Risk of loyalty fatigue growing rapidly

Department stores have them. So do airlines and specialty shops and railways and booksellers and tire-makers. They are loyalty programs and they've come a long, long way since American Airlines devised what is considered the first such program 20 years ago....

Department stores have them. So do airlines and specialty shops and railways and booksellers and tire-makers.

They are loyalty programs and they’ve come a long, long way since American Airlines devised what is considered the first such program 20 years ago.

But what about the consumers who use loyalty programs? Has the novelty of piling up enough points for a flight or a car rental or back massage worn off? Are they increasingly giving a curt ‘No,’ when asked whether they have a card? Do they suffer from ‘loyalty fatigue’?

It’s just possible that they do, says Mary Larson, a partner with the Mitchell Madison Group, a business consultancy in Montreal that specializes in developing loyalty programs.

‘Loyalty fatigue is an issue,’ she says.

John Wright, senior vice-president of The Loyalty Group, the Toronto-based company that manages the ubiquitous Air Miles program says, ‘There is loyalty fatigue for some programs – not all, but some. And it happens when companies don’t listen to their customers.’

Larson concurs, saying she’s not convinced companies are always doing their homework when they want to create that ‘propensity to buy.’ And as a result, she continues, the market is inundated with half-baked programs that are announced with great fanfare, but then just sit there.

‘When we’ve designed loyalty programs, we find there are four factors that made them keep working,’ she says. ‘Immediacy of rewards is the first. Then, the reward has to be a tangible one with value for the individual. You have to encourage behaviour that increases my purchasing; and benefits must be mutually beneficial to the company and the person accumulating the points.’

Ken Solmon, director of research and a loyalty expert with the Toronto office of Impiric, formerly Wunderman Cato Johnson, doesn’t actually use the term ‘loyalty fatigue,’ but does say there are problems in the industry.

‘What happens is that sometimes the programs fade into the background and cease to be a part of the (consumer’s) purchasing decision, or the store decision,’ he says. ‘It becomes an afterthought, and getting points stops becoming part of the decision process.’

Solmon figures he’s packing about 12 loyalty cards in his wallet at any given time. They range from the Air Miles card, to airline frequent flyer cards, to hole-punched cards from neighbourhood sushi and coffee houses.

Solmon says companies with loyalty programs must constantly promote their plans, keeping them fresh and playing up any unique angle they may offer.

‘Some retailers just blew into the market with a wave of advertising and drove them through the roof,’ he says. ‘Then they stopped. If you track them over time, you’ll find they can slip from the consumer’s mind share. Maybe that’s where the fatigue sets in.’

Consider Zellers. The retailer practically pioneered retail-based incentive programs in the mid-1980s with its Club Z program. Everybody was talking about it when it launched, but with so many other programs out there, it seems to have lost its lustre lately, maybe gone a bit stale. Or has it?

‘Actually, we are going to be relaunching Club Z later this year,’ says Doug Ajram, general manager of the program for Brampton, Ont.-based Zellers. ‘According to our data, 75% of the customers who make purchases at Zellers ask for Club Z points. And over the years, we’ve consistently redeemed 1.5 million rewards.’

The retailer is obviously able to keep its members active. Ajram says that’s owing to the variety of awards available, and their achievability. And, of course, some new developments to keep it fresh.

‘Rather than small, little announcements, we’ve come up with some eye-openers,’ he says. In October 1998, for example, the company launched Gen Z, for children of Club Z members. According to Ajram, there are now 1.1 million youngsters enrolled. Further enhancements to the Club Z program include a gold card, a seniors’ program, and more choice in the catalogue.

‘We’ve had focus groups, and after talking with our customers, we’ve adapted the program to meet their needs.’

For its part, The Loyalty Group tries to combat cardholder malaise by convening focus groups, conducting quantitative research and reviewing incoming messages received via phone, fax or e-mail.

‘Listen to what people want when it comes to reward choice,’ says Wright, whose company has just added sponsors such as Northwest Airlines and KLM. ‘The last thing you should have is where customers do their part in providing information to you and then you do nothing for them.

‘In our case, we’ve got IVR (interactive voice response) in our call centre, and an up-to-date site where people can book rewards online. We are trying to make interaction between Air Miles, its sponsors and cardholders as easy as possible. Loyalty fatigue sets in when you don’t deliver for your customers.’

