store. These programs, however, do offer an added benefit to corporations in that these loyalty programs assist in tracking customer purchases and provide insight into the consumptions habits of a particular customer. They also allow for customized advertising and discounts tailored to the purchasing habits and desired products of a particular consumer (Choi 2013). This targeted advertising is seen as beneficial both from the consumer standpoint as well as the store’s standpoint. The consumer gets discounts and deals relevant to the actual products they regularly purchase while the store is able to target their campaigns to be more successful for that particular consumer. This sort of individualized marketing program is nearly impossible with other forms of advertising, and often very costly. Loyalty card programs within grocery stores, however, are a more cost-efficient alternative to other forms of individualized advertising.
Overall, loyalty programs, such as Delta Airline’s SkyMiles program and grocery store loyalty card programs, such as Kroger, are an effective marketing tool to help develop closer brand-customer bonds, reduce churn, and provide additional value to the brand in the eyes of the consumer. By offering discounts and deals to loyal customers, customers are more likely to continue their relationship with a particular brand and consider that brand their first choice within the market they serve. While many industries are adopting loyalty programs, there are still many that have yet to take advantage of the many benefits such programs offer.