Loyalty Programs - Who benefits the customer or the company?

Frequent flier miles, frequent buyer rewards, and store coupons, all components of different customer loyalty programs. These programs have been a popular methodology for companies to collect data about their consumers. However, as more and more companies use these programs, we have to ask ourselves who really receives the benefits, the customer or the company? As we discussed in our class, when building the experience framework companies assume that if they increase the value for the customers, they will also increase the value customer will provide for the company.
Value for the customer. So in order to receive value through the loyalty programs we as customers receive benefits and incentives to enroll and participate. Most if not all of us are part of some loyalty program whether it’s with a clothing store such as GAP or Express or with a music “store” such as I-Tunes with promotional music downloads or with another online or brick and mortar store. From these programs we receive pieces of direct mail marketing from postcards to catalogs reminding us of an upcoming sale and coupons with our billing statements or at the stores at the point of purchase. If you pay close attention to most of these programs, companies carefully designed them to create relationships with consumers. For instance, during seasons of high consumption levels (i.e. Christmas, Valentine’s Day) companies send out many coupons and brochures to have you come and “save” with their products. Some companies go way beyond the average coupon; some will provide extra benefits, bonuses, or special treatment to their enrolled customers. For example, with American Airline’s popular frequent flier mileage program, not only do their customers receive frequent flier miles but they also have the options for upgrades and special treatments on their flights. As we become more and more involved with different companies and their reward programs, our expectations will continue to increase raising the bar for many companies to continue to be innovative and to meet the high standards.
Value for the company. For many companies, execution of these loyalty programs are low in cost and high in benefits; related to the assumptions of creating the customer experience framework, when companies provide value through the programs customers will be willing to make more purchases resulting in higher sales and profits. In addition, higher sales mean more consumer data for the companies, and this will result in more information about their customers and their purchasing behaviors. Finding out more information about customers allows the companies to not only improve their products but to create opportunities to build relationship with them. Thus building long term relationships will hopefully create long term customer loyalty. However, even though the companies may receive many benefits and successes from these programs, they MUST continue to build relationship with customers through other elements such as customer service and quality and pricing of products.