Customer loyalty programs have come a long way since the days of Green Stamps, but unless these programs are carefully crafted, they still may not accomplish what they set out to do. In a retail environment that has mushroomed with online marketers as well as an ever-expanding crowd of discount shops and resellers, traditional retailers are finding it difficult —yet all the more imperative— to distinguish themselves from the pack. It is easier than ever for customers to compare prices and shop around. And when it comes to online shopping, the competition is only a click away.

Even as it is getting harder to come by, customer loyalty has never been more important. According to a recent study at the Kellogg School of Management at Northwestern University, only 12-15 percent of customers are loyal to a single retailer, but that small group of shoppers accounts for anywhere from 55-70 percent of sales. Customer loyalty programs are designed in part to help retailers maintain that base. In addition to keeping the customers coming back, loyalty programs are also a valuable source of data about buying habits, trends, and customer demographics. This information is crucial if a retailer,particularly a bricks and mortar retailer, is to stay competitive.

What’s in it for me?

"Savvy retailers are quickly learning that if they want the many benefits of their loyalty programs, these programs have to offer tangible benefits to their customers as well—something more than superficial discounts any alert shopper can find without having to join a program."

Unfortunately, however, the best-laid loyalty plans often go astray. Colloquy, an organization that provides retailers with information and research about frequency marketing, estimates that while the average U. S. household participates in 14 loyalty programs, over half of those are inactive at any given time. Retailers might depend on them, but customers, it seems, all too often ignore them. Retailers aren’t giving up easily, though. The trick to making such programs work, it seems, is realizing that loyalty works both ways.

Savvy retailers are quickly learning that if they want the many benefits of their loyalty programs, these programs have to offer tangible benefits to their customers as well—something more than superficial discounts any alert shopper can find without having to join a program. Retailers, particularly fashion retailers, are beginning to offer truly exciting and creative rewards, such as fitting and tailoring services, personal styling sessions, private sales, and free tracking of color and size preferences. Email alerts of sales, electronic coupons, and discounts that can be earned at different levels of spending are all popular with customers.

Networked shoppers

Retailers are also learning that whether or not they market online, they must engage their customers through the latest technological trends. Linking loyalty programs to social media and making these programs accessible through smart phone apps is as important in today’s market as a presence in the Sunday sales fliers was in the past. Plastic keychain cards have been replaced by QR codes and tweeted announcements of “secret” or “unannounced” sales. Loyalty programs are nothing new—as anyone who remembers Green Stamps or frequent flyer miles can tell you.

But to be effective, programs must change with the times and be as attentive to customers’ needs and lifestyles as they are to the needs of the retailer behind the program.