Steve Ince, vice-president of marketing for Toronto-based Tip Top, helped implement his company’s loyalty program, called Tip Top Advantage Rewards, in 1998. He refutes any notion that newer programs such as Tip Top’s are contributing to so-called loyalty fatigue.

Ince said his company recently surveyed 400 Advantage Rewards members, segmenting respondents into three levels of purchase: low, medium and high. Without divulging actual numbers, Ince notes that those who purchased the most at Tip Top had the highest level of satisfaction with the Advantage Rewards program.

‘We were pleased with that, because while I’m not sure there is fatigue, I do sense that people’s enthusiasm for loyalty programs has waned a little,’ says Ince. ‘There is a bit of cynicism out there.’

One reason for that, he suggests, is the length of time – years, in some cases – it can take before collectors can redeem points for loot.

It’s this kind of criticism that has traditionally been lobbed at Air Miles. But Wright defends the program.

‘Air Miles offers rewards after accumulating 25 miles,’ he says. ‘We find most people can get that in one month. True, it’s no good for anyone to wait a long time for their rewards, but when you offer rewards, they have to be relevant.’

According to the experts, there are two principles that must be observed if companies are to prevent any real or perceived loyalty ills: communication and segmentation.

‘I’m not saying change the rules every two weeks,’ says Solmon. ‘But change the flower in your lapel. Change the colour. Let me know you’re alive. Communicate with me. Companies that do the best job of communicating with customers have the best retention rate.’

Adds Larson: ‘It’s not loyalty, it’s increasing their propensity to buy. So use segmentation work to make sure you are offering an award that means something. Men’s golf pants? I’m not interested.’

From Karen Howe’s dining table: Creativity, COVID and Cannes

ICYMI, The Township's founder gathers the best of the best campaigns and trends so far.

Cannes Base Camp

By Karen Howe

I’m attending Cannes from the glory of my dining room table. There’s not a palm tree in sight, yet inspiration and intel are present in abundance.

Cannes Lions is a global cultural pulse check. The social course correction in the wake of the murder of George Floyd and BLM has delivered far greater diversity in the judging panels as well as the work. And we are all better for it.

I’m proud to say that creativity defeated COVID, which speaks to its power. Great work and big ideas flourished, despite unimaginable odds.

The work from the past two years spans a vast emotional range. From the profundity of Dove’s “Courage is Beautiful” to the hyper exuberance of Burberry’s “Festive,” they are opposite ends of the spectrum, but each answered a need in us.

Take note, the ascendency of gaming cannot be understated. Smart brands have embraced the channel. It makes sense, because gamers participate to meet others around the world, not just to play. And they represent a huge and powerful community. That’s why QSR Wendy’s gamified their iconic gal in RPG’s Feast of Legends.

Burger King sponsored the unknown Stevenage Football Club, transforming the team into online heroes and vaulting BK into the fray at the same time. Once again, the brand embedded itself in culture.

The birth of gaming tourism arrived when Xbox snuggled up to travel guides and created a brilliant baby: a travel guide for gaming worlds. It, too, embedded itself in culture.

From the standpoint of social good, Reporter Without Borders showed how it worked with Mindcraft for its “Uncensored Library” to bypass press censorship, with Minecraft providing a loophole to a space where young people could be educated. It provided youth with a powerful tool to fight oppression: truth.

COVID changed us in unexpected ways. We learned how to pay attention again and there was a notable lack of 30-second commercials. Instead, longer format content thrived. Apple’s WFH was seven minutes long. Entertainment reigned king, so we find ourselves returning to our advertising roots.

Seeing competitive brands form partnerships was one of this year’s other great surprises. The brilliantly simple “Beer Cap Project” by Aguila to reduce binge-drinking saw the brand reach out to competitive beers to join in. Aguila put incentivizing (keyword: free) reminders to drink water, eat food and get home safely on its bottle caps from all sorts of fast food chains, ride-share co’s and H2O brands.

On a personal level, I’m so proud of Canada again this year. Given that it was two years of work from all over the world being judged, even making the Cannes shortlist was an accomplishment. Canada is herding in the Lions in tremendous numbers – and it’s not even over. Fingers are crossed.

KAREN-HOWE-PIC-higher-rez-300x263Karen Howe is a Canadian Cannes Advisory Board Member and founder of The Township Group