Do Customer Loyalty Programs Work?

Customer loyalty programs are all the rage, but do they increase profits? That is the ultimate measure of success.

I'm no psychic, but I can probably guess what's in your wallet. Chances are it's stuffed with loyalty cards from this airline and that hotel, not to mention a handful of point-accruing credit cards. And your key chain probably has a few hanging versions of the same—video store tag, gas station "quick pass," grocery store card. You probably belong to more loyalty groups than you can count.

Do you really think your customers are any different? It's hard to expect your affinity program to inspire loyalty when all of its members carry your competitors' cards as well.

Face it: Loyalty programs have reached the saturation stage. The first-mover advantage gained by the pioneers in this field is long past. Now as common as kudzu, affinity programs have lost their distinction and, as a result, much of their value.

Kroger was one of the first places in Louisville to use a card to give extra discounts to loyal customers. The other grocery chains like to advertise "low prices, without a card." I'm not sure it is providing any competitive advantage for Kroger at this point.

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