Marcel Corstjens and Rajiv Lal write a thought-provoking article discussing six myths about customer loyalty programs on the Harvard Business School Working Knowledge Forum.
The one I would like to highlight is myth #1 ‘Loyalty programs don’t work in grocery stores where the margins are razor thin.’
This clearly is a myth of epic proportions – Tesco grew from mediocrity to one of the world’s largest retailers, and much of this success is widely credited to their loyalty program. A point the authors make, which I think deserves amplifying is:
For retailers lacking the capability of using information about their card-holding customers and turning these data into tailor-made individual shopper-specific propositions, loyalty systems are no more than an expensive gadget.
This is absolutely valid. The difference between a loyalty program being a drain on margin, or a competitive weapon lies in the ability to gain meaning and insight out of the data generated by the program. This proves to be science fiction for most retailers operating loyalty programs today and to my mind is the single largest opportunity to growth that exists for them.
The full article can be read here: Busting Six Myths About Customer Loyalty Programs